paying workers "out of pocket"

Discussion in 'Lawn Mowing' started by DALMlawn&landscaping, Jun 22, 2004.

  1. DALMlawn&landscaping

    DALMlawn&landscaping LawnSite Member
    from TX
    Posts: 186

    i've heard of a few guys doing this. they will just throw the workers like, 75-100 bucks at the end of every work day. i don't get paid like this, but who does it this way, why, what are some tax issues, just a question i was wondering about.

    -jeff
    Linahan Lawn Service
    foreman
     
  2. if you thinking about paying somebody"under the table"..i suggest dont .
     
  3. DALMlawn&landscaping

    DALMlawn&landscaping LawnSite Member
    from TX
    Posts: 186

    i'm not the one that cuts the checks, i had just heard of some people doing this and was just curious why it might be better or worse than a payroll or what. or is it like contract labor where they pay you with no taxes taken out, but come the time, they file, and you have to deal with it your self or what. i'm just curious at how this might be better or worse. i know guys that get paid like, 100 bucks a day, wether the works takes 6 hours or 10, for that specific job, they will get paid 100 (or 75 or 100 or 125 you get the idea).

    -jeff
     
  4. 1MajorTom

    1MajorTom Senior Moderator
    Posts: 6,074

    I don't think you will find too many people here admitting that they pay 'under the table'.
     
  5. rodfather

    rodfather LawnSite Fanatic
    Posts: 9,501

    I can tell you that the government frowns highly on payroll tax evasion...get caught for it and you will be up the proverbial creek without sufficient means of locomotion if ya know what I mean.

    Recently here in NJ the Department of Labor was looking for guys in the Green Industry who were doing just that and caught a number of them.
     
  6. allstar

    allstar LawnSite Senior Member
    Posts: 282

    Hi Jeff
    I'm pretty sure that you're supposed to take out taxes on anyone employed by you.It doesn't matter if they're hourly or salaried employees.
    From a business perspective,you're better off doing things the 'right' way because payroll is deductible.If you pay someone say $100 but don't take out taxes you certainly can't claim that as a business expense because if you're ever audited you'll get nailed.Good luck.
    An accountant can explain all of this to you.
     
  7. PR Fect

    PR Fect LawnSite Bronze Member
    Posts: 1,075

    I new of one LCO in our area who had no "employees", just "sub contractors". He then needed no workman's com., and saved the "employers share of social security. I believe he had them sign a sub contractor paper before he would let them work for him. He has done some major jobs in the area and he is the only employee.
     
  8. DFW Area Landscaper

    DFW Area Landscaper LawnSite Silver Member
    from DFW, TX
    Posts: 2,116

    This spring, I hired an employee. Works an average of 45 hours per week.

    Anyway, I'm not sure if I've done the smart thing, but the employment taxes are a little b!tch.

    Over time (hours worked over 40) = 50%
    Social Security Taxes = 7.6% witheld from his check
    Social Security Taxes = another 7.6% kicked in by me
    Unemployment Taxes = another 2.7% paid by me
    Workmans Comp Insurance (optional in Texas) = another 8% kicked in by me

    I pay the guy $8.50 an hour and I've figured out that if my employee works an average of 50 hours per week, he's costing me $11.06 per hour.

    My belief is that well over 90% of the LCO's around the country are paying their employees as sub-contractors. With my labor at $11 per hour, it's tough to compete with guys who have labor costs at $8 per hour.

    Later,
    DFW Area Landscaper
     
  9. Rex1321

    Rex1321 LawnSite Member
    Posts: 9

    PR FECT,

    Just because a person signed the paper, it doesn't make him a subcontractor. There are 3 standards used to determine if a person is truly a sub or just a sub on paper. If he is just a sub on paper you will still be held responsible for what ever should come up. (wages, taxes, legal issues)

    Rex
     

  10. MY Unemployment tax is 3.5 percent ..illnois you have to buy workmens comp from insurance company ..mine3 is 13cents on every dollar my employees gross......yeah its tough but you doing right thing....and beleive me the fines and penalties are stiff no statute of limminataions to.
     

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