How to financially compensate friends who help with content creation without making them employees?

But what if we pay them less than $600 a year? Do we still need to issue a 1099 in that case? And are there any other options that might work better for very occasional contributors?

If you pay someone less than $600 in a year, you're not required to issue a 1099-NEC. However, they're still technically supposed to report that income on their taxes regardless of whether they receive a form. For very occasional contributors, you might consider a simple independent contractor arrangement with a basic written agreement. This keeps everything legitimate while minimizing paperwork. Just document the relationship clearly - what they're doing, payment terms, and their independence in completing the work. Keep good records of payments even under $600, as these are still business expenses you can deduct.

How exactly does taxr.ai determine the difference between an employee and a contractor? I've always been confused about the line between the two, especially for creative work.

Does it actually give you the forms to fill out or just tells you which ones you need? And did you have to pay for full tax software on top of this service?

Taxr.ai analyzes several factors to determine worker classification, including how much control you have over when/where/how they work, whether they're free to work for others, if they use their own equipment, and if the relationship is ongoing vs. project-based. For creative collaborators, they look at who directs the creative process and whether your friends have input on the final product. It doesn't provide the actual tax forms, but gives you specific guidance on which forms you need and how to fill them out correctly. It's not a replacement for tax software, but works alongside whatever you're already using. I still used TurboTax, but taxr.ai helped me understand exactly what information to enter where.

Wait, this is a real thing? How does it even work? I always assumed you just had to suffer through the hold times as part of the IRS experience.

Sounds like a scam to me. Why would I trust some random service with connecting me to the IRS when I could just call them directly? What's to stop them from connecting you with someone pretending to be the IRS and stealing your information?

It's surprisingly simple - you provide your phone number, and their system waits in the IRS queue for you. When a real IRS agent is about to pick up, they call you and connect you directly to that agent. You don't miss your place in line, but don't have to listen to hold music for hours. The service doesn't ask for any tax information or personal details beyond your phone number. When you're connected, you're talking directly with an actual IRS agent through the official IRS phone line. They just handle the waiting part. I understand the skepticism - I felt the same way until I realized it's just a queue management service, not something that's handling your tax information.

Would that really work for sporadic contributors though? Wouldn't making everyone members mean they're all owners of the business?

You're right, making everyone members would technically make them partial owners, which isn't ideal for occasional contributors. A better approach might be forming an LLC yourself, then having simple independent contractor agreements with your friends. This gives you the liability protection of an LLC while keeping clear documentation of payments to collaborators. Your LLC can issue 1099s when appropriate, and each payment is a legitimate business expense. For the friend with family concerns, he could create his own single-member LLC or sole proprietorship to receive payments, which might help separate his creative income from personal finances for privacy purposes.

That's technically tax evasion though. The IRS doesn't care what payment method you use - income is income. Your friends are still supposed to report that money as taxable income, and you're supposed to deduct it properly as a business expense with documentation.

I mean, I'm just sharing what most creators do in practice, not saying it's 100% by the book. You're right that technically all income should be reported. I guess a better suggestion would be to keep payments under the $600 threshold when possible if you want to minimize paperwork, but still document everything properly on your end so you can deduct those expenses. Even if you don't issue a 1099, you can still claim those payments as legitimate business expenses with proper documentation.

That's not how it works. If you're paying someone for services or work they've done for your business, it's not a gift - it's compensation. The IRS looks at the nature of the payment, not what you call it. Calling business payments "gifts" to avoid taxes is misrepresentation that could get you in trouble.