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View Full Version : What about making employees into subcontractors?


4 seasons lawn&land
03-02-2012, 02:33 PM
Anyone thought about having their employees get their own DBA and liability insurance and canning the whole workers comp, payroll, and all the BS. I could pay an employees liability for them, for alot less then their comp.and a paychex service would cost, and pay them some extra to make it worth their while. You might spend a little more overall but save on all the headaches. Is this illegal?

shovelracer
03-02-2012, 02:40 PM
There are all sorts of issues with this, but the short of it is that if they use your equipment than they are employees. If they have their own they don't need you.

crazymike
03-02-2012, 03:02 PM
Basically, the only people who do this are low life scum.

It's not fair for your employees. I see guys do this all the time. They tell their employees it's going to be great. They can write off everything. It will be perfect.

Employee thinks it's great.

The problem is, an employee making $12 an hour, has no write offs. They end up getting raped in taxes at the end of the year.

The guy cutting grass for a living, he's not a business person. He's probably not a financial guru. He's probably not capable of putting his tax money away until end of the season.

Workmans comp, is there for a reason. To protect employees. Sure it would be nice to save some money for yourself, but if an employee gets hurt, making YOU money, why should they have to suffer?

Your employees are your lifeblood. Without them, you are nothing. Treat them with dignity.


The only plus side, is most contractors doing this get screwed in the end. Eventually an employee gets hurt, files a grievance, and the government deems that they are indeed an employee. Then the contractor gets back charged with workmans comp fees and then again with employee remittances. Personally, I love seeing this happen!

4 seasons lawn&land
03-02-2012, 03:05 PM
You cant sub-contract operators?

4 seasons lawn&land
03-02-2012, 03:13 PM
Basically, the only people who do this are low life scum.

It's not fair for your employees. I see guys do this all the time. They tell their employees it's going to be great. They can write off everything. It will be perfect.

Employee thinks it's great.

The problem is, an employee making $12 an hour, has no write offs. They end up getting raped in taxes at the end of the year.

The guy cutting grass for a living, he's not a business person. He's probably not a financial guru. He's probably not capable of putting his tax money away until end of the season.

Workmans comp, is there for a reason. To protect employees. Sure it would be nice to save some money for yourself, but if an employee gets hurt, making YOU money, why should they have to suffer?

Your employees are your lifeblood. Without them, you are nothing. Treat them with dignity.


The only plus side, is most contractors doing this get screwed in the end. Eventually an employee gets hurt, files a grievance, and the government deems that they are indeed an employee. Then the contractor gets back charged with workmans comp fees and then again with employee remittances. Personally, I love seeing this happen!



lol its funny because anyone with a regular job, has no write offs and IS getting raped on taxes!

It sounds like you might be talking about doing a 1099 on employees and not taking out any taxes or insuring them which is illegal. Im talking about them getting their own business period. Any time they want to go off on their own they can. Im not saying this is legal. I am asking If it is. But them getting screwed by taxes is called a job! They dont have any write offs if they are on a regular payroll either.

crazymike
03-02-2012, 03:14 PM
You cant sub-contract operators?

how are they a sub contractor if you supply the equipment?

Do you think you're really going to outsmart the government in supplying your staff, workmans comp?

In Canada, you can pay someone cash so much a year as a temporary employee. But that's it.

crazymike
03-02-2012, 03:16 PM
lol its funny because anyone with a regular job, has no write offs and IS getting raped on taxes!

YouIt sounds like you might be talking about doing a 1099 on employees and not taking out any taxes or insuring them which is illegal. Im talking about them getting their own business period. Any time they want to go off on their own they can.

Yeah, but you know inside, that this only benefits you.

The guy making $20,000 a year, might have $1000 in write offs and have to hire an accountant to figure everything out. It will cost him as much as he saves. He will also have to put away money all year for tax time. A guy cutting grass for a living, is probably not capable of that.

4 seasons lawn&land
03-02-2012, 03:25 PM
If it wasnt worth their while they would turn me down and work for someone else that could offer them a better job. Thats why I said originally that you would have to pay them a little extra to make it worth their while to have a DBA and insurance.

I just want to know if its legal

GMLC
03-02-2012, 03:25 PM
If your employees open their own business so you can subcontract them they will eventually catch on and start taking business share in your area and can take your customers. It wont be long before they are a competitor.

4 seasons lawn&land
03-02-2012, 03:28 PM
[QUOTE=crazymike;4333825]how are they a sub contractor if you supply the equipment?

labor

4 seasons lawn&land
03-02-2012, 03:30 PM
If your employees open their own business so you can subcontract them they will eventually catch on and start taking business share in your area and can take your customers. It wont be long before they are a competitor.


They need mowers, excavators, skids, trucks and trailers first and if they have that motivation they are going to do it anyway and I wish them luck.

Glenn Lawn Care
03-02-2012, 03:49 PM
A company I used to work for did that. The guy owned his own lawn care business but worked full time with this company. He used their machines and drove their trucks.

He has equipment himself, more than he need cuz he didn't have any work for the 2 years I new him. He have a 60" exmark ztr an enclosed trailer a walkbehind, trimmed and blower and a newer truck and didn't have 1 account. And he was advertising either. The guy was a tool!
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crazymike
03-02-2012, 04:08 PM
[QUOTE=crazymike;4333825]how are they a sub contractor if you supply the equipment?

labor

A person who only provides labor is called an employee.

Why do you think your staff are not worthy of workmans comp?

What if there is a mower accident, truck accident, etc... and they never work again. Why do they not deserve that?

Are you going to pay them more so they can provide their own insurance?

4 seasons lawn&land
03-02-2012, 04:16 PM
YES! thats what Ive been saying. I could pay their liability Ins. for half what it would otherwise cost me. AND pay extra for the time and aggravation saved. They can use that raise to buy extra health insurance if they want.

djagusch
03-02-2012, 04:24 PM
lol its funny because anyone with a regular job, has no write offs and IS getting raped on taxes!

It sounds like you might be talking about doing a 1099 on employees and not taking out any taxes or insuring them which is illegal. Im talking about them getting their own business period. Any time they want to go off on their own they can. Im not saying this is legal. I am asking If it is. But them getting screwed by taxes is called a job! They dont have any write offs if they are on a regular payroll either.

You are trying to get your employees into a 1099 situation. I get 1099 from large retailers, cemeteries, hoa's etc. If you sub out more than 600 to a biz you are suppose to 1099 them. That is the correct way to do this.

Irs has certain guidelines of what makes a subcontractor or employee. I would check the guidlines online they have a checklist to go through. What I have read in this thread sounds like they are employees. Using your truck/mowers/trailer, main source of biz is from you, and most likely you will keep their times/hrs to your liking.

Doesn't matter if they"could" get more biz, better question is how they could get more biz if they don't have equipment and a open schedule they make. Add the paying for their liability ins, etc. Go for it and see what happens during a audit.

As for the taxing deal. If he starts his own biz he will pay more due to self emloyment taxes, 13% right there. Since your his employer in reality you are paying less in taxes due to the 1099.
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4 seasons lawn&land
03-02-2012, 04:42 PM
You are trying to get your employees into a 1099 situation. I get 1099 from large retailers, cemeteries, hoa's etc. If you sub out more than 600 to a biz you are suppose to 1099 them. That is the correct way to do this.

Irs has certain guidelines of what makes a subcontractor or employee. I would check the guidlines online they have a checklist to go through. What I have read in this thread sounds like they are employees. Using your truck/mowers/trailer, main source of biz is from you, and most likely you will keep their times/hrs to your liking.

Doesn't matter if they"could" get more biz, better question is how they could get more biz if they don't have equipment and a open schedule they make. Add the paying for their liability ins, etc. Go for it and see what happens during a audit.

As for the taxing deal. If he starts his own biz he will pay more due to self emloyment taxes, 13% right there. Since your his employer in reality you are paying less in taxes due to the 1099.
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If thats the info they go off of without regard to whether they have their own insurance and registered business then it might be a bad idea.

djagusch
03-02-2012, 04:44 PM
Google irs subcontractor rules and you will find plenty of info. Irs has a ss-8 form you can fill out the situation and you will get a offically response from them. Reading through the form I think you will get the idea what they will say, employee.
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djagusch
03-02-2012, 04:49 PM
If thats the info they go off of without regard to whether they have their own insurance and registered business then it might be a bad idea.
If they owned the truck, mowers had more work from other sources, advertised, and could set their schedule/way to do the job then you would be ok. But then why would they work under you when they could just get the work directly.
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4 seasons lawn&land
03-02-2012, 05:07 PM
obviously, i get that part. But I looked up that form. Its basically written around preventing people from doing exactly what Im talking about doing. Bummer. Thanks for the info.

Fvstringpicker
03-02-2012, 07:26 PM
Glad you saw the light 4 seasons. You're saving yourself thousands in penalties.

Salcido Lawn
03-02-2012, 07:49 PM
The IRS says, that if you tell somebody went to show up and when to go home and they use your equipment then by definition they are an employee. It would be illegal for you to pay them as a subcontractor because they are an employee
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4 seasons lawn&land
03-02-2012, 08:19 PM
Glad you saw the light 4 seasons. You're saving yourself thousands in penalties.

Lets clarify here. I didnt see the light... I saw the black abyss that is government regulation.

Salcido Lawn
03-02-2012, 08:24 PM
It's a pain, but it's better to play by the rules. I don't want to get audited, I don't know about you?
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4 seasons lawn&land
03-03-2012, 10:49 AM
you get workers comp audits most every year no matter what your doing.

Salcido Lawn
03-03-2012, 05:28 PM
Workman's comp audits are a lot better than IRS audits! There is a company in my town, that got audited by the IRS and after 2 years, it bankrupted them!

mattfromNY
03-03-2012, 06:46 PM
Workman's comp audits are a lot better than IRS audits! There is a company in my town, that got audited by the IRS and after 2 years, it bankrupted them!

IRS and sales tax audit sucks. A place I used to work for went through a big audit bc of sales tax, 'capital improvement' and 'farm exemption' taxes. In the end, after several years, the place didn't end up with much in fines. It was all of the time wasted finding files and attorney and accounting fees to protect themselves, as well as their audit led to MANY of their best customers getting audited. Many of their best customers were fined for tax fraud, or themselves spent thousands of dollars to defend themselves... needless to say, the original place lost alot of good customers and business over being audited.

Salcido Lawn
03-03-2012, 06:49 PM
That Sucks!!
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greenmonster304
03-04-2012, 01:35 PM
paying in this way is very common in the construction industry in my area. A contractor will have a large residential project going on with 20 carpenters and only two will be on the pay role. the rest will be subs even though they show up at the same job site at the same time every day for two years. I do some sub work for an HVAC contractor in the winter and it is just labor but I use my truck and my tools and it is usually a different job every day.