I was prodded into the free-lance-writer business by the Oct. 19, 1987, stock-market crash. Having been employed as a writer at a major media conglomerate for many moons, I had collected a substantial stake in the company's profit-sharing plan. So when the Dow fell 508 points that day and my stake shrank by over 20 percent, I was hysterical. But then I discovered something quite amazing about my profit-sharing plan. Its rules stated that when you left the company's employ, your share got paid out at the values in effect at the end of the preceding month. In other words, if I retired by Oct. 31, 1987, my payoff would be at Sept. 30 prices. Dazzled by this magical opportunity to sell at pre-crash prices, I negotiated a contract with my bosses to continue scribbling on a free-lance basis, and on Nov. 1, I became a "vendor" of various editorial materials.
The first thing a fellow notices after attaining vendor status is that it is harder to get paid in a timely fashion. As a writer-employee, I had had my paychecks deposited instantly and automatically in my bank account. When I became a contract writer, I got paid only after somebody--initially it was a secretary in the business department--put in a requisition for my pay. This seemed odd and unnecessarily complicated, since my new contract called for me to receive the same amount every month, on the first of the month. It seemed doubly odd when months came where the secretary forgot to put the requisition through. Or, alternatively, where the secretary put the req through but then couldn't remember whether the blessed event had taken place.
To be fair, there was only one "did-we-pay-you-this-month?" call. But my diary shows endless fretting and nagging on my part as the sixth or the seventh or the 12th of the month arrived and the check did not. The situation improved only marginally when the monthly requisitions ceased and my payment problems were essentially turned over to the corporate Accounts Payable department. The payments were still generally late, and once, not having been paid as of the 12th, I made the unsettling discovery that I had somehow mysteriously dropped out of the AP payment program altogether. In the summer of 1989, apparently responding to my endless lamentations about late payments, AP started paying me ahead of time, i.e., a few days before the first of the month. This was naturally fine with me until I realized, late in December, that I was now in danger of getting a federal form 1099 showing 13 monthly payments and requiring more taxes sooner. So I complained about this prospect, and before long we were back to the default situation: chronic late payment. I do not believe--or at least cannot prove--that this signifies a cash-management play-the-float strategy by senior accounting executives. And yet, there is this nagging question: Would Accounts Receivable be as relaxed as Accounts Payable plainly is about money regularly changing hands a week or more later than had been contractually specified?
Speaking of form 1099, I have still not decided what to do about the one I got some weeks back from Slate. I had yearned to write for this online journal, and was delighted last fall when editor Michael Kinsley gave me a shot at an article. It was about the huge losses taken by the Nevada bookmakers on the Holyfield-Tyson fight, and I was delighted all over again when the article was "posted" Nov. 22, only seven days after I had taken on the assignment. How fast it all goes online! What a marvelous contrast to the slowpoke print media! Except for Microsoft's payment, which arrived on Jan. 2, 1997, in an envelope bearing a Dec. 28, 1996, postmark. The case law says, plain as day, that this is "constructive receipt" in 1997, and the question I face is whether a sane person should fight to uphold this principle after the Microsoft business-side characters have nonchalantly stuck him with a form 1099 showing those earnings as 1996 income.
F ree-lance writers must also deal with a lot of paperwork and printed forms plainly designed with other kinds of vendors in mind. These other vendors are not guys sitting alone at home writing articles. They are real companies, with legal departments and human-resources departments. And they are equipped to answer questions about the possibility that the enterprise is a "small business concern" as defined by Section 3 of the Small Business Act--to mention only one of many thorny issues raised in a five-page form that landed on my desk several weeks ago.
Leading up to its arrival was a telephone query from an editor of a financial journal that had recently published some of my thoughts on the stock market: "Did we ever send you the paperwork we need so we can pay you?" Naively assuming that this would be a request for my mailing address and Social Security number, I volunteered to provide this information right then and there, on the phone. But no, the publisher of the financial journal--again, it was a huge Fortune 500 company--needed to know much, much more about me. A special toughie was the request for my "Dun & Bradstreet SIC number." I assumed at first that this was some variant of the "principal business or professional activity code" that free-lancers are required to enter on federal Schedule C (where you report "business profits").
Like thousands of others in my line of work, every year at tax time I wrestle with the issue of which four-digit number to write in on this schedule, the instructions for which mention a huge number of self-employment scenarios, none of them envisioning a guy creating copy in his den. Generally, I have ended up choosing No. 7880, meaning that I provide "other business services," which leaves me feeling somewhat marginalized but looks as though it would at least be defensible in a showdown with the IRS. But that was my four-digit code. The D&B codes, as I ascertained after extensive cruising around on the Internet, had eight or (in some accounts) nine digits and provided much more detailed information about one's place in the economy. But how to find out one's number? Instructions that came with the form counseled checking with "your tax department" or--an even less realistic option for a fellow needing to get some work done--the local office of the Small Business Administration. In the end, I brazenly sent the form back without any D&B code, and one of these days I hope to get paid for my musings on the market.
As a New York City resident, I get to pay city income taxes twice. It's incredible, and it works this way. The 1099s one garners during the year are of course cumulated and reported on federal Schedule C, then carried over to New York state form IT-201, which takes you through the state and then the city income-tax calculations. The combined marginal rate for the state and city taxes was recently running around 11 percent, which is bad enough. But when you have paid it all, the New York City Department of Taxation and Finance taps you on a figurative shoulder, reminds you that the city also has an Unincorporated Business Tax, and states firmly that free-lance writers gotta pay this too. The UBT covers the same earned income paid to the city on form IT-201, and this time around, the bill comes to a flat 4 percent (after $10,000 of deductions and exemptions).
Not one employed journalist in 100 has even heard of this ghastly double dip or experienced the surge of fury I felt when I called up the Authors' League in 1987 to ask why they weren't screaming about it. The woman I spoke to coolly asked how much I made as a writer, judged the amount too high to warrant condolences, and said I should be glad to pay my share. She was obviously not a vendor.