For a key man that brings a whole trailer load of tools, plus pics, ladders, scaffolding, to the jobsite, ever paid a weekly tool rental, or “allowance,” outside the paycheck? I am talking about a tool kit in the $5K magnitude.
Ever have your workers comp auditor cry foul?
Gene Davis, Davis Housewrights, Inc., Lake Placid, NY
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Replies
I worked as a union carpenter and the company ocassionally paid me some overtime in lieu of a tool allowance when i brought in my tools that weren't required by the union tool list. i was rebuilding my house after a fire and they also let me have good stuff when they were getting rid of extra stuff at the end of a job. It would cost too much to move, store and remember what they had piled up somewhere but it helped me
Are we talking bonafide empoloyee?
Can't see why the comp or other auditors would cry foul. This can be part of a standard cafeteria plan payroll, where there are various extras available like transportation allowance, tool allowance, uniform allowance, housing allowance, etc, that are required and or provided by the employer. The idea is that this is money that is earm,arked for the specific use - such as tools, so it would be deductable anyway for that employee in many circumstances so when it is propvided by the employer whether direct or via this sort of vehicle, it is deductible for the providing employer.
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Yep, bonafide employee. W4, W2, FICA, fed and state witholding, the whole thing. Included in the WC rolls.
This ain't no sub, this ain't no disco, this ain't no foolin around.
What I may do to keep the whole thing completely clean is write him his weekly check for tool rental, made out to his legitimate biz, not him, personally.Gene Davis, Davis Housewrights, Inc., Lake Placid, NY
I'll bet that you are underestimating too. the kit you desribe is more like 8-10 grand or more.
Welcome to the
Taunton University of Knowledge FHB Campus at Breaktime.
where ...
Excellence is its own reward!
You know, I probably am. Start with enough pneumatic nailguns to sink a canoe, move through the table saws, all the heavy duty corded tools, the cordless ones, compressors, blah, blah, blah. The best Hilti powder-actuated gun they make. Scaffolding and ladders out the wazoo. Wow! You may even be light.Gene Davis, Davis Housewrights, Inc., Lake Placid, NY
How could I be light with that qualifying phrase, "or more"?
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
Give him a dollar or to mare an hour to make up for it.
What's goiing on with the name thing?
Shout out to Andy C. Namaste my friend.
http://www.hay98.com/
Problem with giving him an increase in wages is those wages need to be taxed by both the employee and employer and then the worksman comp man wants his cut.
If it can be structured to be a benifit it's a write off and no comp money...
at least in my limited understanding of the matter...
"Problem with giving him an increase in wages is those wages need to be taxed by both the employee and employer and then the worksman comp man wants his cut."
That's kinda what I was thinking. Seems to me this would be a good (and legal) way to avoid taxed and WC.
Like maybe pay an employee $2 less per hour. Then pay them $1 per hour tool allowance, and a $1 per hour clothing allowance. That way the employee doesn't pay income and SS taxes on the $2 of income, and the employer doesn't pay WC on it.
Any reason this wouldn't work?
My Brother (a mechanic) was paid this way for a while. But his employer was trying a bit too hard. He was paying my Brother half his wages as wages, and the other half as a tool allowance. But his accountant put the brakes on it and said the IRS would never go for it.
We only do well the things we like doing. [Colette]
>>>>"Like maybe pay an employee $2 less per hour. Then pay them $1 per hour tool allowance, and a $1 per hour clothing allowance. That way the employee doesn't pay income and SS taxes on the $2 of income, and the employer doesn't pay WC on it.Any reason this wouldn't work? "Boss, that would work depending on two things. If the employee is getting a tool allowance and doesn't have any tools to show for it then this might be a problem. Of course if you get audited the likelihood that the IRS agent probes that deeply is slim unless you have an exorbitant tools allowance.The clothing allowance can only be paid out for items that are specific to use in the trade. Blue jeans for a carpenter probably would raise an eyebrow but blue coveralls for a mechanic with his name sewn on the pocket would go over better. If you can prove that the clothing item is a safety related item then you could allow for it.
Jon Blakemore
That's right too. it is not a clothing allowance, but a uniform allowance. Safedty toed shoes, hard hats, carpenter overalls with company name sewed on...if the boss requires it, it is auniform.
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
With the clothing allowance thing, I wasn't thinking of the boss requiring uniforms, then paying for them. I was simply thinking about the boss paying a clothing allowance period. I'm sure you know all too well that construction can be hard on clothes. So why not pay an allowance for clothes instead of wages? Even if a GC was audited, I would think the employees could prove they bought enough work clothes/boots to cover the clothing allowance. (As long as the allowance was reasonable)
Difficulties strengthen the mind, as labor does the body. [Seneca]
Boss,Surely the employees buy enough work clothes to satisfy an auditor. The problem is the auditor would look at a pair of Carhartt's and determine that they are just as good on the street as they are on the site.If the clothing cannot be labeled job-specific then you might get into trouble.
Jon Blakemore
"If the clothing cannot be labeled job-specific then you might get into trouble."
You may well be right - I'm just guessing.
Maybe with some creative language in the company policy about work wear there would be a way around it...
Truth persuades by teaching, but does not teach by persuading.
I'm just reporting the IRS rules. Don't ask me to get them to make sense.
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
Beware....I regret to say I've read the small print on my WC policy (I'm in PA) and it is draconian to say the least...you buy the guy lunch and it get's whacked on the WC. As for the audit, you may be right on the cafateria plan...I'm now gonna ask...I'd suggest a weekly expense re-payment. On the books, it's a legitimate expense and won't show up as a wage on an audit. Say 15$ for cell phone, 50$ for gas, etc. IF they are all spelled out I believe it will fly. I will say this...we just had a employee cut off his thumb tip...and WC paid the whole thing and were really great about it. BTW, if you need extra cash for that next underbid project, cut off your thumb tip--it's worth 50, yes 50 weeks of PAY!Do anything...even if it's wrong...It's not wrong...It's rustic!
Methods & Materials Building Co.
Authentic Timber Framing & Classic Carpentry
http://www.methods-materials.com
That is exactly what I was talking about. It is called a Cafeteria plan and accountants know all about how to handle it. bona fide and done every day.
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
You musta missed the exchange, in which I got my new name. I get called a lot of things, and some of them are catchy, so I keep them for a while.
$1 per hour? Whaddya think it would cost me to rent enough gear to frame a house? All I own is stuff you can trim with.
Let's just start with something like this.
View ImageGene Davis, Davis Housewrights, Inc., Lake Placid, NY
Yep missed it.
As far as the tool thing goes. Does everyone else have access to his tools? If he's wearing his own tools out working for you that's one thing. But if he's providing tools for your other employees to make your living with then he's kind of a partner.
Shout out to Andy C. Namaste my friend.
http://www.hay98.com/
I've got what sounds like a similiar set up with my tool trailer. It's set up primarily for framing with lots of pneumatics from frame to finish, a Wacker 6500W generator, a Rol-Air 20 gal compressor, chops saws, SCMS, table saw... you get the idea.
I inventoried it for insurance reasons again this spring.... $16,000+ in tools, 5G for the trailer itself, 1G for the alarm system. Now let's talk about the rig that pulls it around. It all adds up quick.
It also sounds to me like he should be getting paid as a sub... you said he's got his own biz, right? Who the he11 has time to take a full time job while they're running a business? Yer making out like gang-busters unless his wages are up around $50/hr or better. I'm bettin' he's carrying insurance too, right? I'm curious... can you explain a bit more about your relationship and his 'business'? Does he just not have the connections established yet to go it alone full time?
Why is he still an employee then? Why aren't you paying him as a sub (he has a bonafide business, right?) so you can both make more money?
And I'd wager his "kit" is more like $10-12G. $5,000 dollars dosn't buy a "trailer load of tools"...Crikey, the trailer alone cost him nigh $3G! Add the Hilti gun and a scaffold set and that brings him well over the $5G you estimated... I can put $5G of tools in the trunk of my car. And have.
Forget the tool allowance. Make him self-employed and lose the 'worker's comp auditor' forever. The cut you were paying the gov'mint you can then both split. Win-win. (Well, guv'mint loses.)
IW,
I was in a situation similar to what you mention a few years back. I was doing my own thing when the job I was working on ran out of funds with a balance due me of about $4500.00, it being winter and not having much lined up due to the fact that I had planned on finishing the project.
I was approached by a family of builders to come aboard and sub under them, I had work comp on my son that came along with me and liability on the work I preformed.
I brought along ladders, walk plank, drywall lift, tile saw, siding saw table plus the usual truck full of tools. As I worked for some of the different family members, some would pay me to use the various tools that while others would just figure that a drywall lift, siding saw table, etc. were common carpenter tools. I did this for about three years until the day we went back to the above mentioned job. That morning I explained that I wasn't going to finish a job that I had started years earlier for less money.
I'm back working on my own.
I got the $4500.00 that was due me before this all came about, after I put a lien on the property.
The guy that advised me to put the lien on the property was the same guy they hired to finish the project.
Go figure!
As for giving your guy something extra for his tools beyond the scope of normal carpenter tools, I guess if he didn't have them you would either be purchasing them, renting them, or your projects would be moving along at a slower pace. A man can't climb a ladder that isn't there. Compensate him.
RU
I remember the days Timoth described, we all just figured out what was fair and reasonable between us .. but that was a long time ago .. I can see the workers comp point of view, so what happens if someone uses one of your employee's tools (not yours) and something happens .. best ask your lawyer for advice on how or if you can work it out .. my biggest problem when I had a union shop was all the power tools and extention cords would start breaking every Friday morning ... everything is fine until something happens ..
Aye,
Another form I need.
I'll share my poor idea with you and everybody. (D&C)
This Excel97 SS should act as an inventory list and cost analysis sheet.
I've kept it to 1000 lines to keep the size down.
SamT
I like it. great spread sheet!Working for nothing is not getting any cheaper.
I have used a good accountant to insulate me from the tax boys(Canada) just as you hire a good carpenter/builder to build your project. It should be part of the overhead and here the fee is deductible. The reason I liked my accountant was his attitude. He said "Have you ever received a letter from the tax department saying "Have you remembered to deduct---???" Not likely. So he would file for me claiming what he thought was legitimate and wait for their reply. This never came. They always accepted his return on my behalf. He said his job started when they denied something that he had claimed and was part of his fee.
The spread sheet is a great idea. I used an inventory system for insurance purpose and found I was 50% light.
Old marketing philosophy " Sell it for a loss and make it up on volume"
Cheers
Mac