1099 Subs

Discussion in 'Business Operations' started by rgl1990, Mar 4, 2012.

  1. rgl1990

    rgl1990 LawnSite Member
    Messages: 21

    Hi Everyone I have a question for all of you. I know that the vast majority on here pay their taxes legally. But what percentage of the lawn mowing companies on a whole would you say do not pay payroll taxes on their workers? This would be based on actually talking with other company owners. 10%, 25% or more?
  2. wrtenterprises

    wrtenterprises LawnSite Senior Member
    Messages: 331

    Here on the ISLAND @ PSU, I doubt 40% of all LCO's under (3) employees pay the legal amount of taxes. The LCO's over that number, in my experience with the competition, pay what's due.

    There are always exceptions to the rule, but here @ PSU, the 2-3 man operations generally treat everyone who helps them as a sub contractor. Sad but true, as the State of Pa seems to be OK with it. Never once in 12 seasons have I heard of (1) instance of a LCO having legal issues in regard to this problem......
  3. Roger

    Roger LawnSite Fanatic
    Messages: 5,943

    The 1099 provisions are under control of the IRS. The IRS folks are the ones who are not OK with violations of the 1099 rules. They are the ones who establish the guidelines, regardless of what the PA folks think, or do.
  4. gardenkeeper88

    gardenkeeper88 LawnSite Senior Member
    Messages: 350

    Here we have had 2 companies Get caught and had to pay back taxes + int. and penalty.
  5. rgl1990

    rgl1990 LawnSite Member
    Messages: 21

    Ok so everyone's flyer s are out on the street this month and we get to see what everyone is charging at least in the norther Chicago market. The prices here are from $15.00 a week mow blow and go for 7000 sq ft of turf. To a $40.69 per week for 7000 sq ft of turf which includes everything but fertilizer and weed spray no mulch. That is a huge spread to add edging of planting beds and 2 hours of trimming bushes per season. So I was interested in how this spread is possible. I put 3 mowers up for sale and had 11 small landscaping company owners come over to look at them. They were old hydro lescos that were in need of a new engine, They ran but burnt oil. still in decent shape. I asked in conversation how big they were and what they charged for weekly mowing accounts and how they paid their workers. This was general conversation not a interrogation. 10 out of 11 paid either cash or check with a 1099 at the end of the year. Only 1 paid check and deducted payroll taxes but even he said anything over 40 hours was paid cash. Its not hard to see why prices are so low when they should be higher. Most of my friends in the landscaping bus are at about 35.00 a week but charge monthly or $35 x 4.3 weeks = 150.00 a month. Price competition here is getting more difficult and yes I know they get what they pay for But how can we level the playing field for costs. We all pay the same for gas, disposal, advertising, etc. The huge difference is labor.
  6. rgl1990

    rgl1990 LawnSite Member
    Messages: 21

    Lastly I should have added these owners were between 2 to 3 mowing crews with 3 men on a truck. and in business for about 8-14 years these were not your just starting out guys with one mower.
  7. GreenI.A.

    GreenI.A. LawnSite Silver Member
    Messages: 2,131

    Way to many guys 1009 their employees as subs, but even more than the amount of guys doing this are the guys who are paying cash and not 1099 them. You know if they aren't showing the money they are paying out then they are definatly not showing the money they are taking in either. Their have been plenty of discussions on here of weather the employees can be considered subs and what the IRS and various states define as subs and employees. I have talked to a tax attorney and he told me the #1 way companies get caught for tax evasion and 1099 employees is when their is an injury. Think of it this way, one of your mowing guys slices is finger and needs stitches or sprains his ankle stepping in a hole, he goes to the hospital or his Dr and they ask is the injury work related. He doesn't think twice about it and says yes and gives them your company information. The hospital will take his medical insurance info, but they will contact you for your workers comp. But he isn't an employee so your WC won't pay. He starts getting bills from the hospital for the co-pays, and he insists he shouldn't have to pay because he was an employee and working at when he got injured. Now his med insurance co who payed for the hospital visit is looking to get reimbursed as they believe the company and their insurance is responsible. So now you have the two insurance companies going back and forth over who pays.

    This might not seem likely to you guys, but according to the tax attorney this is the #1 way IRS finds out and leads to many audits.

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