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.
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?
What do you think?
I'd think of it as a General Contractor hiring subs, or a Company hiring contractors to work for them.
Almost all of them require things like the numbered list that you posted.
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.
Some recent news blurbs suggest that the IRS is looking a lot closer at 1099 arrangements than they have in the past.
In Nevada, some State court rulings have added cab drivers - one of the more traditional 'independent contractor' groups- to the list of 'employees.'
With the advent of "ObamaCare," I expect that nearly every 1099 arrangement will come under very close examination.
IMO, the advertised arrangement is an abuse of the 1099.
Yes, another 'dodge' to avoid benefits too.
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
Here's a link to one media article on the topic:http://www.forbes.com/sites/robertwood/2012/11/15/new-crackdown-on-using-independent-contractors/
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:http://www.mboenterprise.com/blog/fedex-may-be-over-1-billion-employee-misclassification
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!!
Fortunately most of my 1099 work was for the state so my paperwork was more than enough to keep the IRS happy.
I could be generating up to 14 pages for every inspection I did if you included the copies (4 documents in triplicate and 2 more singles). I wrote a computer program to do it so it wasn't that horrible.
I was pretty used to good record keeping anyway with IBM. We documented our day in 6 minute increments and you had to account for all of it. You also tracked every mile you drove and every dime you spent, if you wanted to be reimbursed.
It turns out that is exactly what the IRS expects to see if you file a schedule C and they call you on it.
I was actually a little disappointed when I was audited because they never questioned any of it tho. It was really pretty underwhelming.
I've seen the exact same ad -- repeatedly.
I simply assume that once any fool gets hooked up with them... runs the math on his end of the 'deal'... and he bails out.
From what I know... and I'm surrounded by liars... the Big Company eats all of the damages created by an installation.
To the extent possible, they back charge the sub.
If this can't be done, the Big Company is back on the market trolling for fresh talent.
The REAL bloom in 1099 "independent" contractors (hah) is 0-care.
This is topped of by Workman's Comp -- which is not required by a one-man band.
Sixty-years ago, there was a nationwide bowling craze -- with the advent of the practical automatic pinsetter.
Brunswick had total control of the installations -- and the refurbishment craft. They were still using highly inflammable lane coatings.
After enough lawsuits/ fires/ claims -- top management backed away. They literally set their old crewmen up as 'independent' contractors. (aka lane resurfacers) They even went so far as to, essentially, give their lane equipment away for zilch. (The parent company circa 1963 was as fat as Microsoft. They'd grown so huge that writing off the gear was a blip on the earnings screen.
Brunswick got its game back by super pricing the critical materials. They realized that that was where all of the profit and control was.
Today's cable companies -- all of them -- have figured out the same thing. They can get independent talent to accept sub-par wages AND duck all of the expenses of W/C and 0-care.
Both factors are still increasing faster than the generalize inflation figures that the government bandies about.
The same scheme is as common as dust in all European welfare states.
It's a running joke in Sweden/ Denmark that every parent hopes that the son becames an independent plumber! Those are the fellows driving around in BMWs and Volvos.(new!)
The current administration figures every trades man to be another "Joe the plumber" -- so audits of tradesmen have absolutely exploded.
They usually hit paydirt because of weak bookkeeping... not because the fellow was raking it in like a Wall Street hedge fund manager. (They pay a top rate of 16% !!! You read that right. Those fellows got Congress to give them a super duper top rate. They share the spoils by contributing LARGE to both parties. We have the best Congress that money can buy. If you troll the Web, you can discover their political contributions -- they are so huge you'd think they were misprints.)
The IRS hates auditing CPAs and tax attorneys precisely BECAUSE their records will be totally in order. So their paperwork dazzles -- yet the IRS still maintains that CPAs and tax attorneys -- (AND IRS employees) are the absolute worst for honest tax returns.
The 'system' goes for low-hanging fruit/ walk-overs.
Since we're destined to see even more IRS audits, be wise: keep your reconds squared away -- with particular emphasis on expenses -- especially the petty expenses paid in cash. Sloppy records will cause the IRS agent to reject your figures and jamb it to you.
E-commerce is destined to amplify everything detailed here.
European governments are ALREADY trying to ban / highly restrict the cash economy. 0-care has MANY provisions that pertain to purely tax law and tax records. These reach far away from the doctor's office -- to include tradesmen.
Most take the form of demanding ever more 1099s at strikingly low thresholds. This reality is still dimly perceived. Most citizens still think that 0-care was a universal health care statute -- where as it was really an over arching tax law.
Dr. Gruber -- of MIT -- focused all of his efforts on the tax angle -- and admitted so on camera, time and again.
His primary goal was to kill off Cadillac health plans -- which he deemed a sop too generous to the wealthiest.
It's ironic: the very title Cadillac health plan came DIRECTLY from the UAW. They were entirely launched by organized labor! They literally invented them -- for blue collar car assemblers.
Cadillac health plans never existed before. Truly weathy top dogs used to simply pay directly out of pocket. No health management company was ever going to design such a deluxe scheme -- with all of the pricing issues -- for a handful of millionaires. (Whose idea of a workman's comp claim is a paper cut to their dialing finger.)
Dr. Gruber holds the opinion that every one-man shop has been hiding his real profits by purchasing these super delux plans. This just goes to show how far off a professor can be.
It's official: Now Bill Gates is leading the band for E-commerce!
So that's both MSFT and Apple.
And, 0-care tax provisions put the wind at their backs.
Keep your eyes on this breaking growth in Big Business and IRS electronic audits.