By Gamal Hennessy

This is a modified excerpt from a book I’m working on called The Business of Freelance Comic Book Publishing. It is designed to help you understand the difference between being a freelancer for a client and being an employee. While this can’t be taken as legal or financial advice, it can help you avoid tax issues in the future.

 Your professional standing in comics is defined by your relationship with your clients. Depending on the way you work, you can be considered either an employee or a freelancer. According to the IRS, an independent contractor is “a worker who is not classified as an employee for tax and other legal purposes.” While you and your client may be very clear about your role, the reality is that you don’t get to make that determination. The IRS and other government agencies have to power to determine your status after your work has started.

While this may seem like a technicality, there is a substantial difference between the two titles. This sudden shift in your legal situation can have several negative consequences.

• If your client is suddenly forced to pay for your employee benefits or alter your compensation, they may reduce your rate to cover the taxes they have to pay on your behalf, or they could stop working with you altogether.

• You could lose all of your self-employment deductions, and you may have to file a completely new tax return.

• This change can create confusion and uncertainty around intellectual property rights for the work you completed for your client.

This legal status minefield is further complicated by the fact that the tests to determine whether or not you are an employee or a freelancer are often confusing and subjective, so there are no magic words you can use or silver bullet you can employ to ensure your freelance status. Your best option is to stack the deck in your favor in terms of your behavior towards your client, your financial situation, and your day-to-day working connection with your client.

• Behavior: You are more likely to be considered a freelancer if you offer your services to the public and not a single client. This includes only taking project-based work and not an ongoing engagement, signing explicit work-for-hire agreements, and refusing to sign any non-compete contracts.

• Finances: You are more likely to be considered a freelancer if you operate your business as a separate entity from your employer. This means paying your own expenses and showing profit and losses from multiple clients if possible.

• Connection: You are more likely to be considered a freelancer if you have an independent business existence from your client. This means that you and not your client controls how, when, and where your work is done. It also means working for multiple clients and setting up a legal business entity apart from your clients, which means forming some type of company.

Have fun with your comic.

Gamal