Supervised Preparers......Independent Contractor?

[AZ-Tax]

My helper I have during tax season to enter data into tax returns, has an "indpedendent contractor" relationship with me. My helper was allowed to come in when they desried and I paid them on a "per return" basis.

Under the "Supervised Preparers", its my understanding my helper will need to obtain a PTIN but not a RTRP license. Can my helper still maintain a "independent contractor" status?

I was told by another EA that "Because of the element of control and no financial risk on the part of the worker, you should treat these workers as employees".

Your thoughts please

Joe-EA

[Gary2]

I think the PTIN/RTRP issue is a red herring. Start at http://www.irs.gov/businesses/small/...=99921,00.html , try answering the SS-8 questions for yourself and go from there. My intuition is employee.

[JohnH]

I think the person is an employee, hands down.

The SS-8 will help you form an opinion, but keep in mind it isn't a matter of weighing the answers to the questions and coming up with a probability. IRS will sieze on whichever answer(s) move you in the direction of "employee" because they want withholding at the source.

I always tell clients the 'Independent Contractor" issue is almost always obvious if the person is truly an IC. Once there's any ambiguity introduced into the situation, you can bet the IRS will call them an employee.

[Lion]

The SS-8 questions that carry the most weight have to do with control. Do you control where he works? On your computer and software? Do you assign him returns or does he bring his own clients? Does he have to finish by 15 April? Does he have to follow your confidentiality rules? Can he lose money or is the risk all yours? You get the idea. Considering the tight control we must have in the tax prep business, he's probably your employee.

[JohnH]

Lion nailed it.
"Direction & control" plus "means & manner" are the key, and it it's much more than just a matter of whether they choose their working hours.


BTW, has anyone ever sent in an SS-8?
If so, did you ever see IRS validate an I/C classification?

I've always told people to fill in the SS-8, but don't bother sending it in. By the time you complete it, then look at it from the IRS's perspective, you'll have your answer.

[WhiteOleander]

Actually, here, the State has been much more agressive about auditing for IC verses employee than the IRS. Then, when they get through wringing the guy out, they turn the info over to the Feds. It can get very ugly. One person I am aware of was audited by the State because a person they had paid as an IC, went to file for unemployment benefits when they were let go. There was a huge tax and penalty assessed by the State and Feds.

[gboykin]

Actually, here, the State has been much more agressive about auditing for IC verses employee than the IRS. Then, when they get through wringing the guy out, they turn the info over to the Feds. It can get very ugly. One person I am aware of was audited by the State because a person they had paid as an IC, went to file for unemployment benefits when they were let go. There was a huge tax and penalty assessed by the State and Feds.

Same here. It seems that it is the IC that is let go and tries to collect unemployment every time.

[kpangelinan]

Actually, here, the State has been much more agressive about auditing for IC verses employee than the IRS. Then, when they get through wringing the guy out, they turn the info over to the Feds. It can get very ugly. One person I am aware of was audited by the State because a person they had paid as an IC, went to file for unemployment benefits when they were let go. There was a huge tax and penalty assessed by the State and Feds.

It's the same exact thing here in Maine.....the state is super aggressive in nailing IC that could or should be IC and then they have a buddy at the feds they hand the info over to.

I agree with everyone's assessment...employee for sure.

[JohnH]

Not sure if this is analagous to the original situation, but I have someone who does some posting for me from time-to-time. I send her bank statements and check stubs for certain clients, which she posts to an Excel spreadsheet I designed. She posts the info and emails the work back to me, usually within a week or two. She gives me the number of bours she spent on the project and I pay her accordingly.

I pay her as an independent contractor. If she did this exact same task in my office, using my computers and following working hours I gave her, I'd treat her as an employee.

[kpangelinan]

Not sure if this is analagous to the original situation, but I have someone who does some posting for me from time-to-time. I send her bank statements and check stubs for certain clients, which she posts to an Excel spreadsheet I designed. She posts the info and emails the work back to me, usually within a week or two. She gives me the number of bours she spent on the project and I pay her accordingly.

I pay her as an independent contractor. If she did this exact same task in my office, using my computers and following working hours I gave her, I'd treat her as an employee.

Yup, I think I'd concur with this scenario.

[Lion]

The IRS has agreements with many states to share information re IC vs. employee. The IRS goes so far as to hand over leads to the states for the states to pursue first. Of course, the IRS gets their leads back with all the research done for them. Maybe it's actually the federal Department of Labor and the states' DOL. Around here, they're referred to as the Audits from He!!.

[Burke]

Went through one of those with the state unemployment guys. They were targeting real estate businesses in particular. Of course, they found one who was mis-classified, office worker. And there were penalties. I thought for sure the employer would hear from the feds, but as far as I know he never did. The ones they should have been targeting were landscapers.