Found on Detroit Craigslist today:
Reply to: [email protected]
Date: 2006-05-09, 11:19PM EDT
Small remodeling company in need of 2-4 part/full time construction workers. This is a perfect for a college student, or someone who wants 40 hours, but can’t work a traditional 9-5. Hours are flexiable.
Skills: Job will consist of a lot of painting, Drywall (must be able to mud and tape) Demo, etc. No electrical or plumbing. Job location changes from week to week, so dependable transportation is a MUST! Must also provide own tools (hammers, screw guns etc).
Pay: 9-12.00 an hour depending on experience etc. We pay on a 1099 basis, which means no taxes will be taken out. Checks are given out on mondays for the previous week. So if you work 40 hours this week, you get paid on monday. No overtime, strait hourly pay.
Please email with references/resume, compensation desired,and a list of skills. Make sure to include your phone number! Job will be filled by this weekend.
Job location is Macomb/Oakland County Compensation: 9.00 to start
Anybody care to have the IRS explain to this guy how the law works?
DG/Builder
Replies
the IRS will........
Life is not a journey to the grave with the intention of arriving safely in a pretty and well preserved body, but rather to skid in broadside, thoroughly used up, totally worn out, and loudly proclaiming
WOW!!! What a Ride!
Forget the primal scream, just ROAR!!!
Back in the early 80's we had a guy in Ohio named J.T. Wills. He was big in full contact Karati. He had a school, was one of the premier referees for TV bouts and was quite a personality.
The local paper ran a Sunday article on him and it started with some thing like J.T. Wills drives up in his new Corvette and gets out wearing his 5 gold chains and a nice ------- suit (I don't know any good suit company names). He just left his 500k house to meet with me at the Hyde Park restraunt etc. etc.
Anyway an IRS agent was in town doing a few routine audits and read the article. When he got back to the office later in the week he pulled J.T.'s file and found that J.T. had only made 16k the previous year of taxable income. I am sure J.T. is out of jail now but after his conviction you never heard much about him again. I think even though they may not read it daily, there is always a possibility they will read any public info and I for one would not run that add. DanT
BIL is a state tax auditor/accountant. He gets 90% of his fraud leads from the local paper and news. Forensic accountants can pick up the smallest detail and inconsistancies. Unless you bury it in your back yard with a borrowed shovel, then whack the guy you borrowed it from.....you will be busted.
back when i was an IRS agent, a guy who bought plaintation homes, restored them, turned into beds and breakfasts, then sold them was interviewed by the local paper. somewhere in the story he made a comment about them being his residence, therefore the gain was deferred when he sold and moved up. my buddy ordered up his file, did the audit, and showed him the error of his ways.
also, the craigs list ad could be describing an hourly paid sub-contractor, depending on the facts of the relationship.
the craigs list ad could be describing an hourly paid sub-contractor, depending on the facts of the relationship.
In which case, he'd better hope his insurance agent isn't reading the ad.
J. D. Reynolds
Home Improvements
And what kind/quality of subcontractor is going to work for $9 per hour?
I suppose every state is different, but construction subs in my neck of the woods must be licensed (which also means insured and bonded).
In other walks of life in todays world, however, hiring temps on the cheap is the current fashion: In Oregon, DHL (the yellow-truck-with-red-lettering-going-head-to-head-with-UPS) is using temp-agency employees at low wages (except in Portland, where they first got their foot in the door, the employees unionized).
Elsewhere though, whenever the employees start grumbling, DHL, a German company, just severs with the temp agency and signs with another.
And what kind/quality of subcontractor is going to work for $9 per hour?
Obviously, a fine young COLLEGE STUDENT subcontractor, as the ad says. Who can do nice drywall work, no less. Don't you have a bunch of such subcontractors in your neck of the woods? :)
There is a company locally that just hires college students to do interior and exterior painting - call themselves, guess what? - College Painters.1 - measure the board twice, 2 - cut it once, 3 - measure the space where it is supposed to go 4 - get a new board and go back to step 1
There is a company locally that just hires college students to do interior and exterior painting - call themselves, guess what? - College Painters.
Yup, here too. Must be national or franchised. I am told they do it all legally, the students are hired as employees.
Now the quality of those pait jobs, that's another story...
What is the problem?
These are going to be "1099 employees" and they will have to pay their own taxes.
1099 Employee – A 1099 employee is in most cases a temporary employee (technically, not even an "employee"). Because they are not permanent, they do not need to complete a W-4 or have the employer withhold taxes. They are responsible for paying their taxes directly to the IRS. The IRS requires that the employer report the earnings paid on a form 1099.
Jim
To those who think the IRS will not care about this employer paying his workers as subs you may want to read this.
It sounds to me like the advertiser is looking for employees.
Jon Blakemore RappahannockINC.com Fredericksburg, VA
IIRC the IRS pays 10% of the collected taxs for reported tax evasion.
bobl Volo, non valeo
Baloney detecter
They have to supply their own tools and they can set their own hours. I suspect that would pass the requirements for being a contractor.Now the pay level is a whole 'nother discussion.
Bryan,I'm not the resident expert in this matter but I would surmise that supplying their own "tools" includes hand tools and maybe $400 of power tools. I've worked for several companies as an employee that required more from their carpenters.In my mind, the worker may cross the line when they start showing up with air compressors, ladders, table saws, etc. I could be wrong.
Jon Blakemore RappahannockINC.com Fredericksburg, VA
These are going to be "1099 employees" and they will have to pay their own taxes
Hmm, that does not seem to jibe with what the IRS says.
TWC (Texas Workforce Commission) will come knocking, looking for its pound of flesh if you "1099" employees who do not have the status of employers. And if you have not filed with TWC as an employer, you have no TWC account number, which is an audit "flag."
After TWC makes sure you can pay UI, the Controller's Office will want you to come in and visit with them about a Sales Tax stamp. They will want to talk about business taxes, too.
Occupational hazard of my occupation not being around (sorry Bubba)
I don't understand the problem. A 1099 worker is considered an independent contract worker - responsible for paying their own taxes (that means the worker pays the full employer/employee slice on social security). A W2 worker is an employee and payroll taxes are owed by the company as well. The IRS has laws about what constitutes a 1099 employee so companies don't skirt the law that way, but it's perfectly legal to contract temp work that way.
"but it's perfectly legal to contract temp work that way."if that's what's really being donethere are folks who try to skirt the law using 1099s for what are really employees
bobl Volo, non valeo
Baloney detecter
So what are you supposed to do, go from one man show to someone thats able to provide 40 hrs a week for another person too?
I know no one helps anyone in this world but how does the transition work? I'd love to have a full time employee but I dont quite have the volume yet.
So what are you supposed to do, go from one man show to someone thats able to provide 40 hrs a week for another person too?
I know no one helps anyone in this world but how does the transition work? I'd love to have a full time employee but I dont quite have the volume yet.
Well, if I have to 'splain this one to you...
Nobody holds a gun to your head to provide 40 hrs of work. You hire part time employees. McDonald does it, WalMart does it, your bank does it. You just have to do it LEGALLY, as in PAYROLL and TAXES. Duh!
Forgive my stupidity. I am learning as I go along as far as the business end of it goes.
Is part time a different classification as far as someone claiming unemployment benefits? At what point does the person switch to full time? What if you were to work someone forty hours all summer and twenty in the winter?
I'm not being sarcastic, i've asked a few people about this and not really gotten any good answers. I'm not trying to scam the government or elude anyone. I guess i'll be sitting down with the accountant soon.
Is part time a different classification as far as someone claiming unemployment benefits
In all the states I know of, It doesn't matter if you are part time or full time to receive unemployment benefits.
In most states, if you are working 40 hours a week and get cut back to 20, better head out the the unemployment office and sign up. You can collect on the drop in pay. Union guys do it all the time.You get out of life what you put into it......minus taxes.
Marv
Thanks. Like I said, i'm still working on the business end of things (learning more all the time) and I think i'm getting to the point where I need to sit back down with the acountant again.
You can collect on the drop in pay.
But only up to whaterver the maximum UI payout is. Which can be like $300 a week.Occupational hazard of my occupation not being around (sorry Bubba)
two things I guess, either:hire part timers paying SS, WC, etcorlearn the rules for subcontracting and follow themorfind a temp agency and use them for help (they are suppose to pay the SS, WC etc)
bobl Volo, non valeo
Baloney detecter
They have to supply their own tools and they can set their own hours. I suspect that would pass the requirements for being a contractor.
I agree with Ryan. There's nothing wrong with this add. If you would rather be an employee go somewhere else.
As to insurance...who says he's not paying workmans comp. You always pay on subcontractors unless they give you a proof of insurance.
The sub also gets to subtract mileage, tools, etc.You get out of life what you put into it......minus taxes.
Marv
"who says he's not paying workmans comp. You always pay on subcontractors unless they give you a proof of insurance."There are states that allow for the right paper work to exempt that coverage
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
There are states that allow for the right paper work to exempt that coverage
IMHO states have nothing to do with it. Insurance companies want to cover their asses on construction sites. All subcontractors must be covered by GC or have their own insurance.You get out of life what you put into it......minus taxes.
Marv
just not totally true
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Sorry for the late jump-in, but just found this.
Each state may vary its definition of what constitutes a contractor vs. employee, but the IRS is pretty clear. In my experience, the local (Oregon Coast) contractors virtually all violate these rules, calling what by any casual measure ot the IRS' definition of an employee, a 'contractor', and paying them with straight 1099's, thus avoiding all those nasty FICA/FUTA/Worker's Comp expenses, as well as avoiding benefits the contractor provides to themselves (retirement plan contributions, medical insurance, etc).
Rather than reiterating them here, might want to take a look at IRS Supplental Pub 15-A, Section 2 (p. 6), which can be seen at
http://www.irs.gov/pub/irs-pdf/p15a.pdf
Lots of examples.
BruceM
All that's find and dandy. But in my opinion, the guy did nothing illegal about running this add. In practice, when he hires someone, he may vary well violate the law but I don't think we should accuse him just because of the add.You get out of life what you put into it......minus taxes.
Marv
But in my opinion, the guy did nothing illegal about running this add. In practice, when he hires someone, he may vary well violate the law but I don't think we should accuse him just because of the add.
That's a right fine point to argue.
The way the advert reads to me is: "I'm hiring labor for close to minimum wage and expect the laborers to bear all of the burdens (especially financial) of that earned wage--all while you turn a blind eye to state & federal wage & labor laws." That's not an assertion I'd want to put in a newspaper with my phone number and/or email address attached to it.
The construction "biz" already has enough fly-by-night, hack, price-gouging, rule-bending, reputation as is. This dufus is advertising in the paper for "contractors" to work as employees, for employee wages, not contractor's earnings. Joe customer out there reads that and wonders why my finishing crew costs four times what he's read in the paper. Then, I'm the one who's a crook in his eyes.
Ok, and I can't be disppasionate about this, having been screwed over this very barrel myself. That after saying "no" to the "bait & switch" "Oh, can you work as a contractor instead" at point of hire myself. (Should'a just left right then and there; oh lessons learned the hard way). Still left me holding the bag in the middle of hosed employees and skin-flint tightwad.Occupational hazard of my occupation not being around (sorry Bubba)
> or find a temp agency and use them for help (they are suppose to pay the SS, WC etc)
Maybe something like this. It looks like they basically let you outsource all the HR legal and regulatory s--t.
http://www.administaff.com/index.asp
-- J.S.
" The IRS has laws about what constitutes a 1099 employee so companies don't skirt the law that way, "They are more like guidelines than strict laws.And yes companies skirt the issue all the time. Often done in construction.That IRS link that was posted above has some of the things that the look at.
To add to your comment, some states are now closing the language loop holes for sub-contract labor. I believe there was mention of Mass. doing just that in the last JLC issue.
As someone else mentioned insurance liabilities are driving some of these issues, as well as state and local taxing district.
Dave
http://www.mass.gov/dia has a link to an attorney general advisory opinion regarding the recent changes in the Massachusetts independant contractor law, Mas. Gen Laws. Chapter 149 section 148 et seq. A violation of the law may result in imposition of criminal penalties, debarment from public jobs and private actions by employees who may recover triple damages and attorneys fees.
Mass. law establishes a presumption of an employer-employee relationship. to overcome that presumption, the employer must establish three factors:
"First, the worker must be free from the presumed employer’s control and direction in performing the service, both under a contract and in fact. Second, the service provided by the worker must be outside the employer’s usual course of business. And, third, the worker must be customarily engaged in an independent trade, occupation, profession or business of the same type.2 M.G.L. c. 149, § 148B."
Very firm guidelines. I was a consultant/programmer for about a decade and we had to maintain and spend a percentage of time in offices offsite on longterm contracts so we would not be considered shadow employees. There are cases where companies, such as Microsoft, have had to go back and not only even up with the government but pay back benefits to the individual contractors. The court found that they were skirting the law with their 1099 practices and taking advantage of what were really employees. If taxes weren't involved I am sure that the government wouldn't have given two pins about it.
Not sure I agree with the decision - these independent contractors spent years working as contractors for the companies in question. They could have walked out the door at any time.
"There are cases where companies, such as Microsoft, have had to go back and not only even up with the government but pay back benefits to the individual contractors. The court found that they were skirting the law with their 1099 practices and taking advantage of what were really employees. If taxes weren't involved I am sure that the government wouldn't have given two pins about it.
Not sure I agree with the decision - these independent contractors spent years working as contractors for the companies in question. They could have walked out the door at any time."
Yeah, but the reason this all came forward in the first place is that the contractors (who were long-term contractors BY CHOICE trading extra pay for reduced benefits) saw that in hindsight they would have made a bundle if they were getting MS stock options that were flying throught the roof. They sued for millions in back benefits and stock options. The ruling on this case made it very difficult for voluntary contract workers in the software biz (such as myself). We all had to find a middleman contract agency to act as our "employer" to comply with the ruling. They did nothing but extract our pay for no value added.
Before this, the software biz seemed to be about 50% independent contractors. When applying for a job, you would often have a choice as to 1099 or W2. This is a case where the IRS got in the way of voluntary and efficient employment agreements for no reason other than to make it easier to collect taxes (difficult to chase scoflaw 1099s because they control no witholdings). This effectively increased labor costs and reduced overall employment. The truth is that most dual-earner households would prefer to have pay over (unused) benefits for one spouse. Thus the IRS put up a barrier to a market-driven trend, holding on to antiquated notions of what "employment" had become in emerging labor markets.-The poster formerly known as csnow
Like I said - not sure I agree with the decision. I always felt that the consultants had made their own decisions and should live with the consequences. And it certainly made it more difficult for us as consultants. But I don't know the details, so I couldn't reject it completely. I can imagine a case where MS literally forced consultants into a corner where they could not walk out the door and find another client because they were bound by noncompete agreements (as opposed to the non-disclosure they thought they were signing). Yes, nobody 'forced' them to, but they may have signed non-compete agreements in the stack of contracts, and I'm willing to cut some individuals slack when faced with the formidable legal talent on MS staff. Apparently so was the court, so I really think there must be some details I am unware of.
"I can imagine a case where MS literally forced consultants into a corner where they could not walk out the door and find another client because they were bound by noncompete agreements (as opposed to the non-disclosure they thought they were signing). "
Here's the thing. "Permanent" employees have to sign those things too, so there was no prejudice here. It was really a case of sour grapes, and the IRS made a bad call under influence from union groups etc who loudly made the bogus claim that independent contractors are "exploited" because they get no benefits.
Second, those non-compete agreements are not really binding. The courts have been very unwilling to support agreements that prevent people from working.-The poster formerly known as csnow
My understanding of the "contract" issue with MS and or software companies was not just whether or not they were employees, It was more due to their "salary" and the exempt/non exempt status. These people were being paid based on a 40 hour week and many of them were working 80+ hours a week.
Yeah, in a non moral way, it would be nice to hire someone a nice wage based on 40 hours and then have them work 60-80 hrs. Just don't ask me to do it.
Even my wife's current employer thought that a salaried employee should have their pay check reduced if they take a few hours off for a doctor's appointment. They didn't think twice about not paying for overtime.
She's the H.R. person. They really didn't like it when she told them the error of their ways showed them documents proving her claim. But then again, this whole policy had a double standard. So did not get the pay "pro-rated" and others did.
If you want to compare scummy employment practices we could go all day. Here's one:
When my 22 year old brother in law died in an accident last year, my mother in law took a week off from work. She had more unused vacation than that and asked that it be applied towards the time off. Instead they docked her pay.
She had more unused vacation than that and asked that it be applied towards the time off. Instead they docked her pay.
That's pretty low. Normally, though, unless there's a "lead time" policy in the employee manual (like you must give 2 weeks notice for vacation time use--oh, and that has to be enforced, not just in print), then it's "cheaper" for the employer to give just the vacation time.
This has cropped up with FMLA before, which permits uncompensated time off, but with no job position or compensation level loss.
Might actually be actionable, well as actionable as such things are.Occupational hazard of my occupation not being around (sorry Bubba)
"My understanding of the "contract" issue with MS and or software companies was not just whether or not they were employees, It was more due to their "salary" and the exempt/non exempt status. These people were being paid based on a 40 hour week and many of them were working 80+ hours a week."
The issue and ruling I am talking about had to do with independent contractors who were paid HOURLY. Hourly pay is yet another reason why many high-tech workers prefer to be contractors since the number of hours can be brutal. If they were "permanent" employees they would not have been paid for overtime.
After years of working as contractors, they realized that they would have made millions off the MS stock options, so they used legal action to change the terms of the deal they had made. While good for them, it sucked for the millions of contract workers who were happy with their employment arrangements.
The ruling changed the definition of what "contractor" and "employee" meant.-The poster formerly known as csnow
--- The issue and ruling I am talking about had to do with independent contractors who were paid HOURLY. Hourly pay is yet another reason why many high-tech workers prefer to be contractors since the number of hours can be brutal. If they were "permanent" employees they would not have been paid for overtime. ---Not necessarily.It depends on what their job responsibilities exactly were. "Permanent" and "Exempt" (from laws about paying for overtime) are not the same thing.Even salaried employees are entitled to payment for overtime, unless they meet the specific requirements for categorization as "exempt". However, you have to have a good lawyer with a good understanding of the distinctions between different kinds of job responsibilities in the world of IT in order to explain it to a judge or a jury.Rebeccah
"Even salaried employees are entitled to payment for overtime, unless they meet the specific requirements for categorization as "exempt". "
Yeah, realistically pretty much everyone working in high tech is exempt.-The poster formerly known as csnow
Yeah, realistically pretty much everyone working in high tech is exempt.
Hmm, from top of head, the qualifying test was supervising 3 or more employees; "professional," or principal/partner, or other head of business. Always wondered if all of the MS certifications were just to show that the employees rated as "professional" to hit that definition . . .Occupational hazard of my occupation not being around (sorry Bubba)
"Hmm, from top of head, the qualifying test was supervising 3 or more employees; "professional," or principal/partner, or other head of business. Always wondered if all of the MS certifications were just to show that the employees rated as "professional" to hit that definition . . ."
I think there is some criteria based upon a multiple of the minimum wage.-The poster formerly known as csnow
The common test for hourly employee or contractor is--- Do they work as directed (employee) or self directed (contractor)....
Labor companies get around this by providing a labor pool to a contractor... they also change forms of business (name change) every so often to get a more favorable insurance rate due to poor safety record. The obvious savings by claiming someone a contractor is payroll tax burden and insurance savings.
Most rural cable installers are contract employees as are Fedex Drivers.. they own their delivery vehicle (chattel mortgage) and self direct their deliveries.
Another loop hole to avoid the insurance and payroll tax burden is equipment rental.
For example if your compensation is $20 per hour and I pay you half of that in equipment rental. For SS and medicare alone you would save $1.50 per hour not counting insurance, unemployment and anything else figured on your hourly wage.
You can still legally pay equipment rental, but like the home office deduction, it falls under greater scrutiny by Big Brother.
So for 10 bucks an hour for your hammer.... you better swing a pretty big hammer;)
Anybody care to have the IRS explain to this guy how the law works?
LoL!
Just wait. A "college student" who gets a 1099 ought to flag the IRS's computers, since it is alleged that they use comparision software to find "mismatched" data.
That, or it won't be IRS, it'll be SSA/Medicare (desparately) looking for any revenue they can find.
Going to be a shock, "oh yeah, you owe us 15% of that money you've already spent; by the way, have you heard from the IRS yet . . . ?"
Hmm, doesn't MI have an income tax, too, and state licensing for contractors?
Hmm, doesn't MI have an income tax, too, and state licensing for contractors?
Yes, we have income tax. State licensing is required for GC, plumbing, electrical and mechanical. No licensing necessary for drywall, tile, paint and some other contractors.
Yes, we have income tax.
Then, they'll likely first to come around visiting this wondrous employer, would be my guess. They, naturally, would share any discrepancies found with their federal brethern . . .
Hmm, that or the State WC agency will want their share of a contractor's pay . . . Occupational hazard of my occupation not being around (sorry Bubba)
Well, apparently the authorities are asleep at the wheel. Just for kicks, I had a buddy reply to the ad and politely point out that what they're advertising is illegal and perhaps they might want to talk to their lawyer about this before they get into trouble.
He got a nice, earnest email back saying there was no problem at all because they are being employed through their accountant. They even put their company name on the email. I'm guessing their accountant's name is Homer Simpson...
there was no problem at all because they are being employed through their accountant
Dang it, so I could have sloughed off all sorts of compliance expenses by dumping them on my book keeper--sheesh, I was dumb . . .
Hmm, I wonder if GAAP covers illegallly hiring trade contract work?
My "spy" in Austin guesses that it would not matter who did the hiring--if you "contract" with a person who does not have the status of an employer (in Texas, at least), that person is no longer a sub, but an employee, and the hiring (contracting) party is fully responsible for all that entails (including trade practice & licensing).Occupational hazard of my occupation not being around (sorry Bubba)
Thought struck meIf he is not the employer, why is he advertising for the people?think some one mentioned itIs the accountent paying the taxes?
bobl Volo, non valeo
Baloney detecter
Amazing. It looks like the advertiser can neither speak Spanish nor find Home Depot.
-- J.S.
The ones doing the explaining will be the state workers compensation board and the department of labor. There isn't anything illegal about paying a sub contractor by the hour. It is illegal to call an employee a sub contractor. I receive a bunch of 1099's at the end of the year. It's all sub contract work, I don't work for those that hire me, I'm self employed. I'm also a sports referee. Schools, rec departments, etc. hire me as a sub contractor of sorts. I'm not a temporary employee, I'm hired to do a job or provide a service.
It's a whole different situation when that "sub contractor" works independently or on your crew and you direct his/her activities. An employer that does this is circumventing social security matching payments, tax withholding, liability and workers compensation insurance. I've been called in by the department of labor and told to bring my business checkbook. They make random calls on businesses. They look at every single check stub. If it is made out to an individual, they want to know why. They often take down those names and do a follow up.
Beat it to fit / Paint it to match