# 1099 not insured



## Grumpy (Oct 8, 2003)

Ok many of you may remember about 6 months ago I was considering making the switch of insurance companies. Not it is official I am going to switch 100%. So I have been interviewing several insurance brokers in my area. Of coarse they all ask how many employees etc...

Well I told them "I have 4 full time employees, not counting myself and the 2 part timers I pay 1099. "

Today one guy said to me that "they are subs", I said "technically yes but I will be picking up their insurance." He said "If anything happens to them, they will not be covered." I said "But I will pay for them." He said "it doesn't matter."

So the insurance company will take my money to insure these two guys to work on an as needed basis, a day here a day there, but if anything happens to them they will not actually live up to their responsibility and actually insure these guys.

Doesn't that sound like legalized thievery? aat very least any business owner/manager that has this kind of policy has made a very very poor decision.

I only bring this up to you guys because you might want to check your own policies. It seems like this rule defies all laws of logic and ethics, yet the insurance companies are obviously getting away with it. Honestly the more I deal with insurance companies the more I understand why soooooo many cheat.


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## Double-A (Jul 3, 2006)

Grumpy, take the approach of a 3 year old and start asking, "Why?".

The insurance company will not cover these folks for good reason, not just to be bandits or thieves (I'd like to think), so ask them why, if you have purchased insurance for them, will they not be covered in the event of a claim.


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## Grumpy (Oct 8, 2003)

Of coarse I ask why, and ofcoarse I get the canned answers. The answer is simple in my mind. it's a way for them (the insurance companies) to maximize revenue and minimize risk. It's a great strategy in my opinion... but worthless to me as an insurance buyer.


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## Double-A (Jul 3, 2006)

Grumpy said:


> it's a way for them (the insurance companies) to maximize revenue and minimize risk. It's a great strategy in my opinion... but worthless to me as an insurance buyer.


 
Of course its not worthless to you, just inconvenient. If they didn't maximize revenue and minimize risk, they'd be the highest priced worthless insurance company out there. :w00t: 


OK, so what was the canned response?


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## Debookkeeper (Jul 23, 2006)

Grumpy - what kind of insurance are you talking?


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## maj (Mar 13, 2006)

The way I've always understood it is if you are paying 1099, they are subs, and responsible for their own insurance and taxes. They have to have their own seperate policy. If you want to pay the premium, that's fine. 

There's a fine line (legally) on how to handle paying "employees" that way. I did it for a while, but I consulted my attorney first and checked all the tax laws.


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## Debookkeeper (Jul 23, 2006)

Maj - this is very true. Someone I knew who was handling a few of his "employee's" as subs with 1099's, fired one of these guys. Well, he went to unemployment and boy did he open a can of worms. As you can imagine the state department of labor audited all his records, and he had to pay back payroll taxes, penalties and fines. This is a line that I never recommend anyone walk. :no:


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## maj (Mar 13, 2006)

First of all, you can't "fire" a 1099 "employee". You have to tell them, "I'm sorry, but I don't have anymore work for, good luck on your own." 

Second, the "employee" should have known he can't draw unemployment, because he is self-employed (legally).


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## Double-A (Jul 3, 2006)

I think the rubber is about to meet the road.


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## Shellbuilder (May 14, 2006)

The insurance agents are telling you what IRS, your state and your unemployment office should have already told you about making up your own rules about who has witholdings and who doesn't. It all gets straight once your 1099ers fall and their famlies sue you for everything you have and will ever have to pay for a drooling family member unable to go to the bathroom on their own.


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## Double-A (Jul 3, 2006)

Double-A said:


> I think the rubber is about to meet the road.


Houston, we have touchdown!

I still want to hear what the insurance company's canned response was, Grumpy.


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## IHI (Dec 25, 2004)

I ran into this situation last winter when I was hiring snow plowing subs, had a good friend that wanted extra work but he had previously dropped his liability insurance since it costs quite a bit and he did'nt plan on plowing much....until I called LOL!! So I called my agent to see if I could cover him under my policy just for snow removal and my agent was good enough to tell me of all the things that could go wrong in different scenario's and all wind up with me paying for coverage and then not getting covered. 

So, I just ended up having him re-start his liabilty coverage and i wrote a check to reimburse him for the coverage then went on business as usual paying him a 1099. Either way 1099 employee's have no recourse for work man's comp, or umemployment, they are their own employeer, so if you cover your end legally there can be no legal recourse against you later should the unforseen happen and the guy/s get shadey on you.

You can pay, but we wont cover.....sounds like a typical insurance policy to me no matter what is being covered....ins. biggest legal scam this country has ever seen. If it was sunny-your not covered, if it was cloudy-your not covered, it happened on Tues., we dont cover on tuesday, etc....they can kist 2 million reasons to stop from paying/covering.


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## Debookkeeper (Jul 23, 2006)

maj said:


> First of all, you can't "fire" a 1099 "employee". You have to tell them, "I'm sorry, but I don't have anymore work for, good luck on your own."
> 
> Second, the "employee" should have known he can't draw unemployment, because he is self-employed (legally).[/QUOTE
> 
> That was my whole point. This person was treating his employees as subs. The guy was not legally self-employed. So it doesn't matter what this employee should have known - it matters that he didn't give a  whether or not he got the owner is trouble. All I was trying to state is the fine line some contractors walk between employee and 1099 Sub.


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## Grumpy (Oct 8, 2003)

Debookkeeper said:


> Grumpy - what kind of insurance are you talking?


Workmans comp. The company specifically I spoke with was American Family Insurance. He said the policy is specifically written that anyone NOT a w2 employee is NOT covered by the policy.


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## Grumpy (Oct 8, 2003)

maj said:


> The way I've always understood it is if you are paying 1099, they are subs, and responsible for their own insurance and taxes. They have to have their own seperate policy. If you want to pay the premium, that's fine.
> 
> There's a fine line (legally) on how to handle paying "employees" that way. I did it for a while, but I consulted my attorney first and checked all the tax laws.


All my full time every day guys ARE w2 employees. I only 1099 those guys who work a day here and a day there as needed. I do want to pay the premiums on these guys, however even though I can and will have to pay the premiums on these guys they still will not be covered by the policy if something were to happen.

So I pay but get nothing in return. So the point here is this... I can understand a company wanting to limit their liability and have a policy that a 1099 not be covered by the policy. I can live with that. HOWEVER if this is the case, then I should not have to pay their premiums.


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## maj (Mar 13, 2006)

Yeah Bookie, I wasn't disagreeing or argueing. I was just adding to what you said. First statement was in ref. to the employer. Second statement was in ref. to the employee.


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## maj (Mar 13, 2006)

Grumpy said:


> Workmans comp. The company specifically I spoke with was American Family Insurance. He said the policy is specifically written that anyone NOT a w2 employee is NOT covered by the policy.


That's who I have ALL my insurance with (business & personal). One of the reasons why is exactly what you are running into. They are the most honest insurance company out there as far as I'm concerned.


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## maj (Mar 13, 2006)

Grumpy said:


> All my full time every day guys ARE w2 employees. I only 1099 those guys who work a day here and a day there as needed. I do want to pay the premiums on these guys, however even though I can and will have to pay the premiums on these guys *they still will not be covered by the policy if something were to happen.*
> 
> So I pay but get nothing in return. So the point here is this... I can understand a company wanting to limit their liability and have a policy that a 1099 not be covered by the policy. I can live with that. HOWEVER if this is the case, then I should not have to pay their premiums.


Independents have to have their own policy. You cannot lump them into your policy. Since we're talking about WC here, well then, I guess they are just SOL.


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## cssconstruct (Jun 19, 2006)

I think that what grumpy is saying is, if the insurance company in no way shape or form is going to cover the guy, then how can they say you owe them a premium for using an uninsured sub. They claim that you have opened them up to increased liability, when in fact they state that they are not actually covering the person with the premium they have received.


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## maj (Mar 13, 2006)

Work comp premiums are based on a per $100 of paid wages. You list who your employees are. You guess what they're paid wages are going to be for the policy period. At the end of the policy period, the insurance company does an audit of what you actually paid out in wages. The difference is either paid or refunded. 

With that said, work comp providers will only pay for claims on employees of the policy holder. Employees are considered just that if they get W2's from the policy holder. 1099's are NOT to be used for employees covered under a work comp policy holder. If you're sending out 1099's, then that person is considered an independent by the insurance companies. 



> Today one guy said to me that "they are subs", I said "*technically yes but I will be picking up their insurance*." He said "If anything happens to them, they will not be covered." *I said "But I will pay for them." He said "it doesn't matter."*
> So the insurance company will take my money to insure these two guys to work on an as needed basis, a day here a day there, but if anything happens to them they will not actually live up to their responsibility and actually insure these guys.


Sounds to me like Grumpy is offering to pay the insurance company for subs that the company is not going to cover. At least this guy is honest enough to forewarn Grumpy of the laws of work comp.

As stated before, you can list whomever you want on your policy. And you can list whatever paid wages you want. It all comes out in the audit.


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## Mr. D (Jun 7, 2006)

why not w2 'em and consider 'em part-time. since you want to pay the premiums anyhow?


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## maj (Mar 13, 2006)

That's what I can't figure out Mr. D!
Perhaps Grumpy is........ dare I say.........trying to "cheat" the system! :w00t: :whistling


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## Grumpy (Oct 8, 2003)

How am I trying to cheat any system by 1099ing them? I'm volunteering to pay their premiums, they are getting a tax document by the very definition of 1099... How is there any cheating going on?

Regardless if you think I am cheating or not, which I am not, you are all totally missing the point. The insurance company is cheating you. They are charging you for coverage that does not exist if you 1099 anyone.


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## jmic (Dec 10, 2005)

You can skirt around things for so long but let one of them 1099ers get crippled or killed on the job, and when the proof comes out that they were really employees, you can kiss your business good-bye.


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## maj (Mar 13, 2006)

Grumpy said:


> How am I trying to cheat any system by 1099ing them? I'm volunteering to pay their premiums, they are getting a tax document by the very definition of 1099... How is there any cheating going on?
> 
> Regardless if you think I am cheating or not, which I am not, you are all totally missing the point. The insurance company is cheating you. They are charging you for coverage that does not exist if you 1099 anyone.


ummm.... By treating them as employees, but not withholding taxes, not paying in unemployment, not being covered by work comp.

Insurance companies do not _charge_ anyone for work comp coverage unless you have them listed. Grumpy, if you list these part timers that you are 1099ing as employees, then you are cheating the system.




> Alot of guys cheat and force each employee to be classified like a sub and carry their own insurance. Ok so employee A goes out and gets a policy then exempts himself and pays $750 for a piecve of paper that he gives to his boss. Then his boss presents those papers to his insurance agent at audit time and ends up not paying a premium because the "subs" are covered. Then employee B, C and D go out and do the same... Even if the boss pays for those 4 policies his price is only $3,000 a year.
> 
> It's cheating and it is very criminal but it is also very common.


These are your very own words Grumpy.


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## Grumpy (Oct 8, 2003)

maj said:


> ummm.... By treating them as employees, but not withholding taxes, not paying in unemployment, not being covered by work comp.
> 
> Insurance companies do not _charge_ anyone for work comp coverage unless you have them listed. Grumpy, if you list these part timers that you are 1099ing as employees, then you are cheating the system.
> 
> These are your very own words Grumpy.


Ummm I thought you knew how to read. I have already stated this once or twice, *and those were not my words* but I will state it again since you don't seem to know how to comprehend what you read. 

I am paying their insurance, WC & GL. However even though the insurance company is taking my money for coverage for any working for me who does not have their own policy, 1099 or w2, they will not cover anyone that is not a w2 employee. Therefore YES they do charge for EVERYONE at audit time and everyone who has worked, w2 or 1099, are all declared. I will pay for anyeone who does not have their own coverage, but only w2 employees will be covered.

I am sending them tax docs so they should be paying their own taxes. These are independants and not employees. They work for me as neded, a day here and a day there, and they work for other guys like me as needed. That is an independant by the very definition of the word.

I am not cheating the system one bit in any way at any nook and cranny you care to examine. Just because you say it doesn't mean it is true. Just because you neglect to read what I type doesn't mean I haven't already stated the facts... and because I know how to cheat the system doesn't mean I do cheat the system, if I were cheating the system I wouldn't be paying $900 a MONTH in WC.

-------------------

Choose to flame me all you want, you are still missing the point. The insurance companies are cheating US.


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## Grumpy (Oct 8, 2003)

BTW taking something I said...


> Alot of guys cheat and force each employee to be classified like a sub and carry their own insurance. Ok so employee A goes out and gets a policy then exempts himself and pays $750 for a piecve of paper that he gives to his boss. Then his boss presents those papers to his insurance agent at audit time and ends up not paying a premium because the "subs" are covered. Then employee B, C and D go out and do the same... Even if the boss pays for those 4 policies his price is only $3,000 a year.
> 
> It's cheating and it is very criminal but it is also very common.


... in an unrelated post and using it out of context against me is a politician move. Perhaps you should run for office. I do remember saying this and I do not deny saying this. But that doesn't mean I do follow this practice. I'd love the money I'd save but I wouldn't be able to sleep at night... and please take strong note to my final line in that quote "It's cheating and it is very criminal".


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## maj (Mar 13, 2006)

Do what you like Grumpy, I was only trying to offer my advice and the facts that I know. I've been there... done that.


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## maj (Mar 13, 2006)

Grumpy said:


> BTW taking something I said...
> 
> ... in an unrelated post and using it out of context against me is a politician move. Perhaps you should run for office. I do remember saying this and I do not deny saying this. But that doesn't mean I do follow this practice. I'd love the money I'd save but I wouldn't be able to sleep at night... and please take strong note to my final line in that quote "It's cheating and it is very criminal".



The thread was titled "_Workmans comp_". How is that unrelated to your thread?

How could it be out of context when I used the whole text? I didn't just take parts of your post (like Finley does), I used the WHOLE thing!


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## maj (Mar 13, 2006)

> Even if the *boss pays for those 4 policies *his price is only $3,000 a year.






> *I am paying their insurance*, WC & GL.



How are these two different?


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## maj (Mar 13, 2006)

> They are charging you for coverage that does not exist if you 1099 anyone


I do not list other independents on my policy. They MUST have their own, seperate policy and I require a certificate of insurance from them. I do the same as you Grumpy. I have several other independents that help me out, as I do for them also. We exchange certificates once a year. 

If you want to pay for their policy, that is fine, nothing wrong with that, But my whole point is that it must be seperate policies. You cannot lump other independents onto your policy & expect your insurance company to cover them. 



> These are independants and not employees


You said yourself, these guys are independents. They should have THEIR own policy. You can pay it for them if you prefer.


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## Debookkeeper (Jul 23, 2006)

I am going to tiptoe in on this one - as I choke on all the testosterone  . I am just sincerely wondering how it is even cost effective to pay WC and GL for another subcontractor? I mean.. if they are only working for you a day here and a day there, how does that even finanically justify it? If they are working for others as well, you are also paying the insurance so they can work for others? I am pretty sure the shortest term for GL and WC is 6mnths? Maybe 3? Just wondering.....

Deb


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## maj (Mar 13, 2006)

Debookkeeper said:


> I am going to tiptoe in on this one - as I choke on all the testosterone  . I am just sincerely wondering how it is even cost effective to pay WC and GL for another subcontractor? I mean.. if they are only working for you a day here and a day there, how does that even finanically justify it? If they are working for others as well, you are also paying the insurance so they can work for others? I am pretty sure the shortest term for GL and WC is 6mnths? Maybe 3? Just wondering.....
> 
> Deb


That's what I've been trying to figure out too Deb. Like it was said earlier...... Why not just put 'em on payroll and W2's? Estimate the wages expected to pay and let the audit work it out in the end. That way he will know for sure they are covered. Why pay for something you already know is worthless? 

It's kinda like a customer wanting a new kitchen. I will bill you for $20,000 but you don't get any cabinets or countertops for that.


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## Debookkeeper (Jul 23, 2006)

> They MUST have their own, seperate policy and I require a certificate of insurance from them.


That is our policy as well. I send a friendly note to all new subcontractors stating that a check will not be issued until I have their W-9 information, a current certificate of insurance, blah blah blah. Like I mentioned in a previous post, the GL has to be at least 1 million or the auditor nabs us for that as well... That is also why I have that subcontractor agreement for guys with no employees who don't have WC. Years back I had an auditor looking at one of my subs invoices, and he came across ONE invoice out of a years worth, who listed a "helper". (it was the guys cousin who was plumbing with him for a few days) and because my solo guy didn't have WC - the auditor informed me he could make us liable for it. Thank goodness I was my charming self with him :innocent: Seems no matter which way you turn someone is trying to  you - without a kiss first, none the less!


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## Gordo (Feb 21, 2006)

Debookkeeper said:


> I am going to tiptoe in on this one - as I choke on all the testosterone  . I am just sincerely wondering how it is even cost effective to pay WC and GL for another subcontractor? I mean.. if they are only working for you a day here and a day there, how does that even finanically justify it? If they are working for others as well, you are also paying the insurance so they can work for others? I am pretty sure the shortest term for GL and WC is 6mnths? Maybe 3? Just wondering.....
> 
> Deb


I have a plumber (a one man show that legally in the state of Va. does not have to carry WC). I sub his services regularly. At the end of the year at audit time, I declare his total labor paid. The company is then charged the WC plumbers rate per one hundred. Example: Plumber sub contract wages=10,000. WC per hundred rate =$7.50. 10,000x$7.50=$750 MY company must pay in WC at audit time. 

Legally, my company does not require WC (we have less than 3 employees). I CHOOSE to carry WC because as others have said it only takes one mistake for an employee to become a parapalegic. Kiss your business good-bye. I want my right hand man covered, just like I would want to be covered if I was working for him.

I am not accusing anybody here, but the reason WC is so F;ed up is because of people circumventing the system. This results in higher rates for those that are legit.

Another thing, I agree with Grumpy as far as WC being a "racket". I think the mafia is alive and well in this system.


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## Debookkeeper (Jul 23, 2006)

Are the insurance laws different for every state? are you saying you elect to pay this workmans comp on this plumber at the end of the year or are you required?


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## Gordo (Feb 21, 2006)

Debookkeeper said:


> Are the insurance laws different for every state? are you saying you elect to pay this workmans comp on this plumber at the end of the year or are you required?


Here is where it gets tricky. Va. law does not require WC on companies with less than 3 employees. We are 2 employees, not including subs (which are considered employees if they do not carry WC).

The general contractor is ultimately responsible for all employees (sub or full time). This is where the general public homeowner does not understand the risk involved in this business.

As far as states differing in their requirements, I only know Va. WC.
I am required to pay because I have chosen to be covered (even though legally I do not have to be covered). Kinda like health insurance.........You legally are not required to have it, but when you need it..........its to late to go sign up for it. 

IMO,if you have any subs or employees you should be covered regardless of loop holes. The peace of mind is priceless. I still think WC is a "racket", but you have to have it.


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## bmartin (Dec 30, 2005)

Why not have them get there own policy and invoice you for the premium?


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## jmic (Dec 10, 2005)

Why not just do things on the up and up and hire employees? You'd have better control of your jobs.


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## Shellbuilder (May 14, 2006)

Gordo said:


> Here is where it gets tricky. Va. law does not require WC on companies with less than 3 employees. We are 2 employees, not including subs (which are considered employees if they do not carry WC).
> 
> The general contractor is ultimately responsible for all employees (sub or full time). This is where the general public homeowner does not understand the risk involved in this business.
> :


Makes you wonder what our lawmakers are thinking when asset requirements for C license is nearly nil and yet you can self insure 3 human beings just because you pass a test. Considering also the scenario of dumb ass w.c and G.L. insurance companies insuring subcontractors who have no state registration. I run into this constantly with carpentry.concrete, tile , brick, palster etc. It's no wonder companies like Zurich stopped writing for G.C.s here a few years ago.


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