I saw this ad recently, and I thought it raised several questions relevant to operating a business. I've edited the ad to encourage a generic discussion, rather than to focus on any one firm:
"XYZ Installations is looking for Technicians. Experienced and inexperienced Technician candidates are needed to fill available positions. Training is available for the right person. (We are) a very popular Broadband Speed Satellite Internet Provider, 90% of the work is Installations, the work is generated through national sales channels meaning that work load is consistent and year round. We offer competitive pay, support, and an up front and honest business relationship with our 1099 technicians. We can route techs 4-5 installs each day, that's a possible 400$ plus day doing (our work orders).
We meet once a week to pick up equipment and turn in paperwork, the rest of the week you start your day from your home, no body over the top of you all day watching your every move.
Compensation -- Call to discuss
Work days -- Saturday is a regular working day, 5 or 6 day work week available and we do not work Sunday.
This is a 1099 position and does require you provide your own tools, truck, and insurance. Requirements: 1. You will need your own truck, van, or suv along with the tools needed to complete the work. 2. (Our vendor's) Certification. We will help you get this accomplished. 3. No Felonies, Assault, Battery, or Domestic battery charges. 4. Pass a Drug test.
We are very interested in good technicians, we know that without good technicians our company is not going to succeed, that being said we will go the extra mile to make sure our techs get paid correctly and support each one of them in any way we can. "
Now, I see a few issues with this.
First off, this work requires state licensing. Is it permitted for an 'independent contractor' to operate under another's license? What about business licenses for various towns?
Secondly, are you really an independent contractor-or an employee? Is this a dishonest attempt to dodge workmans' comp, unemployment insurance, etc.? How do labor laws apply- including wage & hour, OSHA, EPA (LEED), etc?
Let us assume there is a dispute with a customer. Is the 'independent contractor' liable, the firm that hired the independent contractor, or both?
Interesting that 'insurance' is not Liability insurance is not elaborated, only that it's the responsibility of the 'sub'.
The 'sub' would also be responsible for workers comp, IF he has any employees.
Based on the 'ad' Reno posted, $400 a day for 4 or 5 jobs don't sound financially interesting.
License requirements vary state to state. Here in NJ, as it sounds like data/comm a license is required. Dish antennas are considered a 'utility', and dishes under 24" donot require any permits/inspections.
One of our cable companies runs with some form of 'subs'. however I do not know any info.
It is clearly a way to dodge the expenses of hiring employees and they also do not have to deal with the problems in firing/laying off employees. The legality will vary from state to state. This is not an unusual arrangement tho. I have not seen an actual cable, satellite or phone company guy working in the field doing installs for decades. They all seem to be contractors. It must have been litigated.
It probably comes down to the fact that the 1099 is not directly being compensated by the customer so he is not contracting with them.
The only guys I see who might be actual employees are working on the main plant hardware. Even the cable splicers are contractors.
As long as you are a one man band you do avoid most of the insurance requirements. You probably don't even need a business license although I had one when I was a 1099.
I bet that the 1099 guy is going to end up being liable if he drills a hole in someone's antique book case or falls off the ladder onto their Benz. He might not be required to have insurance but he should. The reality is everyone gets named in the suit tho. The contractor will have insurance but only to protect the company, not the 1099 guy.
Up here we have employees of Verizon (Phone Co.) IBEW Members. They also do FIOS. Verizon is a regulated 'Utility' and they stop at the phone/data demark. Rarely does a Verizon guy do anything to a jack.
Cable varies by the provider; Optimum, Concast, etc have employees, but they use 'installers' on occasion. The pole work is usually 'subs'; some union others ??
I spoke to 1 'sub' today; his truck, tools, liability insurance. 5 or 6 day week, he grosses $1100-1400 weekly. Cable from pole to house; demark, one (1) jack with box. Any 'extras' he may negotiate.
I am not sure the IRS cares, they get their money (double FICA etc). As long as you can prove you are not a "hobby" they seem OK with 1099s. They are actually getting more strict about being sure everyone files a 1099 any time they pay anyone. If you have a sharp pencil, you can make out OK on the 1099 on your schedule C but be sure you keep very good records. I got audited once and actually got more money back but it was because I had more information than I needed to prove what I claimed. In my case, I was claiming utilities without claiming home office but I had the documentation to prove I had a home office. It turned out to be just the opposite of what I heard, NOT claiming a home office got me audited. The IRS guy told me to add in the home office and resubmit my return. I got a few more bucks back.
"Insurance" may be the biggest issue people ignore. The issue with this job will be O&E and liability insurance but it is deductible. You certainly do not want to be "naked" working in someone's home. Too many things can go wrong. You also want your truck insurance to recognize this is commercial use. Obamacare will make the individual buy health care or pay the fine the way I understand it
It would appear the DOL has been spurred by a GAO report claiming 1099's cost the government billions in 'lost' taxes, and a 30% 'misclassification' is alleged. Since the IRS is the collector, you bet they're interested.
The States are getting involved as well. FedEx has more recently been in the news, losing a fight with California at the Federal Appeal level:
I am still not sure how the IRS is losing tax money. I understand the 1099 is not paying unemployment and workman's comp but they are also not able to collect from them. Is the government saying these are a profit center? There may also be some float on the withholding between bi-weekly/monthly payments and quarterlies but they are going to get their money. FICA is the same and the 1099 even pays taxes on the other 7% because it is not deductible like it is for the employer.
That only leaves the employee expenses that are not deductible and become deductible for the 1099. Since they changed the 2106 rules, employees usually take a bath on vehicle reimbursements. Employers generally pay far less than the IRS allows and you can't really recover that since 1986. The same is true of employee supplied tools, licenses, education, PPE and supplies.
When I ran my business, I had 1099s from quite a few GCs, and others. I kept records, and the biggest hassle was getting some of the 1099s in a timely fashion.
One property mgt. co. provided 1099s for each property, and they had a total of 17 that I worked in. The national chain I worked for also was a bunch of 1099s. Keeping good records on my end assured that every dollar was accounted for in 1099s.
Many years back I remember a carpenter guy who evaded the tax man for a few years, and the GC who paid him, with legit 1099s each year was hauled in for an audit & info on where this carp guy may be found.
On my part, no bad experiences with 1099s, or any of the subs I hired and 1099d them.
Record keeping is very important; and a good accountant guy is a must.
Ahhh, these issues are no longer mine as I'm an employee!!