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LawTalk
LawTalk, Attorney
Category: California Employment Law
Satisfied Customers: 36352
Experience:  I have 30 years of experience in the practice of law, including employment law and discrimination law.
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I am working as a full time consultant for a company based

Customer Question

Hi,
I am working as a full time consultant for a company based in Europe. Due to the nature of the work arrangement I would be considered an employee (by the IRS and the state of California) and not a contractor. Because of this I had to move out of state to start my consultancy but since I am now looking to move back to California I was wondering if there is a way for me to continue working as a consultant and not be classified as an employee. Since the company I work for is based in Europe its impossible for them to employee me in the US.
At the moment I am only working for one employer 40 hours a week. Would incorporating help? Or hiring staff and looking for new clients?
Kind regards,
Chris
Submitted: 7 months ago.
Category: California Employment Law
Expert:  LawTalk replied 7 months ago.

Good afternoon Chris,

I'm Doug, and I'm very sorry to hear of your situation. My goal is to provide you with excellent service today.

I think that you misunderstand US law as it pertains to employee versus independent contractor law. Federal law controls whether you are an employee or not. CA law has nothing to do with it, If you must be classified as an employee by living in CA, then you are an employee regardless of the state that you live in.

Based on your facts, you should never have been classified as an independent contractor to begin with---and where you move to in the US has nothing to do with it.

But it is the employer who risks getting in trouble with the state or feds/IRS if they misclassify you. There is no penalty to you if you want to continue billing the company as it you were an independent contractor.

You may reply back to me using the Reply link and I will be happy to continue to assist you until I am able to address your concerns, to your satisfaction.

I hope that I have been able to fully answer your question. As I am not an employee of JustAnswer, please be so kind as to rate my service to you. That is the only way I am compensated for assisting you. Thank you in advance.

I wish you and yours the best in 2016,

Doug

Customer: replied 7 months ago.
Hi Doug,Thanks for your quick reply. Is there a way to not be classified as an employee? My employer doesn't want to get in trouble by misclassifying me as a contractor and since they aren't based in the US they can't employ me either.Would it help if I incorporated my company and employed staff, looked for new clients etc?Kind regards,Chris
Expert:  LawTalk replied 7 months ago.

Hi Chris,

No, there is nothing that you can do to avoid the employee issue. You either are an employee based on your job duties and the control the employer has over your job duties, or you are not. Creating a corporation or an LLC does not change that fact.

Thank you for your kind words. They are appreciated.

Please understand that in order for me to be compensated for having helped you, I need for you to positively rate my service to you by clicking on the rating stars located on your answer page---three stars or more. It is that easy.

Thanks in advance.

I wish you the best,

Doug

Customer: replied 7 months ago.
Hi Doug,If I incorporate, employ a team of five people and find five to ten clients that we service 24/7. Are you saying I would still be considered an employee in the eyes of the IRS? The job duties would then be stipulated in a service agreement instead of a consultancy agreement.Kind regards,Chris
Expert:  LawTalk replied 7 months ago.

Hi Chris.

You were the one that stated that you had to be classified as an employee in CA. I did not question that statement of fact. I presumed you to be correct when I formulated my response.

You are now asking to change the facts and have me go through the evaluation process over again. I have no idea what service you provide and the control the employer has over you---and I am not going to get into it here in this thread.

I will be happy to communicate with you by phone and go over different scenarios with you. I have been a CA attorney for more than 3 decades and I handle employment law matters.

Quite frankly, I couldn't answer your new question "If I incorporate, employ a team of five people and find five to ten clients that we service 24/7." without a whole lot more information from you. We can do this over the phone. I will make the call offer to you.

Doug

Expert:  LawTalk replied 7 months ago.

Hi,

Here is information that you can use to determine whether you likely can qualify as an independent contractor:

A W-2 Employee must be provided workers' compensation coverage, unemployment insurance and you must withhold taxes from their wages. A W-2 employee is an employee that you control, directing their work, the hours that they work and the ultimate quality of their work.

A 1099 employee you don't have to provide workers' compensation coverage or unemployment insurance for, you don’t withhold taxes and you have little control over their work. They are treated as an outside company that you are contracting with to do a project---on their own time and using their own judgment.

There is typically not a choice in how an employer designates an employee, but rather the designation is controlled by law.

A worker is more likely an Employee, than an Independent Contractor, if the worker:

1. Is required to comply with the employer’s instructions about the work.
2. Receives training from the employer.
3. Provides services that are integrated into the business.
4. Provides services that must be rendered personally.
5. Hires, supervises and pays assistants for the employer.
6. Has a continuing relationship with the employer.
7. Follows set hours of work.
8. Works full-time for the employer.
9. Works on the employer’s premises.
10. Does the work in a sequence set by the employer.
11. Submits regular reports to the employer.
12. Receives payments of regular amounts at set intervals.
13. Receives payments for business or traveling expenses.
14. Relies on the employer to furnish tools and materials.
15. Lacks a major investment in facilities used to perform the service.
16. Cannot make a profit or suffer a loss from the services.
17. Works for one employer at a time.
18. Does not offer services to the general public.
19. Can be fired.
20. Can quit at any time without liability.

The IRS looks at 3 primary issues when evaluating whether you are employee or independent:
1. The behavioral control issue: How the employer directs your services provided, and whether the employer has retained the right to control the details of your work.
2. The financial control issue: The IRS looks at whether you can to make a profit from your business---not simply an hourly wage---and whether you can make a profit or take a loss in your business.
3. The nature of the business relationship between the two of you: Is this a strict dealing between the hospital and you-as-a-separate-company. If the employer provided benefits such as vacation, health benefits---normally only give an employee, and whether your services are simply the regular business of the business owner.

Now, if you fall into the independent contractor status under the above guidelines, then you can incorporate and enter into a service agreement with the overseas company.

You may reply back to me using the Reply link and I will be happy to continue to assist you until I am able to address your concerns, to your satisfaction.

Please remember to rate my service to you so that I can be compensated for helping you. Thank you in advance.

I wish you and yours the best in 2016,

Doug

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