Correcting independent contractor classification

[HappyKayakers]

I don't know about the rest of you but I've seen far too many crooked employers (in and out of campgrounds) who would gladly (and illegally) misclassify an employee as an independent contractor to save themselves a few bucks. In an ideal world, it would be great to point out the error to the employer and have it corrected on the spot. Unfortunately, that's usually where the employee is told their services are no longer needed.

So, here's the question. Knowing that your employment would probably be terminated if you say anything about it, has anybody worked the job anyway, then filed an IRS form SS-8 to be reclassified when it comes tax time? If the IRS finds in your favor, then the employer would be required to pay their fair share of taxes (retroactively) instead of shifting the entire burden to you.

I'm considering this for a current job situation. I'm told what/when/where/how to do my job, use employer provided materials and am paid an hourly rate - but he still wants to call me an independent contractor.

[Kirk W]

A very interesting subject. I suspect that many seasonal jobs skirt the edge of that situation. I may have to do some reading in IRS publication 1779 which addresses the issue.

[TCW]

...I'm considering this for a current job situation. I'm told what/when/where/how to do my job, use employer provided materials and am paid an hourly rate - but he still wants to call me an independent contractor...

I've never had to deal with this, but am curious whether you are covered by workman's compensation if you get hurt on the job or covered by the campground's liability insurance if there is any tort filed against you for an incident during the performance of your duties?

[DuffMan]

So, here's the question. Knowing that your employment would probably be terminated if you say anything about it, has anybody worked the job anyway, then filed an IRS form SS-8 to be reclassified when it comes tax time? If the IRS finds in your favor, then the employer would be required to pay their fair share of taxes (retroactively) instead of shifting the entire burden to you.

 

I'm considering this for a current job situation. I'm told what/when/where/how to do my job, use employer provided materials and am paid an hourly rate - but he still wants to call me an independent contractor.

 

I certainly wouldn't post that where potential future employers lurk unless you use a throw-away posting ID!

[HappyKayakers]

 

I certainly wouldn't post that where potential future employers lurk unless you use a throw-away posting ID!

So true. And isn't that a terrible comment on our society? The people who are breaking the law still have the power to deny gainful employment to those who follow the rules.

[Cyberdave]

I don't know about the rest of you but I've seen far too many crooked employers (in and out of campgrounds) who would gladly (and illegally) misclassify an employee as an independent contractor to save themselves a few bucks. In an ideal world, it would be great to point out the error to the employer and have it corrected on the spot. Unfortunately, that's usually where the employee is told their services are no longer needed.

 

So, here's the question. Knowing that your employment would probably be terminated if you say anything about it, has anybody worked the job anyway, then filed an IRS form SS-8 to be reclassified when it comes tax time? If the IRS finds in your favor, then the employer would be required to pay their fair share of taxes (retroactively) instead of shifting the entire burden to you.

 

I'm considering this for a current job situation. I'm told what/when/where/how to do my job, use employer provided materials and am paid an hourly rate - but he still wants to call me an independent contractor.

 

 

All that to 'punish' an RV park owner? Since he would then have to factor all of the associated cost of the employee, the rates will go up and, people will bitch about the new higher rates. Most RV parks aren't gold mines for the owners so, raising the rates because your operating costs go up is a fact of life.

 

Also, there are many work campers that use the barter and small wage situation to survive so... what happens to them??

 

I doubt the IRS is going to go after RV parks for $4800 in improperly classified income..

 

If this is an issue and you decide that you need to report them or refuse to work as employees, you might be correct and happy that you corrected an injustice. But, OTOH, I'd rather not be responsible for possibly destroying a business or having the IRS come down on them.

 

Why in the world do you worry about it? I'm retired and have far more interesting things to do than worry about that issue.

[LFDR3116]

As far as workers compensation coverage. In my previous state, the definition of an independent contractor says that you set your own hours, are not told what or when to do something etc. You would be classified as an employee when the employer had his annual audit for insurance purposes. That employer must either supply a certificate of insurance showing that you carry your own workers compensation coverage or he will be charged for you as an employee on his payroll. Not sure how other states work, but I'm thinking in a similar manner. He may not be saving himself as much money as he thinks because he may have no idea how the audit works to affect his insurance charges.

 

I would expect my employer to do business honestly. If he did not, I would not care to work for him. I would file the correction with the IRS. What else and who else does he cheat.

[HappyKayakers]

 

 

All that to 'punish' an RV park owner? Since he would then have to factor all of the associated cost of the employee, the rates will go up and, people will bitch about the new higher rates. Most RV parks aren't gold mines for the owners so, raising the rates because your operating costs go up is a fact of life.

 

Also, there are many work campers that use the barter and small wage situation to survive so... what happens to them??

 

I doubt the IRS is going to go after RV parks for $4800 in improperly classified income..

 

If this is an issue and you decide that you need to report them or refuse to work as employees, you might be correct and happy that you corrected an injustice. But, OTOH, I'd rather not be responsible for possibly destroying a business or having the IRS come down on them.

 

Why in the world do you worry about it? I'm retired and have far more interesting things to do than worry about that issue.

 

I never said anything about 'punishing' these law-breakers, just paying their fair share and following the law.

 

If they need their employees to help subsidize their business, maybe they shouldn't be in business. Or maybe they should. That's up to them if they need to raise rates to cover their actual expenses. I'm just concerned about being treated fairly. And as I stated in the OP, it's more than just campgrounds. I feel no need to subsidize every business I choose to work for.

 

And it's so nice that you chose to respond, not answering the question but going off on a tangent, even though you have far more interesting things to do.

[Ricka]

Quote

 

If you have integrity and it really bothers you that much, find another job. With the problems we have with our current administration allowing Illegals to come here and work, this type of job would bother me absolutely zero. I'd be like the other illegals, pay me cash and I'd be real happy.

[JRP]

Independent Contractor vs Employee is a long standing issue that occurs in many different types of businesses and its not always the employer who is pushing the independent contractor classification. Many times its the employee who prefers the flexibility of being an independent contractor. You'll find hundreds of official disputes over this issue in all different types of business.

When I ran large industrial construction projects we had dozens of rig welders who wanted to be independent contractors but IRS audits required us to classify them as employees unless we changed the whole relationship, supervision and scheduling. We didn't care which way it went, the welders got pissed off cause they liked the independent contractor classification, but eventually the IRS changed the way things had been done for many years at many construction companies.

Like anything at the IRS, don't hold your breath, it usually takes them 6 months or more to respond to an SS-8

[Kirk W]

If the IRS finds in your favor, then the employer would be required to pay their fair share of taxes (retroactively) instead of shifting the entire burden to you.

In rereading your first post, this makes me think that your concern is the payment of Social Security taxes? I guess I need to also look to see what defines when SS tax must be paid and by whom? I have not worked paid employment but one time and only received an stipend on two other occasions. In none of those cases was SS withheld or paid.

 

If you are work-camping in a paid position, do you or your employer pay SS taxes on that income? Would not an employer who chooses to pay SS for you also then have to withhold income taxes?

[JRP]

if your an employee, you and your employer each pay half the social security & medicare tax, that was 7.65% each the last time I did payroll, it can change each year. If you're an independent contractor you pay the whole 13.3% yourself (sometimes referred to as the self employment tax)

However, the payroll tax itself is very little or no incentive to choose independent contractor vs employee. if I pay that 7.65% tax as the employer, I'm entitled to deduct it from my own taxes (assuming I make a profit). If you pay it as a self employed contractor, you're entitled to deduct it from your own taxes in most cases.

The more expensive issues are usually workers comp insurance and unemployment insurance. Whether a part time seasonal worker would even be covered by workers comp or unemployment insurance, varies from state to state based on the specific circumstances of each situation.

[Jack Mayer]

We have had it both ways. Basically we were independent contractors and were paid - essentially - under the table, since no 1099 or other paperwork was ever produced. We have also worked as employees - and that has been typical for us. There we received a regular statement at the end of the tax year. They pay half the SS, workers comp, unemployment etc. We pay half the SS, and state/Fed taxes. That is our current arrangement - a regular employee.

 

It is to the employees advantage to MAKE SURE that you have workmans comp insurance. If you are injured you want coverage. Even a small cut that becomes infected can cost you thousands of dollars otherwise.

[Daveh]

I think this is implied in a lot of the comments but to clarify, while a contract can designate a person as an employee or independent contractor, the contract is just one element in determining the true status of an individual actual status. A determination of employee vs independent contractor is made based on several factors many of which are listed above i.e scheduling, ownership of tools, independence in determing how to get job done. Contracts can be useful to set out these factors if there is a later contention, but just saying something does not make it true. You are an employee or independent contractor based on the actual working relationship, not how the parties characterize the relationship. So, if either party is audited, or a party, or a third party is hurt you will have tax evasion and/or liability issues.The risk is not just if one of the parties like the OP is uncomfortable with the arrangment but the many unforseen events that can trigger a close examination and expose the true relationship. If I am cleaning bathrooms and someoen falls, as an alleged independent contractor I, and hopefully my insurance company, will end up in that whole mess. The same if I as a worker get hurt, my health insurance company is going to ask questions and try to characterize it as a worker comp injury. For both parties the percieved financial gain by mischaracterizing the relationship is really replaced with a lot of risk. The truth is both the honest and cheaper way to go.

[Kirk W]

We have had it both ways. Basically we were independent contractors and were paid - essentially - under the table, since no 1099 or other paperwork was ever produced. We have also worked as employees - and that has been typical for us.

When "under the table" did you then report the income to the IRS and/or pay SS taxes on it? Years ago when Pam as self-employed making draperies at home she chose to report and to pay "self employment/SS" taxes in order to accrue quarters for the purpose of later SS benefits. It was a good decision as she was not employed outside of our home for enough to have been eligible to receive benefits today without those quarters. The work-camping situation could play into this sort of situation for younger fulltimers.

 

~ ~ ~ ~ The truth is both the honest and cheaper way to go.

While this is true, in many cases the employer also needs some good advice on the decision as they often assume that what they are doing is the proper thing. I wonder how many RV park owners are knowingly cheating, versus misinformed when/if they make the wrong choice of such an issue?

[jayco1]

When the IRS challenges independent contractor cases they win 90% of them. When they get a 1099 and you don't include it on your return it is like holding up a sign saying Please Audit Me.