Are your employees Sub-Contractors?

Discussion in 'Business Operations' started by JimLewis, Jul 25, 2002.

  1. JimLewis

    JimLewis LawnSite Fanatic
    Posts: 6,842

    I wanted to make this post because I have seen and heard about this a lot - both on and off of lawnsite; LCO's who think they got it made and don't have to worry about payroll and taxes because they've made their employees "sub-contractors" or "independent contractors".

    For those of you who do this, or have thought about doing this; listen up and wise up.....

    It ain't possible in this business. You're not gonna get around it. No matter how you try, it's virtually impossible to meet the IRS's regulations for a person who works for you mowing lawns as being an independent contractor.

    CLICK HERE to view a list of the 20 factors you need to meet in order to have an person qualify as an independent contractor.

    In this business, you'll likely be breaking rules 1, 2, 3, 6, 7, 8, 9, 10, 13, 14, 15, 17, 18 and 19.

    If you break even 2 or 3 of these rules the person you've been paying as a independent or sub-contractor will now be deemed an employee and YOU will be paying all of the back taxes. NOT FUN! And they will put you out of business faster than you can blink.

    Just beware of this. You guys came here to learn, right? Well, this is one lesson we all need to learn and get right.
     
  2. wolfpacklawn

    wolfpacklawn LawnSite Member
    Posts: 120

    Well said Jim. If you are stupid enough to try and 1099 your employees you should just be a little more stupid and pay them under the table.:p
     
  3. wolfpacklawn

    wolfpacklawn LawnSite Member
    Posts: 120

    Jim, hurry up and make one more post. You are at post # 666. Not a good sign.:angry: :blob2:
     
  4. JimLewis

    JimLewis LawnSite Fanatic
    Posts: 6,842

    Well, that's no good!
     
  5. AVRECON

    AVRECON LawnSite Senior Member
    Posts: 290

    Any good tax attorney could punch holes through that list. Besides that in the REAL world those laws are broken everyday. If I wanted to hire someone to do my lawns, and we agreed on price, and if they had their own equipment and I 1099 them at the end of year. The IRS would be hard pressed to do anything to me for it. You may not like it but it happens like this everyday.
     
  6. Russo

    Russo LawnSite Senior Member
    Posts: 287

    Great post, Jim. Do it right.
     
  7. JimLewis

    JimLewis LawnSite Fanatic
    Posts: 6,842

    Ok. This is the kind of attitude I am talking about. Fine if you want to believe that, go ahead. But I am telling you, that if you hire employees, they do what you tell them to do, with your equipment, and they work primarily for you, there is no tax attorney in the land that will get you out of the problems you will eventually run into with the IRS. If you think otherwise, you are soarly mistaken.

    Speaking of good tax attorneys, call a few. I think you'll find they will give you the same advice I have.

    Yes, it may happen every day. But the IRS busts people who do it every day too.

    As for me not liking it - personally I could care less. If you wanna be stupid and give it a shot for a few years, it won't bother me at all. I am just trying to help people out here and pass along some sound advice. The advice given above by Avrecon is BAD advice.
     
  8. Hawkeye5

    Hawkeye5 LawnSite Senior Member
    Posts: 295

    The problem is not only the IRS, although that in its-self is more than enough. If one of your so called sub-contractors sustains serious injury on the job the worker's compansation court or administrative judge (States vary) WILL find that they are your employee. Then guess what?? No compensation insurance? Tough, pay up. Your former sub-contractor is going to own your business, your house, your car, your dog and your future earnings!! All because you tried to save a few dollars and bent the rules to avoid taxes. Suck it up and do it the right way. JD
     
  9. A1 Lawn@Landscapes

    A1 Lawn@Landscapes LawnSite Member
    Posts: 220

    I actually prepare taxes for H&R in the off season. One of the criteria in selecting a business for an audit is a ratio of 1099's issued to gross income. Small businesses are one of the biggest targets for audits. And let me tell you, even if you do survive the audit, the legal fees will get you.

    It's like the oil filter commercial......Pay a little now, or a whole lot latter........
     
  10. bubble boy

    bubble boy LawnSite Bronze Member
    Posts: 1,020

    good advice for us in Canada, too.

    CCRA is getting tired of losing all this money and is cracking down big time. apparently, last couple years have changed rules to try and stop this "problem" from happening.
     

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