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AlexiaEsq.
AlexiaEsq., Managing Attorney
Category: Employment Law
Satisfied Customers: 11742
Experience:  19+ Years of Legal Practice in the Employment law arena.
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I live in Massachusetts and recently started a small residential

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I live in Massachusetts and recently started a small residential cleaning business. I hire my employees as a contracted position. I want to make sure I am following the law in regards XXXXX XXXXX makes it a contracted position and I also want my employees to keep the correct records for what they can write off on their taxes. Can you help me?
Submitted: 1 year ago.
Category: Employment Law
Expert:  AlexiaEsq. replied 1 year ago.
Hi, my name is XXXXX XXXXX I thank you for your inquiry. I have been practicing Employment law for 19+ years and look forward to assisting you.

Can you clarify in what way you want help? As you know, we can not represent you, but answer a specific question. Are you seeking more information on what would constitute a miscategorized contractor (i.e. mistakenly deemed a contract, when in reality, an employer for whom you'd need to withhold and pay payroll taxes, be subject to state WC requirements, etc.?). Let me know if that is the question you want answered, and I will take it from that perspective, for this particular transaction thread you have chosen.
Customer: replied 1 year ago.
Yes
Expert:  AlexiaEsq. replied 1 year ago.

OK, I tend to agree that it is possible that your contractors can be legitimate contractors. The main key, according to the IRS, is the level of control you dictate over their work activities. "The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done. The earnings of a person who is working as an independent contractor are subject to XXXXX" http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Independent-Contractor-Defined

"Common Law Rules

Facts that provide evidence of the degree of control and independence fall into three categories:

  1. Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
  2. Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
  3. Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?

Businesses must weigh all these factors when determining whether a worker is an employee or independent contractor. Some factors may indicate that the worker is an employee, while other factors indicate that the worker is an independent contractor. There is no “magic” or set number of factors that “makes” the worker an employee or an independent contractor, and no one factor stands alone in making this determination. Also, factors which are relevant in one situation may not be relevant in another."

 

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Independent-Contractor-%28Self-Employed%29-or-Employee



Now with regard to your post:

I live in Massachusetts and recently started a small residential cleaning business. Congratulations!

 

I hire my employees as a contracted position. I want to make sure I am following the law in regards XXXXX XXXXX makes it a contracted position and I also want my employees to keep the correct records for what they can write off on their taxes. Can you help me? See the above with regard to how to run your contractors to ensure that they are, indeed, contractors. Some practical measures that can help ensure that the proofs lean towards 'contractor' vs. employee, include allowing them to choose their hours or jobs they will take, allowing them to decide how they will accomplish the job while pleasing the end client - i.e. giving them latitude on their method of cleaning, even if they must produce a particular result. Also, if they use their own equipment, that can be a big item of proof in favor of being self employed contractor to your business... Of course, what cleaner can afford that? Well, perhaps you pay them more but they are responsible for using or renting the equipment from you or elsewhere. You may be able to be creative.

Optional Information:
Country relating to Question: United States
State (if USA): Massachusetts
What have you tried so far?: I filed last year as self employeed and my staff as contracted. Which means that they TOO are self-employed.

 

No problem with filing by myself and the contractors had no problem. Only one person was told that next year they could not write off their mileage Who told them that? Talk is cheap. They can write off their mileage if that is what they did the prior year - as I recall, the IRS rules on mileage as opposed to "Actual costs" depend on how you did it the prior year - you can only use the standard mileage figures IF you used it prior... Otherwise, a self-employed contractor can use "actual expenses" - i.e. keeping track of gas used on the job, repairs, etc.

 

that I could Of course.

 

but they couldn't which doesn't make any sense Yes, until they speak to and use a CPA, which they should if they plan on continuing as an indendent contractor (i.e. self employed as their own little business, with you as their client, so to speak) - I'd not listen to 'friends' opinions.

 

If they don't have write offs, they are going to have to pay in a lot of money. They will have to pay taxes like the rest of us, and like they do when an employee, when the taxes are "withheld". However, as self-employed people, we are also responsible for the part of the SS tax and Medicare tax that our employer usually pays for us via payroll taxes (in addition to withholding the other 1/2 from our paychecks). So in that sense, yes, they pay more. But, what self-employed small business person, like a contractor, does not carve out a small office space for himself? They can read up on how that can be written off if properly designated. The proportionate amount of household utility bills, and other, attributable to that square footage used exclusively as the office for that business, can be written off. It can help make up and pay for that self-employment tax 1/2 they will have to come up with, in addition to the 1/2 that they pay but that isn't being "withheld". But, also, driving to the "job" can be written off as well. And this past year, 2012, I believe it is about .55 cent/mile. If a job is 20 miles away, that is over $10 written off. If they make $30, $10 is expensed out. Of course, I do hope they don't make the trigger happy decision to write off so much that the venture is not lucrative - because if they don't earn (net after expenses) enough (say, nearly $4700/year) and pay the appropriate self-employment tax (i.e. SS and Medicare), they will find their retirement to be in poverty and their status as insured for Social Security Disability to end - such that should they become disabled later, as so many do, unfortunately, in this day and age, they will NOT have SSDIB benefits to fall back on.


I hope this helps! My goal is to provide you with excellent and accurate service – if you feel you have gotten anything less, please reply back, I am happy to address follow-up questions. Kindly rate me "excellent" when you are done. I look forward to assisting you in the future, should you have legal questions.

Sincerely,

Alexia Esq.

AlexiaEsq., Managing Attorney
Category: Employment Law
Satisfied Customers: 11742
Experience: 19+ Years of Legal Practice in the Employment law arena.
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