The purpose of this blog is to assure crew members who receive petty cash or who get a check that needs to be converted into petty cash that it is not a taxable event.
Crew members are usually given cash but sometimes they are given a check to convert into petty cash for the purpose of covering minor expenses for things needed during production. Oftentimes crew members mistake the receiving of a check as a taxable event when they take it to the bank to be converted into cash.
However, it’s not a taxable event. As a crew member given a check for petty, you’re simply converting a check into cash. By giving crew members a check instead of PC, production companies avoid having to carry and secure cash in the production office.
Cash the Check at the bank it’s drawn from
When a production company hands you a check for petty cash, you should cash it at the bank it was drawn from. In other words, don’t take it to your bank and don’t cash it on your personal bank account. If you cash the check on your account and the check is no good or there’s a problem, your bank (where you cashed that check) will hold you responsible for that cash.
For example, if you’re given a $500 check, and you go to your bank and cash it. The bank will take your information and your bank account number as a guarantee against that check. If at the end of the day, that check doesn’t clear the bank on which it was drawn (the production company’s account) your bank can turn around and take your money to satisfy that bounced or bad check.
Checks hardly bounce anymore because, in the modern world, a bank can confirm cash for a draft or a check that’s being presented at another bank.
However, you need to make sure you don’t cash the check on your account. So don’t give your ATM card or your account number at the bank. If the bank asks if you have an account with them, and you do, tell them you don’t. Otherwise you’re going to get in a pissing match with the teller and, trust me, that’s the last thing you want.
The simple fact is you do not want that check cashed against your personal account because; if it bounces you run the risk of having the cash taken out of your personal bank account.
How do you know what bank a check is drawn from – in other words where can you go to cash the check on the prod company’s bank? At the top of the check if it names Bank of America, go to a Bank of America branch to cash that check. Another way is to pull the routing number (the 9 digit number to the left of the account number and not the check number) off the bottom of the check and google that number. Google will tell you what bank belongs to the routing number. Then go to that bank.
You’ll need one or two forms of identification
The bank is going require that you provide at least one and sometimes two forms of identification when cashing a check. One form of ID could be your driver’s license and the second could be your credit card (if they ask for it).
Personally, I wouldn’t give my credit card if I can avoid it, but if you have to, and you have a Bank of America debit card (assuming we went to Bank of America to cash the check), don’t use it because it is going to tie that transaction to your bank account. This is because you are essentially giving them your bank account to use as collateral against the check in case it doesn’t clear the bank on which it was drawn.
So if you’re at Bank of America, use some other bank’s card if the bank requires two forms of ID and a credit card is one of them. If just one form of ID is required, use your driver’s license. Many banks will also ask you for a fingerprint so you might need to press the ink from an inkpad to put a thumbprint on the face of the check.
The fact that they are collecting your thumbprint is not a big deal. You’re not committing any crime, and you’re not going to get that money counted as income so you won’t be paying any taxes on it. What you are doing is simply converting a check into cash using the bank teller, even though the check is made out to you. They want the thumb print so they can catch a check forger cashing a check – in this case you are not that.
What if the check gets counted as income?
Sometimes people may screw up in accounting and that check will be counted as income, and it will go onto a 1099. If you get a 1099 from a show that has the check that you cashed in it, you just have to call them up and inform them that there’s been a mistake and they’ll reissue the 1099.
If they’ve gone away and the show doesn’t exist anymore, you can simply write a note with your tax person or submitted with your tax return explaining that you received a 1099 erroneously, that it’s not included in your total compensation, and that you can’t get a hold of the people who issued it.
Tell them it’s a mistake and then explain why it’s a mistake. It’s likely you won’t have this problem, but in case you do, that’s what I would do if I were in your shoes.
Example of the note I would attach to my tax return: I was issued an incorrect 1099 by XYZ Company for $XXX.00. The 1099 says I received income, but the transaction was for petty cash where I cashed a check at the bank. I then spent that money materials for the production and turned in original receipts to settle the cash I was provided. I did not receive income as indicated on the 1099 and have, therefore, not included it in my gross income on this filing.
You’re not laundering money or committing fraud
The other thing that I often hear people say is, is this fraud? Am I laundering money? The answer is No; you’re not, as long as you’re getting cash to purchase items for the project you’re working on. If you’re in wardrobe, props, construction, for example, and you’re buying things that have to do with the job you are doing on production – you are in the clear. So it’s not a problem.
Here’s an absurd example. If you’re handed a check, told to go cash it and then go buy a car, you might find yourself in a money laundering situation. I have never in my career seen anything like that. We do buy cars all the time, but we buy them from brokers or from junkyards and it typically happens from the production accounting office. You’re likely never going to be asked to buy something of value using cash that the production accounting office doesn’t set up either through a credit card, a check, wire transfer.
Try to be on the lookout for shady stuff. It hasn’t ever happened in my career but I have heard of things like that happening so don’t do anything stupid. If someone asks you to do something that sounds shady, just tell them “no, thank you. It’s not really part of my job and I think accounting probably would better handle that transaction.”
When you’re given cash, or given a check to convert to cash, the same petty cash rules apply where most studios and production companies want to keep individual transactions under $200 to $250. One good example is wardrobe; where the costumers may need to buy a whole bunch of stuff that adds up to more than 250 bucks, but you’re likely not going to be buying a single item that costs as much as $250 (unless you’re buying suits or some other high-end stuff). Even the expensive things are typically pre-approved by the production accounting office or UPM before spending the cash.
Summary
The important point here is, if you’re handed a check, and asked to convert it to petty cash, it’s not income to you. It’s not money laundering, it’s not fraud, it’s not illegal. It happens regularly.
It’s best to cash the check at the bank from which the check is drawn. So if at the top, it says Bank of America, go to Bank of America. If it says Citibank, go to Citibank. If it says Wells Fargo, go to Wells Fargo.
Don’t go to your own bank, and if you’re a customer of the same bank at which that check is drawn, do not, for any reason use or give out your account number to guarantee that check.If you do, you’re basically asking for trouble if there’s a problem on the other end, and the last thing you want to do is pay for the producer’s mistakes.
