Stu wrote:
- quote -

P appears to be paid on a W-2 basis by A, and not C, with a
fairly large chunk of the hourly rate NOT going to P (i.e.
shielded from W-2 witholding). P was aware that his H-1
status would not allow him to become an employee of C, due
to Company Policy at C, the very first day he started
working there. Management at C was promptly notified of
this and provided a reference to
http://www.irs.gov/pub/irs-pdf/p15a.pdf

C may have been obligated contractually with A to retain P
for the duration of the contract, but that contract appears
to be ongoing now.

The problem may have arisen due to a hiring manager at C not
being aware of Company Policy regarding H-1, or Agency A
trying to desperately place P, but the fact that Management
at C was alerted and the situation is ongoing leaves one to
wonder if this should be reported to the IRS on a form 211.

The section on "leased employees" in Publication 15A leaves
a lot of ground to make the relationship between A, P and C
legal taxwise, but I am not an tax pro.

Regards,

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TxQns wrote:

- quote -

I'm not an expert on this, but I believe that under INS (or
whatever it's called these days) rules, P has to be an
employee of someone, and it's either A or C.

In terms of whether the person is legally an employee or
independent contractor, there are many more facts that are
needed.

Stu

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Company C "hires" a Person P (contract to hire) from Agency
A for software development. Person P is in the U.S. on a
H-1B visa. Agency A fails to disclose that to Company C, and
as a result Company C can't hire Person P as an employee,
even after 6 months.

C pays A on a hourly basis for P's services.
P is being supervised and trained by real employees of
Company C.
My view: Per IRS Publication 15A, P is actually an employee
and not a contractor of C, and the IRS is not getting their
full W-2 withholding from the amounts C is paying to A/P.

Is this worth reporting to the IRS?
On a IRS 211 form?

Thanks.

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