# "Busted"



## FrankSmith (Feb 21, 2013)

dave_dj1 said:


> the people that work for me are 1099 subs and they want it that way.


That's all I needed to reed and I new you should have work comp on them. They are your employees. I never have a conversation with my subs about if they should be set up as subs or employees. Why do "the people working for you" want it this way? You probably offer to pay them more if they will and just didn't mention it to us.


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## 91782 (Sep 6, 2012)

Californiadecks said:


> You are not an independent contractor if you perform services that can be controlled by an employer *(what will be done and how it will be done).* This applies even if you are given freedom of action. What matters is that the employer has the legal right to control the details of how the services are performed.


?????

Uh, pretty much, I've said who, what, when, where, how many and how often down to the finest minutiae all my life. It's the biggest issue, in that what a sub-contractor has learned or practiced for others is at variance with how I or "we" do things.

So to me, that paragraph in and of itself is ambiguous, or open to interpretation.

What would be an example then of what a contractor could not ask of a sub that would be different from telling an employee?


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## Calidecks (Nov 19, 2011)

SmallTownGuy said:


> ?????
> 
> Uh, pretty much, I've said who, what, when, where, how many and how often down to the finest minutiae all my life. It's the biggest issue, in that what a sub-contractor has learned or practiced for others is at variance with how I or "we" do things.
> 
> ...


It's very easy to figure out. My subs file end of the year taxes such as a schedule C if they are a sole pro. They also work for more than one customer. I call the plumber and give him the plans, tell him when I'll be ready for him and he does his job. I can't tell him how I want it done just what the finished product will be.


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## Calidecks (Nov 19, 2011)

SmallTownGuy said:


> ?????
> 
> Uh, pretty much, I've said who, what, when, where, how many and how often down to the finest minutiae all my life. It's the biggest issue, in that what a sub-contractor has learned or practiced for others is at variance with how I or "we" do things.
> 
> ...


That QUOTE was from the IRS website it wasn't mine.


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## 91782 (Sep 6, 2012)

Californiadecks said:


> That QUOTE was from the IRS website it wasn't mine.


No sir, I am not challenging you, and I understand where you got it, and that you offer it only as "fact".

But what I'm asking is, how the "ell" does one get a clear distinction between a sub and an employee status, based on that?

I mean, I'm just scratching my head over it Mike.

Example: I go to a spec under build, and I see a counter top guy not mounting the counter as I have arranged with his boss - "The Sub-contractor". I tell him, "this is how I want it done. If you question that, then put down your tools and call your boss, because that's EXACTLY what I'm going to do".

On a day to day basis, I see very little difference between employees and subs - other than who the checks get cut to.


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## Calidecks (Nov 19, 2011)

In my state it's clear. You must have a contractors license to be a sub. I can tell you the states and feds talk. I had a mistake on my taxes that was resolved like most IRS issues "with a check! It wasn't long before the state came calling on the same mistake. They wanted theirs as well. 

I ended up amending three years to be proactive because the mistake was repetitive. It really was an honest one. But that is beside the point.


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## Tom Struble (Mar 2, 2007)

SmallTownGuy said:


> No sir, I am not challenging you, and I understand where you got it, and that you offer it only as "fact".
> 
> But what I'm asking is, how the "ell" does one get a clear distinction between a sub and an employee status, based on that?
> 
> ...


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## hdavis (Feb 14, 2012)

Besides the IRS regs, there are state labor laws that come into play if the person is classified as an employee under the state labor laws. We had this discussion before, and it's possible to be a 1099 under IRS regs and an employee under state labor laws. Cali probably remembers the discussion - I think we used the California labor laws as an example.


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## 91782 (Sep 6, 2012)

Tom Struble said:


> if you would call his boss you are not really dealing with the sub


The guy sure as hell is NOT punching my time clock tho. However, I am "directing" him, just as I would an hourly employee on the payroll -except I know I have no direct authority over him but to prevent further work until an issue is resolved.

In MI, its easy - anyone doing over $600/yr MUST be licensed. End of story. But that IRS paragraph above is pure mush-mouth.

Just saying...


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## Tom Struble (Mar 2, 2007)

oh..i see what you are sayin..now..:thumbsup:


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## Calidecks (Nov 19, 2011)

SmallTownGuy said:


> The guy sure as hell is NOT punching my time clock tho. However, I am "directing" him, just as I would an hourly employee on the payroll -except I know I have no direct authority over him but to prevent further work until an issue is resolved.
> 
> In MI, its easy - anyone doing over $600/yr MUST be licensed. End of story. But that IRS paragraph above is pure mush-mouth.
> 
> Just saying...


You have the ability to control your job but not his job. In other words you can't fire him. You can just throw him to the curb. Now his boss may fire him when he gets wind of his guy pissing off a GC.


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## trussme (Jan 18, 2013)

It's so simple.

You are a sub contractor if:
You bid a job
You gave your employer ID number or your ss# to the office of the comany you are working for.
You choose how to complete the job or a task. Not instructed or taught.
You drive your own vehicle to the job site.
You have a company name and license to perform work just like the guy your subbing off of.
If the sub has employees, he needs workmans comp.


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## 91782 (Sep 6, 2012)

trussme said:


> It's so simple.
> 
> You are a sub contractor if:
> You bid a job
> ...


Yes. Except that - the paragraph below that I quoted earlier from Mikes IRS info doesn't say ANY of that. See what I mean?

In other words, an earnest person could (and probably does) make a tax decision based on the IRS info - and still finds him/herself at variance with some other statute. 

This is a FACT: On my job, I DO tell the subs AND my employees to exacting detail how every bit of it will be done. Said differently, a sub does what he/she wants - so long as its EXACTLY what I want.



> You are not an independent contractor if you perform services that can be controlled by an employer *(what will be done and how it will be done).* This applies even if you are given freedom of action. What matters is that the employer has the legal right to control the details of how the services are performed.


Based on the above only, every sub I've ever used has been in fact, an "employee" - which just ain't so.


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## trussme (Jan 18, 2013)

Ok look at it like this... WE ALL could be subs. You work for Ryan Homes, Toll Brothers...whoever.. We are considered a sub to them. What do you give them? Do they give you plans and a specbook? Yes. Then thats how the job is to be done. Did they ask for insurance? Yes. Did you have to invoice them to get paid...yes. Did you get paid on the same day everyweek? probably not. When that lady from the licensing department came on site for the very first time and started asking questions, you should have responed (which I hope you did) very professionally and made it clear that he has all the proper documentation back at the office and he will fax her any needed info in the morning. But I tend to think that one of his own workers turned him in because he is not paying his taxes correctly or at least not being clear in his decsion to pay in that particular fashion. let me ask, How did she find you? By chance? I think not.

Don't get me wrong. Half of what we must do is a PITA! But I think she caught you red handed, and then she talked to one of your "Subs" and he gave you up quick, fast, and in a hurry.


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## trussme (Jan 18, 2013)

dave_dj1 said:


> Short story long and 10K later I now have WC Dave


You should have never folded. Did "YOU" ever call any governing body (Not insurance companies) and ask what documents you need from all your subcontractors to be compliant with the state law?

Do That, and dump the workmans comp. :thumbup:


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## pcplumber (Oct 12, 2008)

There are many links that explain the difference between a sub and an employee:

https://www.legalzoom.com/articles/employee-vs-independent-contractor-differences-you-need-to-know

The easiest way to tell the difference has been stated several times in this and many threads. If a person does not have a contractor's license (at least in California) then that person cannot act as an independent contractor without a license.

A person who is licensed, or performs a service that does not require a license owns a separate business with this own tax identification number and then it is possible for that person to be an independent contractor, but if that person works solely for you, does not do business with other clients, works on only the jobs you give him, works the hours you tell him, if you act in the capacity as his boss and write him a paycheck without being billed, etc. then that person is not an independent contractor.

A real independent contractor is a 'contractor' who owns his own business and runs it like a real business. That does not mean that an independent contractor cannot work solely for you, but he still has to have a real business and should nor work and get paid like an employee.

There is nothing wrong with a legitimate independent licensed contractor working under the same rules as an employee and you may never get caught. The biggest problem will occur when that person has an injury or has some other dissatisfaction, turns against you and then you will be in for some big trouble. 

I've seen it happen too many times where businesses classified employees as independent contractors and it bit them in the butt 20 to 40 years later when these people filed for social security and disability.

You can pay an employee as an independent contractor, the employees love the extra money and it is strange how they tell you they are stupid and never understood why you paid them that way when they apply for unemployment, disability, or even social security when they retire. You can't get away with cheating the system.


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## hdavis (Feb 14, 2012)

Life may be simple some places. Here's a FAQ from California:

"
Q.	How can it be that the Labor Commissioner determined I was an employee with respect to a wage claim I filed and won, and the Employment Development Department (EDD) determined I was an independent contractor, and denied my claim for unemployment insurance benefits?

A.	There is no set definition of the term "independent contractor" for all purposes, and the issue of whether a worker is an employee or independent contractor depends upon the particular area of law to be applied. For example, in a wage claim where employment status is an issue, DLSE will often use the five-prong economic realities test to decide the issue. However, in a separate matter before a different state agency with the same parties and same facts, and employment status again being an issue, that agency may be required to use a different test, for example, the "control test," which may result in a different determination. Thus, it is possible that the same individual will be considered an employee for purposes of one law and an independent contractor under another.
"

http://www.dir.ca.gov/dlse/faq_independentcontractor.htm


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## Calidecks (Nov 19, 2011)

hdavis said:


> Life may be simple some places. Here's a FAQ from California:
> 
> "
> Q.How can it be that the Labor Commissioner determined I was an employee with respect to a wage claim I filed and won, and the Employment Development Department (EDD) determined I was an independent contractor, and denied my claim for unemployment insurance benefits?
> ...


However, every contractor in this state should know that that person is not an independent contractor if he's not duly licensed. Where the issue can be gray is having an employee with a contractors license. My accountant said they need to file business taxes at the end of the year with a profit and loss statement to accompany them if they are going to be subs. This is why it can be very important to have contracts with your subs.


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## hdavis (Feb 14, 2012)

Mike, the major point I was making is it isn't a gimmeee that qualifying as a sub according the to IRS means they also qualify as a sub under state and federal labor laws, where there are other possible liabilities.


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## Calidecks (Nov 19, 2011)

hdavis said:


> Mike, the major point I was making is it isn't a gimmeee that qualifying as a sub according the to IRS means they also qualify as a sub under state and federal labor laws, where there are other possible liabilities.


I've never had a thought as to who an employee is or isn't. It is simple. are they a duly licensed business? If not they aren't an independent contractor. I can tell you everyone of my subs have other clients besides me and all those subs are duly licensed. I've been around this state for a few days and I can tell you the only people I've seen that think they are operating in the gray area are cheating.


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