They are statutory employees, get a W-2 with a check on that
category, have FICA taxes deducted but not income taxes, and
use Schedule C.

Nan, EA in LA

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- quote -

I think they'd be referred to as statutory independent
contractors, since they'd be actual employees.

Stu

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"DFStoneJr" wrote:

- quote -

I'm suspicious there. He may have no more than double
hearsay as to what the people in Centers who work SS-8's are
doing. Any statistics, if they even maintain them, should
be viewed as possibly relevant only to the price of fish in
Denmark. Since there's no appeal of these determinations,
there's no administrative impact in favoring employee
classification, so any "leniency" accomplishes nothing. Due
to the General Accounting Office's chronic ranting over the
overall compliance problem, it would even be
counterproductive in several regards.

Fred F.

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- quote -

Statutory employees??

Carol
What can one expect of a day that begins with getting out of bed.

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- quote -

Dick's observation was excellent. I think that your
description weighs more on the side of employee rather than
independent contractor.

On the other hand, I have a vague recollection of a statute
that allows some commission sales people to be treated as
independent contractors for income tax purposes even if they
are actually employees.

Does anybody else remember anything like that?

Stu

================================================== ==========
Moderator:
Yes, as long as they are not captive sales people or
they work in an industry designated as trade practice
by the IRS.
================================================== ==========

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"Dick Adams" <rdadams[at]smart.net> wrote:

- quote -

Not necessarily. In most cases, it's pretty obvious whether
an employer-employee relationship subject to withholding
exists. I'm no an accounting manager. I work M-F from 8 to
5, 6, 7, 8 ...., as mandated or requested by my employer. I
am subject to my employer's direction and control. I
receive a salary every two weeks. There's no justification
for me to go to my employer and say, "You know, why don't
you pay me as an IC?"

The guy I talked to was speaking of relationships that are
less black-and-white, ones in which either party has reason
to file or has file an SS-8. In such cases, he says, the
IRS is coming down more in favor of the employer's decision
to pay the worker as an IC rather than as an employee.

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- quote -

Against the employer, they can and will assess back
unemployment taxes. Against the employee/subcontractor, they
probably won't do anything except when your "employer's"
situation has changed and then you have to amend your
return.

- quote -

Should have and did are two different things and what should
have happened has no bearing on what you have to do by April
15. What *did* happen dictates your actions.

- quote -

Not as much you as the employer. We had a client whose
subcontractors were re-classifed by the DOL and it sure
created a mess for everyone. The subs were not happy that
some of the income they thought was from self-employment
eventually became wages. Fortunately, the DOL and IRS only
went back to the beginning of that year but these subs had
already paid estimated taxes based on that
now-wage/formerly-self employment income.

Again, as the employee/subcontractor you don't have a lot to
worry about at this time from the DOL but definitely be
aware that your return can be changed if the IRS gets
involved in it.

Carol
What can one expect of a day that begins with getting out of bed.

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- quote -

Why's that? What's the DOL going to do to me if I was paid
as an independent contractor and not as an employee of the
company? The concern that sarted this thread was whether
taxes should have been withheld from my earnings, whether
the employer should have paid the employer portion of the
FICA tax, and the implications for the tax return that I'm
filing in two days.

Now I have to worry about DOL? In what regard?


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- quote -

Lead generation is a shared responsibility. Calls that come
into the office are assigned to salesmen on a somewhat
random basis -- I never could figure out exactly what the
rationale was. At the same time, we were requested to knock
on doors, write letters and use similar methods to generate
leads on our own. You would think that leads generated that
way would belong to the salesman who did the soliciting, but
that wasn;t always the case, as some leads that I generated
wound up being followed up on (and sometimes sold) by other
salesman. For all intents and purposes, it would appear to
me as if we were following up on leads provided to us by the
company, and requested to solicit leads on behalf of the
company, not on behalf of ourselves.

We were free to sell for other companies if we terminated
our relationship with the company in question.

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- quote -

This is just not true! If it were, we'd all be
self-employed

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"DFStoneJr" <DFStoneJr[at]NOSPAMhotmail.com> wrote:

- quote -

You are in a very grey area. Real Estate Sales people,
Barber, Beauticians, and others fall into trade practice
clause. I think there are two issues that are not going
to make you independent. The first is: who is paying for
lead generation? The second is: are you free to sell for
other companies?

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"DFStoneJr" <DFStoneJr[at]NOSPAMhotmail.com> wrote:

- quote -

I'd still say you would be considered an employee rather
than an independent contractor.

Stu

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- quote -

I'd worry more about the DOL anyway.

Carol
What can one expect of a day that begins with getting out of bed.

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- quote -

Stu,

Just to complete the picture by answering your additional
questions:

1) and 2) I wasn't told how many hours to work in a day. I
was expected to provide estimates for all the potential
customers given to me at the start of the day, as well as
any others that came in during that day. I was also
expected to supervise the crews installing the roofs I sold,
inspect their work upon completion, collect payment from
customers and provide assistance to customers in filing
their paperwork with their insurance companies. If it took
14 hours, as it sometimes did, that's what was expected.
Some days, such as when it rained, there wasn't a lot to do,
and I was free to go home.

3) Business cards with my name and the company's logo were
provided by the company. The cards listed my personal
cellphone number and my e-mail address, both at my request,
to provide customers with the information necessary to
contact me directly instead of through the office.

3) There was no written contract. There was a verbal
agreement that if I came to work for the company, I would
receive a commission of 45% (reduced to 41.85% about a month
later) of the gross profit of each roof I sold.

I've responded to a couple of others on this thread. If you
have any further thoughts, I'd be happy to hear them, no
matter how brief they might be. Thanks for your time and
advice.

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- quote -

Fred,

Thanks.

One of the guys I sold a roof to is an examiner with the
IRS. Although he's in the corporate arena, he knows more
about the individual side than I do.

He says the IRS has become especially lenient on employers
in determining who's an employee subject to withholding and
who's not. More importantly, he agrees with your assessment
that the financial benefots would most likely be a wash.
Taking that into consideration, along with the potential for
ill will being generated, I guess I'll juts go ahead and
file the Schedule C and forget about the SS-8.

Many thanks to everyone who responded.

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DFStoneJr wrote:

- quote -

Barring a clear situation, it's not easy to classify you
based upon facts you may post no matter the level of detail.
Though you've worded it in the orig post as favoring EE,
these determinations can be difficult, and if you file an
SS-8, the "employer's" response will be solicited. It's not
unusual for the paperwork the IRS thus mulls over to
seemingly not be referring to the same worker.

- quote -

Amend, or IRS may do it for you, triggered by the SS-8
filing. Deductions may be moveable to Sch A in whole or
part, 1/2 SE tax deduction is lost, SEP deduction is gone
and penalty may apply, but a 7.65% portion of the 14.1% net
self-employment tax remains, whether kept by IRS or
reimbursed at the request of your employer. Or the latter
may eat the employee SS portion if they amend 941's, but tax
you on that in a future W-2. Alternatively, if the employer
were also audited, a relief procedure under section 3509 may
apply, which changes again the picture on filed worker
1040's. In sum, an SS-8 can become procedurally messy,
protracted process, and difficult for an unrepresented t/p
to handle.

A tax practitioner can best advise on the net money aspects,
whether likely EE or IC, and whether further to wake up the
sleeping dogs - the IRS, the "employer" dragged into it, and
to the consternation of the other same-class 1099 workers
there. But especially if the SEP is giving you full
deduction benefit and more tax-deferred investment earnings
than with an IRA, some mental math suggests your present
situation is likely +/- a substantial wash.

Fred F.

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"DFStoneJr" <DFStoneJr[at]NOSPAMhotmail.com> wrote:
- quote -

It was just a lot longer than I usually like to read. It
wasn't meant as a criticism of you personally. But if I'm
not getting paid for it, I tend not to want to dwell too
long on it.

- quote -

While there is additional information which may be relevant
(does your employer tell you how many hours to work each
day? Or that you have to work each day? Do they give you a
business card? What does it say? Do you have an employment
contract?

There may be others I can't think of off the top of my head.

But based on what you have given, it looks pretty clear to
me that you are most likely a statutory employee.

I believe that the IRC provides that certain statutory
employees who work strictly on commission may be treated as
independent contractors. But I don't remember the details.
I'm sure someone else here will, though.

- quote -

Ah, well, I'm sure the tax preparers here will be able to
give you a better response to this than I could.

Stu

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"Stuart O. Bronstein" <spamtrap[at]lexregia.com> wrote:
- quote -

From what I have been able to determine, the issue of
whether someone should be considered an employee subject to
withholding or an independent contractor exempt from it is a
complex one. I thought the information I included was
relevant; apparently, at least some of it wasn't. I
apologize, but, not being a lawyer, I didn't want to be in
the group alluded to in your second paragraph.

Here are the two questions that it comes down t:

1) Am I an independent contractor or an employee who should
have had taxes withheld from his checks?
2) If I file an SS-8 and the IRS determines that my employer
should have withheld taxes, that my commissions should have
been reported as wages on a W-2, and that I should not have
filed a Schedule C, what happens to the deductions I claimed
on the Schedule C, the SEP I set up, and the self-employment
taxes I paid? Do I have to amend my return?

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"DFStoneJr" <DFStoneJr[at]NOSPAMhotmail.com> wrote:

- quote -

Either way your hypothetical is too long and involved at
least for me. Get to the point and ask your question.
We'll let you know if there are other factors that are
relevant.

I volunteered as a pro tem judge in small claims court for
years. And I was always astounded at what legally irrelevant
garbage people thought was important and went on and on
about, and the legally relevant facts they utterly left out.

Stu

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It's not a homework assignment. Honest. I just used the
hypothetical format I became familiar with in grad school 19
years ago; I also figured it was better to not name my
former employer in a public forum.

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