Workers compensation

[oceanlovin'ea]

Who exactly is required to carry workers compensation insurance?

I have a man who delivers appliances for Sears. He has 1 employee and 2 subcontractors who work for him. The subcontractors prefer to be paid as sub contractors. They signed a statement that said they understood the difference between an employee and a sub contractor and it was their choice to be considered sub contractors. So my client is not trying to avoid putting them on payroll. They are the two men that drive his other truck.

What I read said that if you have more than 4 employees you must carry workers comp. He doesn't have more than 4 employees. So does he have to carry it.

Maybe Sears requires it. Hadn't thought about that till just now.

The reason for these questions is that during the first couple of months he used Prmepay to process his payroll but they are very expensive. So he changed to South East Employee Leasing. That makes him an employee of South East Leasing and he got a W-2 from them. But he sends them a check to cover the payroll. Actually Southeast Leasing is very expensive too. But I guess the workers comp is cheaper through them.

So will I put the w-2 on line 7 and then deduct the money he pays to southeast leasing on his schedule C?

To muddy the waters even a little more, he set up a corporation but has never actually done anything through the corporation. The EIN he used in the past is in his name not the corporation.

[taxmandan]

State law dictates who has to have WC coverage. In Orygun it is required if the business has just one employee, check your state laws. Your second paragraph makes it clear that he would be in violation of IC/employee laws, it's not their choice how to be treated, it is defined in law. Your client is headed for deep trouble with the way he is handling this issue, the first time one of those "Independent Contractors" heads to the employment office to file for unemployment they will change their tune and claim they were employees all along. ICs do not qualify for unemployment. And your client will pay BIG penalties and fines for his lack of proper treatment of these employees.

If he had ICs not employees, what was he paying the leasing companies for? If the workers were employees of the leasing company then they are not independent contractors.

Daniel

[BOB W]

Nys......

...... DOL requires IC to be picked up as employees unless they can prove the IC is a ligit business and does work for other businesses as well.

As far as WC goes, unless the IC has a workman's comp policy they are picked up as an employee > no if ands about it. NYS ignors those letters that say the IC is an IC.

[TaxBird]

As an aside...

You might want to check out PayCycle (www.paycycle.com). It's a nifty little online payroll software which is ideal for companies who have less than 5 employees.

I think the cost is ~$15/mo for up to 5 employees and $.25 per employee after that. No extra charges for quarterlies or year end.

Everything's online, it will do direct deposit, and email reminders are sent to the client when it's time to pay (I think it's ~ 2 days to a week prior). You (the tax preparer) can even set it up so that they go through you (Wholesale option). That way, you maintain visibility on the account activity.

Doesn't handle multi-state very well, though.

As for the purpose of your post, I agree with previous posters. 1. You don't get to choose IC status and 2. The rules vary by State.

Good luck with your guy.

[S T]

Calif and WC

yes in Calif one employee and we have to provide WC coverage, so you need to check with your state laws.

Seems like your t/p has a contract with Sears that might say one thing, but what your State mandate is is something different. Sears will not back up your T/P if there is an employee issue due to Work comp, Labor Law and Employee Taxes.

From your post your t/p is on payroll with S/E Leasing, but seems to be only for himself and maybe his one employee also covered under S/E Leasing and receiving a paycheck and W-2 from them? How does your t/p pay the IC? How does your T/p pay the "1" employee?

Your T/p could be in for some future issues, such as IC not qualifying for IC status (back payroll taxes) , the IC should have been employees all the time, what if the IC is hurt on the job (sues your T/P for work related injuries because they weren't covered under work comp), etc.

Going through an employee leasing agency for small business sometimes is a good idea, as they take care of all of the payroll and work comp, etc. Just not so good for the employee as there are usually no benefits.

If your T/P is controlling the jobs, hours worked, how to do the job, etc, then the other parties are not IC, they would be employees. Maybe work through the SS 8 form and see what you come up with.

Sandy

[oceanlovin'ea]

How he operates

He was paid by South EAst Employee Leasing. One employee was paid by them for the last 4 weeks of the year. (Got to ask about the rest of the year.)

He paid the IC every week or 2 weeks. There were 2 that worked the majority of the year. They drive the other truck he has. So they have their own schedule. He is not with them or controlling their schedule. They go to Sears and pick up their merchandise to deliver.
2 others were only a for a short time. Maybe for vacations or when someone was out.

I know it is a touchy issue. I have social security numbers for these guys so they are legals. That is why he had them sign a statement showing they understood how they were being paid and that was their choice.

So he probably had himself and one guy on his truck and 2 guys on the other truck.Total of 4 people at any one time during the year.

[taxmandan]

The fact that he is treating people differently, two of them are employees and two are "IC"
means he is headed for major trouble. And that letter he had them sign will work against him with the taxing authorities not help him. It shows that he did not make the determination according to the facts and circumstances under law. Damage control is what needs to be done now, and he needs to get everyone on the payroll as employees to minimize the penalties he'll pay for this mess. As for me, he would either fix it or find someone else to do his taxes and/or bookkeeping.