How do you classify your workers?

**David Fermani** · 03-30-2007, 05:01 PM

How do some of you pay your workers? Are they treated as sub-contractors that get a 1099 or are they actual employees? I always lived in the *grey zone* and sub-contracted my labor to avoid paying worker comp and payroll taxes. I had my subs sign sub-contractor agreements stating that they used their own tools and supplies (which they did), that they were free to work at other shops and that they were responsible for any and all taxes and insurance. I saved alot of money this way. Do any of you do it this way?

**imported_Detailing Technology** · 03-30-2007, 05:29 PM

1099 and Corp to Corp. My workers are not detailers, but it doesnt matter, same business issues.

I also decline my personal workmans comp.

**Bigtony** · 03-30-2007, 06:57 PM

I do the same, 1099Misc.

**3Dog** · 03-30-2007, 10:47 PM

Sub contractors. But that doesnt change worksman comp. Worksman comp is based on what you pay out for labor.

**David Fermani** · 03-30-2007, 11:16 PM

Originally Posted by 3Dog

Sub contractors. But that doesnt change worksman comp. Worksman comp is based on what you pay out for labor.

You`re not responsible for paying WC if your help is sub-contracted. WC only covers employees and in this came that`s not what they are.

**jimmybuffit** · 03-31-2007, 05:17 AM

We pay hourly wages. In our structured, fixed location my CPA feels my guys are not independent contractors.

The definition is quite complicated and (folks say) it raises a red flag with the IRS.

Just my 2 cents.

JB

**MichaelM** · 03-31-2007, 08:01 AM

Originally Posted by Jimmy Buffit

We pay hourly wages. In our structured, fixed location my CPA feels my guys are not independent contractors.

Same here.

**imported_DennisH** · 03-31-2007, 09:25 AM

My tax advisor told me is was fine to do Subs and 1099 till I got a IRS audit they ZAPPED for 2 years of taxes for the employees to include state and social security. The fines were 10% per month so tax owed was less than fines. We protest and lost and the tax advisor bailed with Ã¢â‚¬Å“gee IÃ¢â‚¬â„¢m sorryÃ¢â‚¬ but you are still respondable for your own taxes. I dig out the IRS regs I couldnÃ¢â‚¬â„¢t see were any judge or board could find it either way. Now this was not a detail business but similar in structure to what you guys are doing. Remember they can go back 3 years and 5 if they have justification.

**3Dog** · 03-31-2007, 07:03 PM

Originally Posted by David Fermani

You`re not responsible for paying WC if your help is sub-contracted. WC only covers employees and in this came that`s not what they are.

In Tennesse (modeled after Texas, Arizona and Florida) you are required by law to have a workmans comp policy even if you a a one-person operation. If you use subs they use what you pay out (1099) to base your payments. In the past WC was only for laborers..not the owner. We have been informed that the Federal law is changing and soon the owner will have to have a WC policy also.

**PRB** · 03-31-2007, 07:40 PM

Originally Posted by David Fermani

I always lived in the *grey zone* and sub-contracted my labor to avoid paying worker comp and payroll taxes.

Did you pay them a higher wage to compensate for their having to file as K`d labor and not as employees?

**David Fermani** · 03-31-2007, 08:43 PM

Originally Posted by PRB

Did you pay them a higher wage to compensate for their having to file as K`d labor and not as employees?

I feel that I do according to what other shops are paying their people. I have 1 person that regularly gets paid $1000-$1200 per week without any deductions. I write a check directly to his company and he`s suppose to pay his taxes and insurance.