Last week contractors in Kansas got a letter stating that they were liable for the unemployment contributions, penaltys and interest due from subcontractors if the sub did not pay his unemployment taxes. The only way around this evedently is to require the sub to providea good and sufficient bond guaranteeing payment of all contributions, penalties and interest due ot to become due with respect to wages paid for employment on the contract, or by submitting a “Prime Contractors Release of liability Application , and receiving a certification from the Dept OF Labor that the sub, has paid all bills, and that he is not liable for taxes on wages paid during the referenced subcontract.
Do any of you folks in other states have to deal with this type of govt. PITA, and if so how much of a burden is it ?
Replies
Fbart,
I'm wondering how the state is going to track that? By subs associated with a GC's building permit? Not trying to be offensive to anyone in Kansas but c'mon, do they realize how much work that would be.
In Florida, everyone with a license and a business pays the unemployment contribution. They don't tie it to any association between the GC and subs...you are just required to pay it or else I suppose you face some sort of fine and penalty. Now I'm sure there are unlicensed subs here that don't pay squat but no one has ever said the GC was responsible for them.
Besides, a GC shouldn't be using them if they are unlicensed.
Mike
All legitimate employers In Kansas are supposed to pay Unemployment taxes also. What is really draconian about this is the liability for penalty and interest, on someone elses misconduct.
To others reading this thread, the issue is only Unemployment taxes, not workers comp. insurance.
we recieved the same letter and I find it hard to believe this would stand up in court.
I'm not a lawyer and not saying it wouldn't, just that I find it, for lack of a better word, Wrong.
I know of this letter in Ohio too. Here the biggest fear is Workers Comp as they can and do audit occasionally and if you lack comp documentation from any sub and the sub hasn't paid you pay their comp at your rate. And you rate is based on payroll from the last 6 months so yours goes up the next 6 because of it. DanT
Comp is worked the same here.
Comp works the same way here in MA and you better have those certificates too. Yearly audits are the norm here..... as soon as you re-up your policy for the year they schedule your audit. But instead of your six months, we pay the full 12 months in advance... all up front and all based on the audit of the previous year. So you often get double whacked as you have your audit and find that you owe for the previous year and now need to match that for the upcoming year. View Image
So you often get double whacked as you have your audit and find that you owe for the previous year and now need to match that for the upcoming year.
Damn man, thats gotta hurt the ole pocket book! Christ I'm glad I dont have to worry about stuff like that.
Doug
Fbart,
This should sound like old news to guys on the east coast. Not sure about Kansas but in a bunch of other areas employees being paid as subs has become almost the norm. I would bet a bunch of cash that's the root cause of this.
When guys who work by the hour are told exactly how to do something and use the bosses tools, they aren't subs but rather employees.
And if anything goes wrong? Well, they most likely didn't have W/C on themselves ( Someone will be along any second to tell you you can't put W/C on yourself if you're a Sole Proprietor. It's not their fault, their insurance agent doesn't know his business) or disability or unemployment. And then, to top it off, they find out that the Health insurance they get thru their wife's job doesn't cover guys who are "Self Employed".
So some states are cracking down and it sounds like yours is.
But don't be fooled, the state doesn't so much want to take care of guys who are stupid as it wants to make sure it gets it's cut.
New Jersey's way of dealing with it was to make EVERYONE be covered by W?C insurance. They must have figured that no guy billing his boss was gonna pay $12 on the hundred. That would eliminate any gains he got by being a "Sub".
A ton of Sole Prop. I know were not covered and the builders and shops they did work for got slammed. An old customer of mine sells installed projects. He has a pool of sole Prop. installers who work alone and therefore carried no W/C.
A few years ago he got hit with $22K in W/C payments to cover all the subs who were not covered.
I know one company that got around the whole thing by making all of it's subcontract installers become either LLC's or S-Corps and then just invoicing them.
Not sure that still works, but it did for a while. They didn't even have to send them 1099's then.
They'd laugh that one off here. how is an individual sub going to lay himself off and prove that he is not still working under the table.
Or to look at it another way - When I closed up shop in '81 in CO and let myself go, after the corporation had been paying WC, taxes, and underemployment all those years, I had to jump through a lot of hoops to file for unemployment to demonstrate I was not doing a fraud scheme.
And get this - I didn't even want the darn unemployment check. What I wanted was the name of the contractor whose jobs were listed on that board over there. They were not about to give out opportunities to work to somebody just because he said he wanted to work. Oh No - They had to know that you would be drawing down the fund otherwise first.
It took me three days to satisfy their paperwork and then less than three hours to land a job - I could have been working all that time.
Welcome to the
Taunton University of Knowledge FHB Campus at Breaktime.
where ...
Excellence is its own reward!