OK, I'm not an accountant or an attorney, and some of this may be governed by the laws in your state, but: Models are usually NOT employees whether you hire them directly or through an agency, neither are MUAs unless they work exclusively for you. One of the determining factors is whether they work for other people, who provides their supplies/tools, how much indendence they have in how they do their work (if she turns on her own, you aren't directing her), etc. Unfortunately, the only person on a photo shoot who is almost always an "employee" (meaning deductions are taken) is the photo assistant. Of course a regular office assistant or any other person who works at your place of business regularly would be as well. My studio manager was an employee, but I've never had a model who was. If I hire them directly, I send them a 1099 at the end of the year if they make over $600 in a year. If I hire a model through an agency, same thing. If I pay the agency and they pay the model, I send the agency a 1099 covering all the models I've hired (unless they're incorporated in which case I don't have to send anything), and the model agency sends 1099s to their models (since they're usually not employees of the agency either). There is one exception that I'm aware of, and that's when there is a "production company", like for a movie, and they hire a bunch of folks who would normally be ICs. In that case they put eveyone on payroll as employees. Part of that is for insurance reasons, payroll expediency and also because as employees the employer owns the copyright to anything the employee does automatically. The downside is that the employer is then responsible for unemployment benefits charged against them. One more thing - no matter if the person is an employee or IC, you need to have worker's comp insurance to protect your butt.
Again, check this with your accountant (try to find one who is familiar with the photo/acting business, shouldn't be too hard in Dallas/Austin - wherever you are.
Andy Pearlman Studio