How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask Stephen G. Your Own Question

Stephen G.
Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 4020
Experience:  Extensive Experience with Tax, Financial & Estate Issues
Type Your Tax Question Here...
Stephen G. is online now
A new question is answered every 9 seconds

I AM STARTING A MULTI FAMILY FRAMING COMPANY. I WILL BE PAYING

Resolved Question:

I AM STARTING A MULTI FAMILY FRAMING COMPANY. I WILL BE PAYING TWO MEN $300 - 500 A YEAR, PER MAN. AT THE END OF THE YEAR I WILL BE ISSUING THEM A 1099. DURING THE TRANSACTIONS I WILL BE WIRING THE MONEY INTO A REGIONS BANK ACCOUNT. I HAVE BOTH OF THE MEN'S DRIVERS LICENSE, SOCIAL SECURITY CARD, AND CHECKING ACCOUNT NUMBER. HOW MUCH LIABILITY DOES THIS CAUSE FOR ME? I PLAN ON CONTINUING WITH THIS SAME AMOUNT FOR SEVERAL YEARS TO COME. WHAT HAPPENS IF THEY DON'T FILE THEIR TAXES? CAN THE IRS COME AFTER ME? IS THERE ANYTHING I CAN DO IN ADVANCE, TO PROTECT MYSELF?
Submitted: 9 months ago.
Category: Tax
Expert:  Stephen G. replied 9 months ago.

Stephen G. :

Hello, my name isXXXXX & I'll be helping you today. My goal is to give you a complete & accurate answer that you can understand.

Customer:

HELLO,

Stephen G. :

If you were to be examined & the IRS were to assert that these framers were actually employees rather than independent contractors, and they prevailed, you would not only be liable for their personal income tax liability under the "failure to withhold income tax rules", but you would also be responsible for the related employer payroll taxes.

Stephen G. :

Is this what you are asking?

Customer:

HOW WOULD THE IRS DETERMINE WHETHER GUYS ARE MY EMPLOYEES OR SUBCONTRACTORS?

Stephen G. :

There is a series of questions that are used to make that determination. I can give you a link to them before we are done. However, the issue centers around how much control you have over the individuals; if you determine their hours, pay them by the hour, control how they perform their work and they work most of the time for you (rather than other framers or similar work, you can pretty much count on them being classified as employees.

Stephen G. :

The IRS is really starting to clamp down on this very issue, including in the building trades.

Customer:

I WILL PAY ONE MAN AND HE WILL PAY THE REST OF THE MEN, BY THE HOUR. HE WILL DETERMINE THEIR WAGES, AND THEIR WORKING HOURS. THEY WILL ALSO WORK FOR OTHER CONTRACTORS.

Stephen G. :

Here's a link to the 20 factor test that the IRS uses.

Stephen G. :

http://www.appraisalinstitute.org/newsadvocacy/downloads/key_documents/IndependentContractorVsEmployee.PDF

Stephen G. :

As you can see, there's been a lot of history related to this very question and it has led to a great deal of litigation with the results being inconsistent but always expensive.

Stephen G. :

If your arrangement is with one individual and he employs the crew, then the determination of employee/independent contractor may fall on him with respect to whether or not the framers are employees or his or are they independent contractors.

Stephen G. :

Also, anyone that you treat as an independent contractor you should have a written contract with that spells out what is to be done, the compensation under the contract, the payment terms, and an acknowledgment that the subcontractor is classified as an Independent Contractor and that he is responsible for his own income and social security tax payments.

Stephen G. :

Questions?

Customer:

YES MY ARRANGEMENT WILL BE WITH ONE MAN. I WOULD BE RUNNING THE RISK, WHO THE IRS WOULD DEEM AS EMPLOYEE/INDEPENDENT CONTRACTORS. IT SOUNDS IT WOULD BE A HEAVY RISK TO TAKE. WHATS IS THE WORST CASE SCENARIO?

Customer:

WHAT WOULD BE THE BEST WAYS TO PROVE, IN DOCUMENTATION; THAT THESE GUYS ARE NOT MY EMPLOYEES.

Stephen G. :

The worst case is that you owe a lot of money, taxes interest & penalties. The amount would depend upon what payments you made to independent contractors that were actually emoloyees.

Stephen G. :

As I said previously, I would suggest that you read the 20 factors the IRS uses and attempt to stay on the right side of those for as many as you can. Also, your independent contractor(s) should be operating under a written contract which clearly fixes the liability for income taxes with them.

Stephen G. :

You probably need to have an attorney draft up a standard agreement that you can use.

Stephen G. :

You will need to consider the requirements for workmen's compensation insurance in your state. Most require independent contractors in the building trade to be covered by the General Contractor.

Stephen G. :

Of course you should also have a general liability policy to protect yourself from any business claims that may arise for whatever reason.

Customer:

THE MEN HAVE THEIR OWN WORKERS COMP AND GENERAL LIABILITY POLICIES.

Customer:

I HAVE MY GENERAL LIABILITY AT 1,000,000 AND WORKER'S COMP AT 500,00

Customer:

500,000

Stephen G. :

You can't buy a workmen's compensation policy on yourself so I don't know how that's possible.

Customer:

THAT POLICY IS FOR THE 3 MEN I HAVE THAT WORK FOR ME, OUTSIDE OF THESE MEN.

Stephen G. :

I'm not talking about your policy, you said the independent contractors had their own workmen's compensation policies.

Stephen G. :

Are these 3 men your employees?

Customer:

YES

Stephen G. :

What kind of work do they do?

Customer:

SUPERINTENDENTS FOR THESE MEN.

Stephen G. :

That would be a significant indication that the supervised individuals are employees.

Customer:

SO WHAT CAN I DO TO PROTECT MYSELF?

Stephen G. :

Independent contractors are not supervised; they perform under a contract and are judged based upon how they meet the terms of the contract;

Stephen G. :

Treat everyone as employees. You'll never be certain that you won't be challenged if you treat them as independent contractors, particularly when on one job some are employees & some are independent contractors.

Customer:

OK, WHAT TAX FORMS WHAT I NEED TO GIVE THEM? WHAT IF THEY ARE NOT LEGAL CITIZENS?

Stephen G. :

Unfortunately, only you can determine if it is worth the risk. Generally, all you need is one "independent contractor" to get fired and go apply for unemployment compensation and claim he was actually an employee and you're right in the middle of it; the Labor Board in your state gets involved & they almost always side with the "little guy" and then the IRS are the last one's in.

Customer:

OK THANKS FOR YOUR HELP

Stephen G. :

If they are not legal citizens, that it is illegal for you to hire them and there are potential criminal penalties for that. For all new hires, you have to have a Form I-9 on file which documents that you have examined their papers and determined that they may be legally employed.

Stephen G. :

It is impossible to protect yourself again the illegal alien problem.

Stephen G. :

If you hire them.

Stephen G. :

If you need to contact me again with any tax or financial questions, you can just ask for "Steve G" at the beginning of your question. Thanks again for using us for your tax and financial questions. You may get a short survey from the site; if it isn't too much trouble I would appreciate it if you would answer it; the survey results are used to rate our performance;

Stephen G. :

Please remember to rate my response; it is the only way we get credit for out work.

Customer:

OK THANKS

Stephen G. :

Thanks very much.............................Steve G.

Stephen G. :

Please remember to rate my response; it is the only way we get credit for our work;

Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 4020
Experience: Extensive Experience with Tax, Financial & Estate Issues
Stephen G. and 2 other Tax Specialists are ready to help you

JustAnswer in the News:

 
 
 
Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.
 
 
 

What Customers are Saying:

 
 
 
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
< Last | Next >
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
  • I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight. Bonnie Chesnee, SC
  • Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation. John Minneapolis, MN
  • Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with. Orville Hesperia, California
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex Los Angeles, CA
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP Hesperia, CA
 
 
 

Meet The Experts:

 
 
 
  • Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    570
    10 years experience
< Last | Next >
  • http://ww2.justanswer.com/uploads/KU/KUMI95/2013-9-30_195031_kumar.64x64.jpg Wallstreet Esq.'s Avatar

    Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    570
    10 years experience
  • http://ww2.justanswer.com/uploads/CU/Cuttinggirl/2011-10-29_03719_wcrop2.64x64.jpg Wendy Reed's Avatar

    Wendy Reed

    Enrolled Agent

    Satisfied Customers:

    3052
    15+ years tax preparation and tax advice.
  • http://ww2.justanswer.com/uploads/CATax/2009-08-04_204548_Mark.jpg Mark D's Avatar

    Mark D

    Enrolled Agent

    Satisfied Customers:

    985
    MBA, EA, Specializing in Business and Individual Tax Returns and Issues
  • http://ww2.justanswer.com/uploads/IN/insearchoftheanswer/2013-8-16_0233_attorney.64x64.jpg Richard's Avatar

    Richard

    Tax Attorney

    Satisfied Customers:

    3229
    29 years of experience as a tax, real estate, and business attorney.
  • http://ww2.justanswer.com/uploads/MY/MyVirtualCPA/2012-7-5_44024_cookmegan1.64x64.jpg Megan C's Avatar

    Megan C

    Certified Public Accountant (CPA)

    Satisfied Customers:

    6121
    Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
  • http://ww2.justanswer.com/uploads/JG/jgordosea/2012-6-7_43138_GordosVeritas.64x64.jpg jgordosea's Avatar

    jgordosea

    Enrolled Agent

    Satisfied Customers:

    2783
    I've prepared all types of taxes since 1987.
  • http://ww2.justanswer.com/uploads/OZ/ozaukeecpa/2012-6-7_193219_Picture1croppedandshrunk.64x64.jpg MequonCPA's Avatar

    MequonCPA

    Certified Public Accountant (CPA)

    Satisfied Customers:

    2231
    CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.