Discussion:Employee vs. Contractor?

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Discussion Forum Index --> Tax Questions --> Employee vs. Contractor?

Cpasupport (talk|edits) said:

16 November 2005
S Corp owner runs a limo/taxi business. He owns 5 such limos.

His workers have to pay if they mess up his car (accident) by agreement, but he lets them use his car. He pays them lets say 30% of collections. The workers choose their hours off of the designated upcome jobs list (Shuttle from Airport 8:00p.m.,9:00p.m.).

He's been paying them as contractors but except for the agreement that they reimburse him for damages, they have no risk of loss (they don't carry the insurance, pay for gas, etc.).

Employee vs. Contractor?

Next one. Ethical questin same topic. S Corp Owner/HVAC employer pays HVAC guys to install. They use employers vehichle and work 40 hrs. per week and get install bonuses for efficiency. Some only get the install bonuses but still 99% of the time work with employer. I think they are employees. They are paid as contractors.

I hate to switch the employer to classifying them as employees because he had a previous problem with not paying withholding taxes that has resulted in it being assessed against him personally.

A)Drop client=He pays me and except for this books are decent B)Keep going as contractors & keep signing those tax returns as 100% contractors (Except S Corp owner does pay himself a salary). C)Force the change to employees. D)Anyone?

Snooks (talk|edits) said:

16 November 2005
Sound like employees to me. I would explain the rules, if he doesn't agree suggest submitting Form SS-8 for clarification. If client still refuses to comply, you should probably suggest they find a new accountant.

Mellace (talk|edits) said:

17 November 2005
Question #1: You could argue (and I believe win) that the workers are subcontractors. a. The employer does not control the hgours when people have to work. b. The 30% fee the owner gets could be viewed as more of a rental fee for the equipment. I would prob. structure it as such, adhering to the laws where the business resides.

Question #2: Employees. The employer CONTROLS when the employees work schedules the jobs, sets the pay, etc. You sound like you may be just starting out and don't want to really loose a client, but believe me, doing anything intentionally wrong isn't worth doing. Do you know that the IRS could suspend you from doing any tyoe of tax return for three years? Also, if the IRS feels as though his mistakes were due to your improper advice, or they feel that you should have known better as a professional, you could also be hit with a prepare penalty. Believe me, it's not worth it. The first time this guy has a problem with the IRS over this issue he's going to save his own back and say that he relied on your advice. Not worth the client. Good luck! -Mike Mellace www.mellace.com

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