Employee versus Independent Contractor
“Employees” or “independent contractors”; which one defines what the musician is? More than in most other lines of work, this question is a compelling one for musicians. Perhaps, it is how the musicians union has traditionally classified free-lance musicians that has blurred the differences.
According to the musicians union, all performing musicians and bandleaders are “employees.” The only employers there are, according to the union, are those who contract with musicians for their personal services and/or those of their band members. But, understanding the legal distinction between the two is of the utmost importance!
There have been a number of lawsuits that hinged on the distinction of the workers’ status. Misclassification can be a costly mistake, particularly for bandleaders. What defines the difference is the degree of control exercised over the musicians’ services. When you control not only what they do, but also how they do it, then your sidemen are employees.
If you, as a bandleader, are an employer of musicians, and you treat them as employees, you are obligated to deduct withholding taxes, and pay for FICA and FUTA. If you, as a bandleader, treat your sidemen as independent contractors, then you need not be concerned with taxes, etc. In most cases, the latter can cost you a great deal.
If the IRS determines that your sidemen are actually employees after you have claimed that they are independent contractors, you will not only have to pay back taxes and interest, you may also have to pay a penalty! Bandleaders would be well advised to always treat their sidemen as employees and withhold taxes. You will also have to pay FICA and FUTA as well. Many bandleaders these days are relying on payroll professionals to handle these details for them.
However, if you are a soloist, or a member of a small group who operate as a partnership or co-op, where each member has control over what he does and how it does it, then you are all independent contractors.
Please be advised that the information being provided here is merely practical advice and the writer is neither an attorney nor a financial professional, and may not be relied upon to the exclusion of professionals.
Also please read the linked article below provided by the Internal Revenue Service. It is most informative.
Employees vs. Independent Contractors