Discussion:Employee or IC??
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Discussion Forum Index --> Tax Questions --> Employee or IC??
Rgtaxservice (talk|edits) said: | 13 April 2009 |
| New client came to me with a 1099Misc bx 7 income. He claims he's an IC but it just doesn't smell right. A glance at last years return shows a 1099misc from the same company. Client is in the trades, he's a mason. In '07, he was working as an employee (mason) for a company, collected unemployment for a while, be began working for Company 'X'. Company 'X' issued a 1099isc in '07. His last preparer reported the income on SCH C but allowed business miles.
Company 'X' issued another 1099Misc for '08. This is the client's only income. He works with the owner of the company as a mason. The other company is just a contractor. The client has no interaction with the contractor's customers. He just does the masonry work installation...with the contractor/owner. He does not provide any material, although he does have is own tools. He's not on the hook for anything. Personally, I think he's an employee and company 'X' just taking the easy way out. I'm not hungup on reporting the income, it's writing off the business miles that's gnawing at me. These are all local miles. I'm going to review the 20 factors with the client - his wife was here - not him. I'm thinking of having the client provide written proof from the contractor/company that the client is in fact an I/C. Maybe something stating that "After reading the 20 factors, company 'X' maintains that client meets the criteria of an Independent Contractor". I want to do this for my protection as well as the client's. | |
Wonder Woman USA (talk|edits) said: | 14 April 2009 |
| In California, all building tradespersons are supposed to be employees of the contractor -- don't know how that is where you are, but a call to the guy who remodeled the kitchen (or to the state agency that oversees consumer affairs) will probably tell you how it should be.
So, is the guy willing to lose his job over this? Are you going to discuss with him why he's supposed to be an employee? In my experience, that's kind of like discussing being an employee with an immigrant who is doing housework to survive -- they can't afford to not have the job. Good luck! | |
| 14 April 2009 | |
| Suggestion:
Cover in your engagement letter that deductions could be lost if the IRS determines he is an employee. I would also cover a blurb about travel expense and commuting miles. And a blurb about not being responsible for penalties and interest. After that I wouldn't worry. We are not supposed to audit. He's on notice and you can't control what the employer does. Also, keep in mind if he gets reclassified, he gets 1/2 of the SE back. That should help a bit. Bilbo | |
| 14 April 2009 | |
| The client needs to submit an SS-8 Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding.
It may be that the client does not know the Emp vs Ic Rules. The employer probably does and doesn't want to pay the SE taxes. What you need to ask is who made the decision to change him from W-2 to 1099 and if it wasn't him did he have any say in the decision? Who sets his compensation for the work that he does? I can see him being IC and working exclusively for the same company throughout the year. Apparently they have enough work to keep him busy. On the other hand if this was not his decision and he doesn't set the compensation Company X is pulling one on him.taxea | |
| 14 April 2009 | |
| Exactly. But I don't really see anything in your original post that would tell us one way or the other. I've seen lots of real IC's that work for only one place for a long time, but they also set their fee, their schedule, choose what they will and won't work on, and are quite unsupervised in their work, etc. And on the other hand, I've seen tons of big companies hire contractors through job shops where the person is clearly functioning as an employee. I've never understood how the big guys get by with this, but I've heard that they've now started limiting the length of time a contractor can stay on. | |
| April 14, 2009 | |
| Another key question is whether this guy has his contractors license. If no, it's virtually impossible for him to be a subcontractor, especially in California. | |
Rgtaxservice (talk|edits) said: | 15 April 2009 |
| I spoke with the husband. After a discussion about the distinction between the two, he confided that he meets the criteria of an employee and never considered himself self-employed. He has not been happy with his employment situation for quite some time. He's not willing to go the SS-8 route though. He's trying to seek employmnt elsewhere and does not want to rock the boat. I'm going to set him up with estimated payments to lessen the shell shock for TY2009. | |
| 15 April 2009 | |
| Thats why employers do what they do...employees don't want to out them. taxea | |
