Freelance. To Incorporate Or Not.
If you work as a freelance or independant contractor you may want to look into the benefits of incorporating as a small business. I have done this for many years with great results. I can only offer a camera perspective but I suspect that it applies to all trades in the film industry. As a freelance cameraman I work sporadically and my pay rate varies from gig to gig. This can put me in a very high tax bracket one month and another bracket the next month. I first noticed this while working on a television show. They were taking out enourmous chunks of my paycheck every week. This is because the IRS thinks that you make that rate every week for the entire year and they put you in that tax bracket even if the gig is only one or two weeks. At the time I was under the spell of big tax returns. A welcome bonus every Spring. After the third of fourth raping of my pay checks, I decided to look into incorporating.
The first hurdle in incorporating is getting your accountant’s blessing. Many accountants will tell you “it’s not worth it” or “You don’t make enough to justify incorporating” That is just fooey! They either don’t have the program to deal with corporations or they don’t want to get it. Luckily mine was totally on board and suggested establishing an S-Corp. S-Corps are fairly easy to maintain with only one yearly filing and an update of the list of officers. I decided to go with Nevada because of the killer tax laws there. It will be up to you to decide where to incorporate. The best part of all of this is that you keep ALL of your paycheck. Nothing is taken out. Then at year’s end corporations do not have the same limit restrictions of what can be written off. I have been very lucky and my write offs have almost always canceled out the amount owed to taxes. Get the picture?
I used My Corporation to set everything up. They are fairly inexpensive and will do everything for you. There are a few ways to save a few pennies by sending in some of the forms yourself but the entire process only cost me around five hundred smackers. This has easily saved me thousands over the years. If you work on a freelance basis then you owe it to yourself to look into incorporating. Unless you like giving more than necessary to the IRS.
Click here for more info at mycorporation.com