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OT - Question regarding independant contractors and insurance 1099

snowman

Diamond
Joined
Jul 31, 2004
Location
Southeast Michigan
I've got a couple small part time gigs, mostly just fun stuff for me...a little extra steady cash.

One, I approached the job as a "trade". I was to get paid in materials and shop access. I provide a unique service that none of his other employees have. I do it from home, from his shop, whatever....I set my own hours, and just basically report within a couple days of being called. Very loose agreement. The shops accountant nixed it for very valid reason, workers compensation. So, instead, I get a paycheck when I work for him, and still have access to the shop. Win win...no worries about taxes later.

So now I have this other job, where I am more an employee (actually in vet medicine). Set hours, set responsibilities, hourly pay, only thing I provide is my own uniform. No special training that sets me apart from his actual employees...I'm just a "sub". His accountant wants to pay me on a 1099.

I could care less about the tax liability...I'll just run the 1099 into the machinery business, then I can deduct everything I do for the job. My biggest concern, is the other accountants concern....workerscomp. If I am injured on the job, I'm on my own. Not a big deal for minor stuff, but if I get mauled by a dog...well, then I'm going to have to sue the owner of the hospital.

I guess what I'm asking is that I know for a fact that I am not an independent contractor. If I accept a position as one, is there anything covering me in terms of "oh shit" insurance (assuming the hospital has at least a basic liability insurance policy).

How is this shit handled? Right now, I show up for work, then get a check a week later.
 
Do not quote me on this. This is just my understanding with the guys I sub for.
I am covered under their liability insurance, not workman's comp. If I break an arm or worse, I have to file a claim against the insurance policy. My work agreement has it spelled out, but I am only covered for unavoidable circumstances. If I pull a bonehead move and get hurt its on me. This works for me, milage will vary.
 
Whether you are an employee or a contractor is a fuzzy area in the IRS regulations. Just because you have set hours, set responsibilities and are paid an hourly rate doesn't necessarily make you an employee.

Since the company wants to treat you as a contractor I am VERY surprised that they do not require you to carry your own general liability and workers compensation insurance policies.

Steve
 
Since the company wants to treat you as a contractor I am VERY surprised that they do not require you to carry your own general liability and workers compensation insurance policies.

Steve

Good point, if Snowman does something stupid to a dog(or the dog is just stupid), the dog mauls him, and then he pokes the dogs eye out....

Who is going to pay Snowman's medical bills, when he is laid up and the bills mount, he's going to sue the vet..
And then when the dog owner sues, liability probably won't pick it up since the dogs eye was
poked out by an "independent contractor", and the independent contractor doesn't have insurance to cover such incident....

Sounds like the vet is trying to save that shiny nickel, at the expense of losing everything.
 
Whether you are an employee or a contractor is a fuzzy area in the IRS regulations. Just because you have set hours, set responsibilities and are paid an hourly rate doesn't necessarily make you an employee.

Since the company wants to treat you as a contractor I am VERY surprised that they do not require you to carry your own general liability and workers compensation insurance policies.

Steve

Those are my thoughts as well. I don't think it's been thought out by the company owner. I haven't yet spoken with him about it.

The biggest thing going against independent contractor, is that it is illegal to provide any type of medical care if not under the supervision of a veterinarian. That in and of itself excludes the idea of being "independent". Most companies, when audited annually by their workers comp, are required to provide a list of 1099's that they issue.

All in all, it sucks...because I like the job and the environment, but it IS a dangerous job. In my years of doing it, I've already been exposed to zoonotic diseases ranging from leptospirosa to rabies, and it's just not a risk I can take.
 
Good point, if Snowman does something stupid to a dog(or the dog is just stupid), the dog mauls him, and then he pokes the dogs eye out....

Who is going to pay Snowman's medical bills, when he is laid up and the bills mount, he's going to sue the vet..
And then when the dog owner sues, liability probably won't pick it up since the dogs eye was
poked out by an "independent contractor", and the independent contractor doesn't have insurance to cover such incident....

Sounds like the vet is trying to save that shiny nickel, at the expense of losing everything.

Actually, my guess is that the vet's accountant is trying to save that shiny nickel. From my dealings (through his staff) with the vet thus far, he's got a pretty level head.
 
The workmans comp issue is a STATE law and regulation.
The IRS decides who is eligible for a 1099 for taxes, but the IRS, at the federal level, doesnt get involved in workmans comp.
The federal laws affect who pays for your SS- with a 1099, assuming the IRS accepts that you are, indeed, an independent contractor and not an employee, you pay both halves of your SS and Medicare.

but workmans comp will be decided by Michigan law.
http://www.michigan.gov/documents/wca/wca_WC-PUB-002_431573_7.pdf

the relevant paragraph would seem to be-

10. Who is an independent contractor? 418.161
An independent contractor is one who maintains a separate business and holds
himself or herself out to and renders service to the public.
Generally, a person cannot become an independent contractor just because he or she wants to be, or because an employer wants the person to be an independent contractor. It is not enough that the employee and the employer agree. If a person only works for one business and is directed and controlled by that business, the person probably is an employee and not an independent contractor.
The "economic reality test" is a body of case law which defines an independent contractor. Consult your attorney for further explanation.
Question 11 discusses some key elements of an independent contractor relationship.

11. A general contractor employs a subcontractor which is a sole proprietorship with no employees. Can the insurance company auditor charge the general contractor premium on money paid to the subcontractor?
No. However, it is the responsibility of the general contractor to provide reasonable proof to his or her insurance company that the subcontractor is a sole proprietorship with no employees. The following proofs may be used. For additional proofs, see Bulletin 89-03 on page 7 of this booklet.
(a) The Federal Identification Number of the sole proprietorship.
(b) A copy of the written contract between the sole proprietorship and the general contractor.
(c) A list of other general contractors for whom the sole proprietorship has worked recently and/or is currently working for.
(d) A copy of the assumed name certificate which the sole proprietorship has on file with the county.
(e) Proof that the sole proprietorship is paid by the job and an IRS 1099 form is given to the sole proprietorship by the general contractor at the end of the year.
(t) A sworn statement from the sole proprietor that he or she has no employees.

My guess is, legally, you are without any question, an employee, not an independent contractor, in the eyes of the State of Michigan.

I have no idea, though, how much Mi. enforces this kind of thing.
 
If what you do as a job is what earns the money for a businesss you aint a contractor your an employee.

Pretty much black and white no gray area.

To be a contractor you have to do something that the business dosant do.

Tax Topics - Topic 762 Independent Contractor vs. Employee

I can tell you I spent quite a few years as an independent contractor doing the same computer programming work as the company employees.

Which is why following legal advice gotten on an internet forum is usually not a good idea.

Steve
 
My biggest concern, is the other accountants concern....workerscomp. If I am injured on the job, I'm on my own. Not a big deal for minor stuff, but if I get mauled by a dog...well, then I'm going to have to sue the owner of the hospital.

I guess what I'm asking is that I know for a fact that I am not an independent contractor. If I accept a position as one, is there anything covering me in terms of "oh shit" insurance (assuming the hospital has at least a basic liability insurance policy).

How is this shit handled? Right now, I show up for work, then get a check a week later.

Just get Workman's comp insurance.

I lay out less than $400/year for mine.
 
If what you do as a job is what earns the money for a businesss you aint a contractor your an employee.

Pretty much black and white no gray area.

To be a contractor you have to do something that the business dosant do.

Tax Topics - Topic 762 Independent Contractor vs. Employee

That's partially correct, but not totally so. In our mechanical contracting business we needed a ditch dug anytime we had to run underground pipe. We had our own backhoes, trenchers, road tractor and lowboy, and operators capable of doing the work. Sometimes we'd do the work, but other times we'd sub it out to a local guy who had his own machinery and offered digging services to us as well as other contractors. All depended on the workload at the time. But, if we subbed it, the person doing the work was an independent contractor without question, and that was true even though digging a ditch was a regular part of our work.

OTOH, if we'd contracted with an operator to provide digging work for ourselves and others, using our equipment, any attempt to classify that person as an independent contractor would fall flat on its face even though we could claim that digging is no longer a part of our own business and that we're just an equipment provider. Both the federal and the state employment law people have heard every story you could imagine, along with plenty of others you couldn't imagine, and they'd classify that person as an employee all day long.

Now, change the business relationship so that we lease the equipment to the same man in a legal and clearly defined lease. He provides his own fuel, insurance, etc. We don't care whether he gets 80 hrs of work per week, or no work. We're just looking for our $XX per month as spelled out in the lease. We can hire him to dig a ditch, and he's an independent contractor even though he's digging with equipment we own.

Its all about the business relationship that exists between the two parties. A man could own nothing but a pick and a shovel and a worn out Yugo, and still qualify as an independent contractor so long as I exercise no control over how he gets the job done. He'll dig a ditch for 200 bucks and I don't care how he does it as long as the final result is located where its supposed to be and is to the proper depth. Whether it takes him 2 hours or a hundred isn't my concern. I need it done in a week, and its not my concern as to whether he does it in a single 12 hr day, or if he works 2 hr/day and heads to the beer joint, as long as its done in a week. OTOH, if he uses my pick and shovel, and I tell him he needs to be on the job at 7am tomorrow, he's an employee because I'm furnishing the tools and controlling the work.

In Snowman's case, there's no question that he's an employee since there's a legal requirement that he work under the supervision of the veterinarian. Other factors, such as the fact that the vet supplies all tools, equipment, and the workplace just serves to further support his status as an employee.

In all such situations where someone tries to classify an employee as an independent contractor, I have to wonder just how dumb the employer has to be to assume the risk for what amounts to no more than a few bucks per hour. As an employer, once you do something illegal like failing to provide legally required comp coverage, you've exposed your own assets as well as your company's assets to a lawsuit if someone gets hurt. Today, when a trip to the ER for a few stitches and a broken finger can generate a bill upward of $10,000, saving a buck or two per hour on comp premiums just doesn't make sense to me.
 
Seriously?

That's it?

What did you tell them you do?

I am listed as a light manufacturing and repair business.
Primary work is on vessels.

I get off easy- one man shop and carry 2mil general liability, 1mil 'marine operators' and the workers comp.
The 2/1 insurance is ~$1700/yr and ~$375 for the Workers Comp.

I generally don't carry any employees so the rate is based on minimum payroll #'s/yr.
 
I've got a couple small part time gigs, mostly just fun stuff for me...a little extra steady cash.

One, I approached the job as a "trade". I was to get paid in materials and shop access. I provide a unique service that none of his other employees have. I do it from home, from his shop, whatever....I set my own hours, and just basically report within a couple days of being called. Very loose agreement. The shops accountant nixed it for very valid reason, workers compensation. So, instead, I get a paycheck when I work for him, and still have access to the shop. Win win...no worries about taxes later.

So now I have this other job, where I am more an employee (actually in vet medicine). Set hours, set responsibilities, hourly pay, only thing I provide is my own uniform. No special training that sets me apart from his actual employees...I'm just a "sub". His accountant wants to pay me on a 1099.

I could care less about the tax liability...I'll just run the 1099 into the machinery business, then I can deduct everything I do for the job. My biggest concern, is the other accountants concern....workerscomp. If I am injured on the job, I'm on my own. Not a big deal for minor stuff, but if I get mauled by a dog...well, then I'm going to have to sue the owner of the hospital.

I guess what I'm asking is that I know for a fact that I am not an independent contractor. If I accept a position as one, is there anything covering me in terms of "oh shit" insurance (assuming the hospital has at least a basic liability insurance policy).

How is this shit handled? Right now, I show up for work, then get a check a week later.

If you are an True independent Contractor you need to provide your own Health insurance/and Work Comp Insurance and also pay your own Social Security/Medicare taxes. So keep in mind if the Oh Shit thing happens your on your own if you don't have any of your own insurance. Not to say you couldn't sue them or the state may fine them but after the fact is not the time to worry about it, now is the time. and there is the saying "you can't eat your cake and have it (too)",
 
The IRS definition of an independent contractor has never, in my experience, had any teeth -- it's all to do with whether the person who is hiring & firing likes you enough to call you a W-2 employee. Earlier this year I hired a couple of carpenters on 1099. The litmus test that seemed most relevant was whether, in the past 12 months, they had done equivalent work for other companies besides my own. In this case, they had.

As far as worker's comp, in Michigan any time you pay someone they're your employee and you are required to carry worker's comp. In this specific case, we got a bare-minimum policy, and then had the 1099 employees sign waivers stating that they were independent contractors with no employees, and were thus responsible for their own workers comp.

My 2c, snowman: push for W-2 + proper insurance coverage at the vet gig. It's a sticky point, and the burden should be on the employer, not the employee, to handle that administrative headache. At a bare minimum, insist on a certificate from their insurer listing you as additional insured against liability resulting from your work for them, and get something on paper from them re: covering any expenses resulting from exposure to sick animals.
 
snipped a good bit...

In Snowman's case, there's no question that he's an employee since there's a legal requirement that he work under the supervision of the veterinarian. Other factors, such as the fact that the vet supplies all tools, equipment, and the workplace just serves to further support his status as an employee.

This is the correct interpretation of the vet work snowman describes.
 








 
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