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https://en.wikipedia.org/wiki/California_Assembly_Bill_5_(2019)
Wikipedia has a good summary. It will be interesting to see how this actually plays out as far how venues, musicians and other performers respond. If a restaurant or bar advertises live music as a regular part of their business I wonder if musicians, band and crew members will need to be put on the payroll. If I perform at, say, 20 - 30 different venues in year 2020 will I need to get W-2 forms from each venue? How much will it cost me to file my taxes? If I get a license to perform on the Santa Monica Pier will I then be a city employee for the time I am there performing even though I am only getting paid via tip jar? Live performances on that pier and many other beach locations are a normal part city business that attracts revenue.
"services that relate to the usual course of the “hiring entity’s” business" seems to be the caveat statement causing confusion.
A google search for "how does AB 5 affect musicians" brings up many interesting articles. I am speed reading through a few and it sure looks qwerky. Even for YouTube venturists of any age.
Last edited by Tobias; 01/14/20 02:05 PM.
Does the noise in your head bother me ?
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I've been following this closely too. A classic example of a poorly written law with lots of unintended consequences in it. I found one article written by a CA business attorney who said on the one hand it depends on how the various venues choose to interpret it, they could say this is not a problem for them and do it as normal which means if it's one of your country club gigs in Palm Springs they still give you your checks and a 1099 at the end of the year but on the other hand their advisers could say the law is too vague, they don't want to be the test dummy for a court case and live music is cancelled until something changes.
If the gig is for a private party who are only using the clubs facilities then it becomes the private parties problem. If it's a wedding or something then no issue but if it's a corporate function using the clubs facilities then it's the same problem. I know as live musicians we may not care but this affects all the gazillions of DJ's too that we've complained about for years. Same principle.
That attorneys opinion as if he was speaking to a client in that situation is right now the law is the law so his advice is to cancel the entertainment. Or put you on the payroll and issue a W2. Unlikely for lots of reasons. He also said that the lady who wrote and sponsored the law is very willing to talk to people about an exception or suggestions for amending the law. The problem with that is the earliest that could happen is next October due to standard legislative scheduling. It could easily go into next year too.
That leaves us in the dark until then. IF it actually happens.
For folks outside CA this is about many companies who illegally classify workers as independent contractors when they should be regular W2 employees. By not doing that they save tons of money in payroll taxes, workers comp, health and unemployment insurance. Being an IC puts all that onto the worker. That's a legit point and the IRS publishes a 30 point fact sheet listing all the things that either make you an IC or not. As a tax pro, I can say for a fact the IRS is going after companies for doing that on the federal level. However, IRS rules are much, much more liberal about that than this new CA law is.
CA as usual, took that concept much further to the point it's impacting weekend warriors just doing some casuals for fun and extra spending money and all the thousands of one day studio gigs or music producer gigs or whatever. I did one studio gig in the last five years I think. Plus lots of other occupations way to numerous to list here. I do some yacht club and hotel gigs every year too and since those are corporate entities with professional advisors I'm also waiting to see how this shakes out.
If an act is big enough to be their own corporate entity then it's no problem, it's a B2B contract. But for anybody doing that there are a ton of expenses in CA like the annual $800 fee plus business licenses, filing corp or partnership tax returns and more.
I really have no idea right now how this is going to work out but it could get ugly.
Bob
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California with yet another weird tax law! Unbelievable!
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The problem is their title "Legislator," they think they must keep moving through the halls and passing ever more legislation, not unlike sharks who need to keep swimming to breath (now that I said shark,... hmmm did I hit it too close ...)
Solution: we need to re-title all of them to DE-LEGISLATORS and LAW LEAVE-IT-ALONE('ers) not LAW MAKERS
Larry
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Yes as another example. When I played in a Band. The owner of the Band called us IC when the irs rules would really require him to hire me as an employee. Well he got auditted and guess what?They agreed made him pay all the taxes and penalties.This was almost 40 years ago.
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just thinking about it from reading it here.... the amount of record keeping required by clubs and other such places that hire live music will be astoundingly complicated. If you have traveling bands and the bands have 5 members each.... over a period of 6 months, assuming different bands each week, that's 130 different people's tax info to file, pay, and keep up.
Unintended consequences..... hire fewer bands because it's just too much paperwork to keep it all straight.
Way to go California legislators.....
You can find my music at: www.herbhartley.comAdd nothing that adds nothing to the music. You can make excuses or you can make progress but not both. The magic you are looking for is in the work you are avoiding.
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Here in Florida, I'm an independent contractor. Many entertainment purchasers give me a 1099 at the end of the year. I claim all my income so that's no problem.
I did not want my social security number on other people's computers so I got a Federal EIN (Employer Indentification Number). Since I pay others who work for me (including band-mates) that qualifies me as an employer, and in turn, I send those people a 1099 at the end of they ear.
I figured if one of the clubs that hire me gets hacked, they won't get my SS number.
When I worked on the cruise ships, they considered me an employee and gave me a W2 at the end of the year.
Mixing both W2 and 1099 income at the end of the year was no problem. I keep good records. My sisters are both CPAs and they explain the rules to me.
Insights and incites by Notes
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Next time you talk to one of your sisters ask her to look up AB-5. I'd be curious to know what she thinks. Mention I'm an EA. If she doesn't have time I completely understand, it's tricky but maybe she has a client or two in CA, I have clients in other states too.
Bob
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Face it this happened because musicians and waitresses have been notorious for not paying taxes.
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California with yet another weird tax law! Unbelievable! In concept I agree with this law. The headlines are Uber and Lyft drivers. Until now they're IC's and I have a few as clients and I can tell you they make squat. After factoring in depreciation on their cars long term they're in a net loss. Forget accounting tricks, I mean a real loss. There are many other types of companies who totally take advantage of their workers as well by misclassifying them as IC's. Where this law falls down is they rushed this through without parsing out the details and going through all the different scenarios. Sound familiar? I just read about another occupation that is scared right now. Clinical Psychologist. Most are IC's who work for many different clinics. The clinics are not about to put them on W2's and it's totally impractical for them to become a formal entity in CA by following the new rules spelled out in AB5. What makes this so tricky is in the fine print. There are lists of different occupations that have different levels of exceptions. First are you in such and such a category? Yes, go here. No, go there. Then are you listed in this one or that one? Yes, keep reading and on and on. When you finally find where you fit there's a whole list of items that MUST be done. Not 8 or 9 out of 10 no, ALL of them. We already know I'm a musician. I'm also a semi retired tax pro who's been putting myself out there as an IC tax consultant to several firms. An EA is listed as one of the exceptions IF I jump through all these hoops. I'm basically in the same bag as the psychologists. It's a mess right now. Typical politicians. They find one concept that seems to make sense, get people behind it and then do this. Bob
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Face it this happened because musicians and waitresses have been notorious for not paying taxes. John, I think it is because politicians are complete idiots. As of January first here in New York State there are new more lenient bail laws. Now we have felons back out on the streets. The law requires judges to consider each defendant’s ability to pay bail before setting an amount. What BS! Our police forces are not happy. https://www.courtinnovation.org/sites/default/files/media/document/2019/Bail_Reform_NY_Summary.pdf
I got banned from Weight Watchers for dropping a bag of M&Ms on the floor.
It was the best game of Hungry Hippos I've ever seen!
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Lol, same here Notes . . . used to have a shoe box full of 1099's at year's end until I cutback on the mileage I would drive to gigs.
Later,
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different system in the UK - a lot laxer for musicians playing pubs and small venues - its mostly a cash basis.
it's a good few years since it affected me but only when we were booked through an agent did the tax issue arise. gave rise to the old joke..........'no photographs for security reasons..................social security.....'
mind you going back an even longer time I seem to remember at some of the bigger clubs we had to hand over our set list for Performing Rights Society requirements.
on the other hand in those days if we were paid by cheque, you could sign it on the back and cash it at the bar.
Mickey Mouse and Donald Duck played in a lot of bands...............
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We get a mix of cash, checks with no 1099 forms and checks with 1099 forms.
We claim everything, including the cash. Leilani was audited twice, and came out clean as a whistle. This alone was worth the price of claiming every penny we make and taking every legal deduction offered to us.
Notes
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100% MIDI Super-Styles recorded by live, pro, studio musicians for a live groove
& Fake Disks for MIDI and/or RealTracks
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Well, just for you folks who live in other states thinking it's only for us lucky Californians: https://www.insidernj.com/press-release/fight-freelancers-anti-independent-contractor-law-ab5-not-working-california-states-congress-must-avoid-devastating-mistake/I knew this was going to start happening, politicians just can't help themselves when they can create a soundbite about "exploited workers". Have fun digesting this guys. Of course just because this Congress passes something doesn't mean it passes the Senate or the Prez signs it but it's a scary proposition nonetheless. Bob
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