Sub Contracting

Discussion in 'Lawn Mowing' started by R&E PROPERTY MAINT., Nov 17, 2002.

  1. R&E PROPERTY MAINT.

    R&E PROPERTY MAINT. LawnSite Member
    Posts: 25

    I'm new to this industry and was wondering if you could hire your crew as sub contractors? if so, is there a form you need to file with the state?
    Is anyone out there do this?
    thanks in advance for your response..
    p.s. I have searched this topic and found nothing
     
  2. No you cannot do that.

    You have to meet all of 20 requirements with the IRS to quallify sub's.

    In your post you are disqualified 3 times with 3 words "hire" "your" and "crew".

    Jim Lewis posted on this many times, seach his posts and the answers are there for your questions.
     
  3. rodfather

    rodfather LawnSite Fanatic
    Posts: 9,501

    LGF said it. Your crew is using your equipment, your trucks, your trailers. They are not subcontractors and you are definitely waving a read flag for an IRS audit when you file your income tax report.

    They are your employees and it is against the law to send them 1099's Misscellaneous Income forms the following January
     
  4. kutnkru

    kutnkru LawnSite Silver Member
    Posts: 2,662

    Basically if they do not have their own equipment, vehicles, trailers, insurances/bonds to do the job successfully - they are not considered a sub-contractor, but rather an employee.

    If they do in fact have their own insurances and equipment, you can then pursue a restrictive covenant between your parties and take it from there.
     
  5. JimLewis

    JimLewis LawnSite Fanatic
    Posts: 6,842

    Yes, these guys are right. The IRS has compiled a neat little list of 20 factors that must be true in order for a worker to be a true sub-contractor. You must meet at least 18 of these factors;

    http://www.hasys.com/systems/20_factors.pdf

    By having someone work for you doing lawn care you'd very likely be breaking the following factors;

    1, 2, 5, 6, 7, 8, 9, 10, 12, 13, 14, 15, 16, 17, 18, 19 and 20.

    You can try it anyway, and break these rules. And you may even get away with it for 5 years or so. But then the IRS will figure it out eventually and YOU will have to pay back taxes for all of those employees for all of those years. Sound like fun?
     
  6. strickdad

    strickdad LawnSite Senior Member
    Posts: 544

    this brings up a intresting question, if what jim, lgf, and the others say then how is it if you hire labor from a temp agency. they after all will be running your equipment.. i know most of you will say they are from a seperate company etc. but whats to stop me or any other s corp. owner from setting up a temp agency that provides labor to there lawn and landscape co. they would be under a different name, but would be controlled by the same corperation ..
     
  7. JimLewis

    JimLewis LawnSite Fanatic
    Posts: 6,842

    That situation is totally fine. There is no difference (as far as the IRS is concerned) whether you have your own employees or those of a temp. or employee leasing company do the work.

    The reason this is not a problem is because somebody is still paying for the employees taxes, unemployment, worker's comp., etc..... They don't care one bit who pays this stuff - as long as someone is doing it.

    It's when you AREN'T paying for any of these things and trying to pay someone just for wages earned and telling that person they are responsible for their own taxes, worker's comp, etc. that the IRS is going to start scrutinizing everything.

    Make sense?
     
  8. strickdad

    strickdad LawnSite Senior Member
    Posts: 544

    it sure does jim, but i can also see that if i can control the temp agencys priceing structure (by owning this temp agency) then i can find enough write offs tax wise to more than pay for any employees taxes and any other incurred expenses. intresting concept dont you think?
     
  9. CMerLand

    CMerLand LawnSite Senior Member
    Posts: 393

    Strickdad,

    Not sure where you getting to with the whole tax write off from the temp agency deal but all your labor costs including taxes are a complete write off right from your landscape company. Your payroll expenses(ie wages paid), plus your share of all payroll taxes are a 100% write-off from your gross income, so by trying to do an end around with a temp company scheme isnt going to get you anywhere. Pehaps Im just not seeing the loophole you think you see in this and you could enlighten us further.

    CMerrick
     
  10. strickdad

    strickdad LawnSite Senior Member
    Posts: 544

    by owning multiple companys a corp can offset its tax liabilty esspecially when one of its companys doesnt do real well (on paper that is) im a little "leary" on discloseing operating techniques in an open forum like this , if you have a good cpa, he or she can enlighten you futher.
     

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