- quote -

Usually you have to be one or the other but sometimes you
can be both. Generally, for you to be treated as both an EE
and an IC you have to perform two separate functions, the IC
portion of which should NOT be related the company function.

For example, let's say that I'm employed as a staff
accountant, but also a very skilled carpenter. The company
I work for wants to "upgrade" the look of the office by
adding some fancy molding and woodwork to the offices,
things like chair rail, cornice work, & molding. It is
possible for me to do those things as a contractor and not
an employee.

However, if I'm employed by a construction company as a
carpenter and the construction company wants to upgrade the
look of its offices or a model home, it would be ill-advised
for me to act as a contractor for that project since I would
be doing substantially the same work for the same company
that pays me on a W-2.

Gene E. Utterback, EA

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- quote -

Is there any actual prohibition against being both an
employee of and a contractor for the same company? (I've
done it, so I hope not; but the amount of contracting was de
minimus, and it was a long time ago so I'm not worried about
the answer. Also, I didn't take advantage of the
contracting to do anything other than pay taxes and spend
the remaining money.)

Seth

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<JFOREMAN10[at]houston.rr.com> wrote:
- quote -

You should look at the economics of this proposal VERY
carefully!

If you provided services through the new company, that
company would have to pay you a salary - with all the
attendant withholding and payroll taxes, unemployment,
worker's comp, etc. If your combined salaries exceed the
FICA maximum in any year, you would lose the employer's
portion of the amount paid by the second company. (Your
share would be treated as additional income tax
withholding.)

Even if it works from other angles, these complications
could make it unworkable.

Lanny K. Williams CPA
Nawarat, Williams & Co., Ltd.
Income Tax Services for Expatriate Americans

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<JFOREMAN10[at]houston.rr.com> wrote:

- quote -

Another idea. Could I setup a corporation and bils through
it as well as be an employee for the company I am billing?

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<JFOREMAN10[at]houston.rr.com> wrote:

- quote -

Yes but the deductible IRA limit is so low. I like the
flexibility of the self employment SEP.

Maybe my wife can be an employee there so our insurance is
still in effect and I will not be an employee and just
contract with the company. Is this legitimate?

Thanks

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<JFOREMAN10[at]houston.rr.com> wrote:

- quote -

You can't have it both ways.

However, you can contribute to a deductible IRA.
That should solve your problem.

--
<<< Benjamin Yazersky CPA [NJ & NY] > >
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- quote -

No.

Helen, EA in PA
Member of The Tax Gang
Immediate Past President, PA Society of Enrolled Agents

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I am an employee at a friend's company. They do not offer a
retirement plan. Since they do not have a retirement plan
could I contract with the company so that I could set up my
own self employement SEP while still remaining an employee
for health insurance purposes?

I know this sounds kind of crazy but it would allow me the
best of both worlds.

Thanks.

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