This job is kind of like not having a job
Having a job in this economy is not always what it's cracked up to be, yo. Take a gander at the latest Ask HR Wench:
In January my brother's job was out-sourced. He managed to stay employed at the same company by taking on a different role (part-time, at an hourly rate roughly half of what he had been making).This is what happens when companies begin to hemorrhage: outsourcing, lay offs, mis-classification of employees, slow paying bills, mass disorganization, disappearing paperwork, et al.
He was classified as an independent contractor the first two months he was employed with this company, from Feb - Apr, 2008. After that, he was hired as an exempt employee. He has received his W2 for the time he was an employee, but not his 1099 for the time he was a contractor, which means he has yet to file his 2008 tax return.
As of January, my brother has again been classified as an independent contractor. He was supposed to get paid on the first of this month but has yet to see a payment (and has not seen payment for February, either).
I don't know that he is being classified correctly and neither does he. He works from home, on his own schedule, but that's about all that matches the list of qualifiers from the IRS.
I know I'm showing my ignorance and I can take a virtual eye roll, but my brother and his wife needed his income and still do. He needs to get paid. He needs supplemental UI and isn't sure how to classify himself and I am having a hard time making sense of it. He needs to file his taxes. This whole thing seems shady to me.
For what it's worth, I've read the IRS and CA EDD website and I found this on the California Department of Industrial Relations website: http://www.dir.ca.gov/dlse/faq_independentcontractor.htm
This sentence in the opening really is what makes me wonder if he's even classified correctly:
"Since different laws may be involved in a particular situation such as a termination of employment, it is possible that the same individual may be considered an employee for purposes of one law and an independent contractor under another law."
I have already advised him that his first order of business on is to call his employer/client and ask for his 1099 and payment. If that fails I have advised him to call the IRS for his 1099 and then the CA DIR to get their take on his classification.
Thank you for your time and any help you can offer. I do appreciate the help!
Short answer: Tell him get the hell out of there, now. Guess what comes after slow pay? Paying $0.10 on the dollar. Happened to an HR consultant I know.
Long answer: I have no idea if he is classified correctly. It sounds like he's not. I think you have given him good advice so far; the only other thing I would add is for him to discuss his situation with a tax professional.
I know a little birdy who was taken advantage of in an employee-to-independent-contractor situation who didn't believe he was slowly sinking into debt to the advantage of his "employer/client". It took a serious smacking around from a tax professional to get it through his head that he was screwing himself six ways from Sunday by continuing that work relationship. She was able to lay things out so they made sense to a layperson (whereas I mostly just screeched, "JUST DO WHAT I TELL YOU!!").
Best of luck.
6 comments:
Oh man.
In my experience as someone who did 1099 work for years, it is next-to-impossible to be doing the exact same job as an employee and as a contractor. You can't just moved people back and forth--if you could, everyone would do it, to avoid paying payroll taxes.
It sounds to me like that's what they're doing, because you don't mention how his job changed substantially when he was moved from one to the other. That's really bad, because I can also tell you from experience that some companies want you to do 1099 work so they don't have to pay you. Aside from saving on benefits and payroll taxes, you're essentially a vendor...which means it's a whole lot easier to just, like, not pay you, than it was if you were on the payroll. I had a major, major company that failed to pay me for MONTHS when I was working 40+ hours a week for them. I did get paid eventually, because I got really, really aggressive...but I know people who didn't.
He needs to talk to a tax professional and an attorney, like, immediately...before this gets any worse. Some companies are just ignorant of these things, and that's one thing, but these folks sound downright shady.
Kerry - It reminds me of certain insurance companies that have policies to deny *every* claim the first time. They start paying when people send them claims 2, 3, 4, or 5 times.
Ever since companies told us in the 1980s that they could no longer provide a job for life, we have been independent contractors. It's just that it has taken a big recession to remind people of that fact. Your brother should recognize that he is an independent contractor and obtain the documents from the companies that prove that to the IRS. He should also deduct ALL of his work expenses when he files. Although his tax rate will be higher as a self-employed person, his overall tax should be lower. He should also seek the advice of a proactive accountant who is not clinging to the old notions of employers and employees.
Bruce - I agree that we are all independent contractors in the sense that we are all responsible for our own careers. Other than that, I have a hard time picking up what you're putting down as far as employees and employers being an "old" notion. But I'm willing to listen if you care to elaborate.
In situations like this the company is clearly taking advantage of the employee/contractor and is most likely not in compliance with the spirit or letter of the law. They are being assholes, Bruce, and I'm anti-asshole. Therefore, I think he should do what he needs to do to keep his career safe: get the heck out of Dodge.
The IRS "clings to the notion" of employees being different than contractors. As long as they do, the rest of us don't have a choice.
I agree that he needs to leave, but if he stays he needs to make sure he documents all his expenses, so he can deduct them from his taxes.
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