Cracking down on misclassified workers

[kelpdiver 2]

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Interestingly, this was one of the key points of the dude that flew the plane into the IRS building.

Prior to this move it was quite easy to work as an independent contractor in software engineering and reap pretty impressive income. This move by the IRS made the big contracting firms what they are today. I don't necessarily agree with the mans assertion that they made the engineers slaves to those companies as I've seen plenty with the determination and balls to do it create their own consultancies to be able to continue to act as a contractor...but they've certainly made it very difficult.

The IRS move coincided with the end of the dotcom/y2k boom. It also spurred universities in India and elsewhere to start focusing on these subject matters.

End result: while a monkey could make easy money in the 90s, now that's no longer the case. Having to work corp to corp or as a W2 through an intermediary interferes a bit with the net you could take in, but I think these other factors are as significant or greater.

[kelpdiver 2]

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If the DZO requires the hours you work, the employment is full time, and the DZO supplies the equipment, in most cases this would be considered an employee not a subcontractor. I am an employer and need to know these things.

On the other side:

I would argue that the hours are not set. You are limited to daylight hours by USPA, not the dz. You may choose not to take a student for whatever personal reason or possibly that you will not jump if the winds are too high or the temperature is too cold.

The dz may supply tandem rigs, but I would argue that an instructor may or may not be able to use certain equipment based on manufacturer's approval. Also, instructors are free to use their own equipment, manufacturer permitting of course.

I think there may be a distinction between the ad hoc TMs and AFFIs that come on weekends, versus a guy that is scheduled/expected to be on site 5 days a week or more.

[marks2065 0]

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If the DZO requires the hours you work, the employment is full time, and the DZO supplies the equipment, in most cases this would be considered an employee not a subcontractor. I am an employer and need to know these things.

On the other side:

I would argue that the hours are not set. You are limited to daylight hours by USPA, not the dz. You may choose not to take a student for whatever personal reason or possibly that you will not jump if the winds are too high or the temperature is too cold.

The dz may supply tandem rigs, but I would argue that an instructor may or may not be able to use certain equipment based on manufacturer's approval. Also, instructors are free to use their own equipment, manufacturer permitting of course.

it does not make a difference that you cannot jump at night or not take a student because of safety reasons, that the hours are set by management and that the dz supplies the equipment does. The equipment manufacturer's requirements do not make any difference, nor do the uspa requirements.

[JohnnyD 0]

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it does not make a difference that you cannot jump at night or not take a student because of safety reasons, that the hours are set by management and that the dz supplies the equipment does. The equipment manufacturer's requirements do not make any difference, nor do the uspa requirements.

Doesn't matter? I guess Perris and Eloy will be going to night jumping only during the summer then. If it also doesn't matter that it takes a mfr rating to jump specific tandem gear, then I guess the ratings are worthless.

The point I'm making is that the dz can argue (I'm betting this argument has been made successfully) that they do not have sufficient control over their instructors to necessitate that they be W-2 employees.

Take it for what you want. You can always protest your 1099 and see where you get.

[JohnnyD 0]

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I think there may be a distinction between the ad hoc TMs and AFFIs that come on weekends, versus a guy that is scheduled/expected to be on site 5 days a week or more.

I think there probably are some cases where that may be true, but I would imagine it would necessarily involve responsibilities that are far more reaching than being an instructor and when the person is acting as an instructor, I would expect they would be doing so as an independent contractor. I would think they would be a W-2/1099 hybrid.

[marks2065 0]

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it does not make a difference that you cannot jump at night or not take a student because of safety reasons, that the hours are set by management and that the dz supplies the equipment does. The equipment manufacturer's requirements do not make any difference, nor do the uspa requirements.

Doesn't matter? I guess Perris and Eloy will be going to night jumping only during the summer then. If it also doesn't matter that it takes a mfr rating to jump specific tandem gear, then I guess the ratings are worthless.

The point I'm making is that the dz can argue (I'm betting this argument has been made successfully) that they do not have sufficient control over their instructors to necessitate that they be W-2 employees.

Take it for what you want. You can always protest your 1099 and see where you get.

the requirements to do the job do not determine if you are or are not an employee.

[georgerussia 0]

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This has needed to have been done for years. It's shameful what some companies have been able to get away with.
http://www.nytimes.com/2010/02/18/business/18workers.html

The article raised some questions:

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Companies that pass off employees as independent contractors avoid paying Social Security, Medicare and unemployment insurance taxes for those workers.

The first part is basically a misguide. Companies do not avoid paying SS/Medicare (and fed/state) taxes for contractors because the contractors are responsible for paying their taxes (and this includes SS/Medicare taxes).

Unemployment insurance - indeed, contractors don't pay it. But they do not use it either (not eligible for unemployment aid), so this sounds reasonable.

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Companies do not withhold income taxes from contractors’ paychecks, and several studies have indicated that, on average, misclassified independent workers do not report 30 percent of their income.

I don't see how it can happen. When you're a contractor working for a company, the company gives you 1099 form, and sends the copy to IRS. I do not see how one can avoid reporting any of their income. It is possible to cheat on the expenses, but not on income. And if the company pays cash, then it doesn't really matter for reporting if he's contractor or employee.

* Don't pray for me if you wanna help - just send me a check. *

[JohnnyD 0]

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it does not make a difference that you cannot jump at night or not take a student because of safety reasons, that the hours are set by management and that the dz supplies the equipment does. The equipment manufacturer's requirements do not make any difference, nor do the uspa requirements.

Doesn't matter? I guess Perris and Eloy will be going to night jumping only during the summer then. If it also doesn't matter that it takes a mfr rating to jump specific tandem gear, then I guess the ratings are worthless.

The point I'm making is that the dz can argue (I'm betting this argument has been made successfully) that they do not have sufficient control over their instructors to necessitate that they be W-2 employees.

Take it for what you want. You can always protest your 1099 and see where you get.

the requirements to do the job do not determine if you are or are not an employee.

Let me be as direct as possible.
Facts that provide evidence of the degree of control and independence fall into three categories.
Behavioral
Financial
Type of relationship
A very strong argument can be made (and I assume has been successfully made) that a skydiving instructor does not meet any criteria that would necessitate being classified as a W-2 employee as opposed to an independent contractor.

Again, you are free to protest your 1099. Are you planning on doing so?

[Southern_Man 0]

What about people who work manifest? Ground trainers/helpers? packers and riggers?

"What if there were no hypothetical questions?"

[JohnnyD 0]

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I don't see how it can happen. When you're a contractor working for a company, the company gives you 1099 form, and sends the copy to IRS. I do not see how one can avoid reporting any of their income. It is possible to cheat on the expenses, but not on income. And if the company pays cash, then it doesn't really matter for reporting if he's contractor or employee.

If you are an incorporated entity and have indicated that on the form W-9 on file, the customer is not required to issue you a 1099. As such, most people do not. The actual income of an independent contractor that is reported to the IRS is usually only a fraction of reality, unless they are in the category of people who are required to be issued a 1099.

[marks2065 0]

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Let me be as direct as possible.
Facts that provide evidence of the degree of control and independence fall into three categories.
Behavioral
Financial
Type of relationship
A very strong argument can be made (and I assume has been successfully made) that a skydiving instructor does not meet any criteria that would necessitate being classified as a W-2 employee as opposed to an independent contractor.

Again, you are free to protest your 1099. Are you planning on doing so?

this is not about me or you, the thread was about people being misclassified. The requirements to do the job are not the issue, who requires the hours, how many hours and who owns the equipment are a few of the main points that determine wether you are an employee or a subcontractor.

[JohnnyD 0]

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What about people who work manifest? Ground trainers/helpers? packers and riggers?

Manifest is the one person who I think would have to get a W-2. Everyone else could be a 1099 depending on how the business(es) are set up.

[marks2065 0]

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I don't see how it can happen. When you're a contractor working for a company, the company gives you 1099 form, and sends the copy to IRS. I do not see how one can avoid reporting any of their income. It is possible to cheat on the expenses, but not on income. And if the company pays cash, then it doesn't really matter for reporting if he's contractor or employee.

If you are an incorporated entity and have indicated that on the form W-9 on file, the customer is not required to issue you a 1099. As such, most people do not. The actual income of an independent contractor that is reported to the IRS is usually only a fraction of reality, unless they are in the category of people who are required to be issued a 1099.

In illinois, any subcontractor recieving more than $600 needs to be given a 1099

[georgerussia 0]

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If you are an incorporated entity and have indicated that on the form W-9 on file, the customer is not required to issue you a 1099.

What you're talking about is an independent service (like hiring a lawyer), which is indeed true independent contractor.
However this seems to be not what the article is about - it is about misclassified workers (who apparently have one or more "employers" and getting most of their income from there).

* Don't pray for me if you wanna help - just send me a check. *

[JohnnyD 0]

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this is not about me or you, the thread was about people being misclassified. The requirements to do the job are not the issue, who requires the hours, how many hours and who owns the equipment are a few of the main points that determine wether you are an employee or a subcontractor.

>Who requires the hours
They are specified by the USPA and mfrs issuing the ratings. The dzo is limited to operating during those hours. The issue is control. This is not in the dz's control.
>How many hours
Entirely dependent on workload. No two ways about it. No students, no work. Rain, no work. Too windy, no work. The issue is control. This is not in the dz's control.
>Who owns the equipment
Could be the dz. Could be the instructor. Could be a third party. Regardless of who owns it, the instructor has to have the rating to use it. The issue is control. This is not in the dz's control.

[JohnnyD 0]

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If you are an incorporated entity and have indicated that on the form W-9 on file, the customer is not required to issue you a 1099.

What you're talking about is an independent service (like hiring a lawyer), which is indeed true independent contractor.
However this seems to be not what the article is about - it is about misclassified workers (who apparently have one or more "employers" and getting most of their income from there).

No, I'm referring to an incorporated entity. An S-Corp can be a one person company and you don't have to issue a 1099 to S-Corps or Partnerships unless they are in the category of people who are required to be issued a 1099 (lawyers are in this category).

[marks2065 0]

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this is not about me or you, the thread was about people being misclassified. The requirements to do the job are not the issue, who requires the hours, how many hours and who owns the equipment are a few of the main points that determine wether you are an employee or a subcontractor.

>Who requires the hours
They are specified by the USPA and mfrs issuing the ratings. The dzo is limited to operating during those hours. The issue is control. This is not in the dz's control.
>How many hours
Entirely dependent on workload. No two ways about it. No students, no work. Rain, no work. Too windy, no work. The issue is control. This is not in the dz's control.
>Who owns the equipment
Could be the dz. Could be the instructor. Could be a third party. Regardless of who owns it, the instructor has to have the rating to use it. The issue is control. This is not in the dz's control.

you really don't understand do you? if the dzo says you need to be at the dz for 5 days and or over 37.5 hours and you use his equipment you are an employee period. doctors nurses pilots and many other professions have many things like education and licenes that are required but that does not determine wether you are or are not an employee.

[JohnnyD 0]

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In illinois, any subcontractor recieving more than $600 needs to be given a 1099

A 1099 is a federal form, not an Illinois form.
1099's are generally not required to be issued to Corporations or Partnerships.

Seriously, I'm not just making this up.

[marks2065 0]

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In illinois, any subcontractor recieving more than $600 needs to be given a 1099

A 1099 is a federal form, not an Illinois form.
1099's are generally not required to be issued to Corporations or Partnerships.

Seriously, I'm not just making this up.

my business is required to 1099 anyone that is not on my payroll that I pay over $600.00 to

[JohnnyD 0]

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In illinois, any subcontractor recieving more than $600 needs to be given a 1099

A 1099 is a federal form, not an Illinois form.
1099's are generally not required to be issued to Corporations or Partnerships.

Seriously, I'm not just making this up.

my business is required to 1099 anyone that is not on my payroll that I pay over $600.00 to

Sure. Unless that person is an incorporated entity. Here's the section of the 1099 instructions:

P. Payments to Corporations and Partnerships

Generally, payments to corporations are not reportable. However, you must report payments to corporations for the following.

*

Medical and health care payments (Form 1099-MISC),
*

Withheld federal income tax or foreign tax,
*

Barter exchange transactions (Form 1099-B),
*

Substitute payments in lieu of dividends and tax-exempt interest (Form 1099-MISC),
*

Acquisitions or abandonments of secured property (Form 1099-A),
*

Cancellation of debt (Form 1099-C),
*

Payments of attorneys' fees and gross proceeds paid to attorneys (Form 1099-MISC),
*

Fish purchases for cash (Form 1099-MISC),
*

The credits for clean renewable energy bonds and for Gulf tax credit bonds treated as interest and reported on Form 1099-INT, and
*

Federal executive agency payments for services (Form 1099-MISC). For additional reporting requirements, see Rev. Rul. 2003-66 on page 1115 of Internal Revenue Bulletin 2003-26 at www.irs.gov/pub/irs-irbs/irb03-26.pdf.

[Southern_Man 0]

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What about people who work manifest? Ground trainers/helpers? packers and riggers?

Manifest is the one person who I think would have to get a W-2. Everyone else could be a 1099 depending on how the business(es) are set up.

The devil is in the details.

Be interesting to know if anybody had sought a determination.

"What if there were no hypothetical questions?"

[JohnnyD 0]

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What about people who work manifest? Ground trainers/helpers? packers and riggers?

Manifest is the one person who I think would have to get a W-2. Everyone else could be a 1099 depending on how the business(es) are set up.

The devil is in the details.

Be interesting to know if anybody had sought a determination.

As much as I think I can make an argument with enough substance to stand behind on instructors being independent contractors, if you look at the applicable issues in regards to the manifest person, I think you would tend to go the opposite way on every issue.

I would be very interested to know if the issue has ever been challenged and if it has, what was the outcome.

[quade 4]

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That big enough for ya?

I was just wondering if large Corp's do this or is it more of an issue with the smaller firms.

The answer is yes, they pretty much all do it or involved in some way. Even the ones that say they aren't, even the ones that have "Human Resource" guidelines that specifically state where the line is draw are still probably involved at some level.

quade -
The World's Most Boring Skydiver