6 ms·

If you are a direct contractor, it sounds like the IRS would consider you an employee. If you are actually an employee of a company that contracts you out to a

If you are a direct contractor, it sounds like the IRS would consider you an employee. If you are actually an employee of a company that contracts you out to a 3rd party, then this doesn’t apply. ”The IRS developed the 20-Factor Test shown below to help employers evaluate whether a worker is an employee or an independent contractor. No one factor on the test is more indicative of employee status than another. If there is a high number of “yes” marks, then it will most likely indicate the presence of an employment relationship, a high number of “no” marks may or may not indicate a contractor relationship.” https://www.regent.edu/admin/busoff/pdf/20-questions1099test.pdf https://www.regent.edu/admin/busoff/pdf/20-questions1099test...

mancerayder 9y ago
Fully agreed. Question is, what's the best course of action? Is this common?
- chrisbennet 9y ago
  You’re treated as an employee because you are an employee (of the contracting agency). You aren’t an Independant contractor. And yes, it sucks depending on the agency. You need to go contract Direct if you want to be treated as an “independant” consultant. The Agency usually makes you sign something that makes it near impossible to contract Direct for a company they place you at. You need to use your network to find your own contracts. This is easier said than done.
  - mancerayder 9y ago
    Wait a second. What if you're contracting via an LLC and they (the consulting agency) made you sign a contract that it's not an employee relationship?
    - chrisbennet 9y ago
      I’m not sure exactly what your situation is but if you are paid “W2”, you’re an employee, end of story. If you’re working “1099” and leaving is an option for you, talk with the parties to your contract and renegotiate or clarify expectations if you can. I can tell you’re pissed (I don’t blame you) but you can’t bring that to the discussion/negotiations. At the end of the day, you usually can’t make a bad client “behave”. You either pick good clients or leave.
      - mancerayder 9y ago
        It's 1099. It's indeed a situation of being treated like an employee. I was curious how people have experienced these circumstances. I'm thinking the same thing with regards to getting people to behave.
        chrisbennet 9y ago
        It sounds like they want to have their cake and eat it too. I.e. they want the advantages of of a 1099 contractor (not paying health insurance, etc) AND the advantages of having a 9-5 employee. If you don't mind losing the contract, I'd discuss their options. Something along these lines: "I don't think our expectations are lined up. I expected this to be a 1099 consultant position but you are treating it like it's a W2 position. Before the IRS gets all up in our business, how should be we fix this? Do you want to treat me as true independent consultant per IRS rules, have the subcontractor hire me on as a W2 employee and bill me out like we're doing now, or shake hands and go our separate ways?" In reality, this is why companies go through contracting agencies. The agencies don't (really) offer true employee benefits but the client companies still get the advantages of a 1099 employee (easy to "let go" at the end of the contract).
    - Spoom 9y ago
      IRS protocols very frequently override contracts in this regard. If they determine that you should be treated as an employee by the 20 Factor Test (see above), they will go after the company for their half of your back payroll taxes. The form to initiate such an inquiry is Form SS-8: https://www.irs.gov/forms-pubs/about-form-ss8 https://www.irs.gov/forms-pubs/about-form-ss8 While an SS-8 is pending, you can file your taxes as if you were a W-2 employee by filing Form 8919: https://www.irs.gov/forms-pubs/form-8919-uncollected-social-security-and-medicare-tax-on-wages https://www.irs.gov/forms-pubs/form-8919-uncollected-social-... I did this in Canada (long ago) with a former employer who contracted me but treated me as an employee, and the Canada Revenue Agency sided with me, regardless of the contract text. All I've read suggests that the IRS is similar in this regard. Keep in mind that if you do this while you're still employed, they are likely to fire you. The ideal thing to do here, if you can negotiate with the employer in good faith, is to have them void the previous 1099s and file back W-2s for you, so you can then file amended 1040s and get back your previously paid tax. Unfortunately, an employer who would do this in the first place is likely just trying to avoid payroll tax liability, so I doubt you'll see much success going this route.
      - ccajas 9y ago
        I believe the statute of limitations is 3 years, correct? I have been a case of being misclassified as an employee but paying me on 1099. But that happened over 9 years ago so I don't think I have a case anymore.
        Spoom 9y ago
        I'm not sure. There are limits on claiming a refund (e.g. if you are filing previously unfiled returns), but I'm not sure that they apply in case of a dispute. Let us know what you find.
- Sevii 9y ago
  Its pretty common for consulting companies to get requests to do 'staff augmentation' and lend their employees to another company 9-5. We try to avoid that at my employer but its still happened a few times.

mancerayder 9y ago

Fully agreed. Question is, what's the best course of action? Is this common?

chrisbennet 9y ago
You’re treated as an employee because you are an employee (of the contracting agency). You aren’t an Independant contractor. And yes, it sucks depending on the agency. You need to go contract Direct if you want to be treated as an “independant” consultant. The Agency usually makes you sign something that makes it near impossible to contract Direct for a company they place you at. You need to use your network to find your own contracts. This is easier said than done.
- mancerayder 9y ago
  Wait a second. What if you're contracting via an LLC and they (the consulting agency) made you sign a contract that it's not an employee relationship?
  - chrisbennet 9y ago
    I’m not sure exactly what your situation is but if you are paid “W2”, you’re an employee, end of story. If you’re working “1099” and leaving is an option for you, talk with the parties to your contract and renegotiate or clarify expectations if you can. I can tell you’re pissed (I don’t blame you) but you can’t bring that to the discussion/negotiations. At the end of the day, you usually can’t make a bad client “behave”. You either pick good clients or leave.
    - mancerayder 9y ago
      It's 1099. It's indeed a situation of being treated like an employee. I was curious how people have experienced these circumstances. I'm thinking the same thing with regards to getting people to behave.
      - chrisbennet 9y ago
        It sounds like they want to have their cake and eat it too. I.e. they want the advantages of of a 1099 contractor (not paying health insurance, etc) AND the advantages of having a 9-5 employee. If you don't mind losing the contract, I'd discuss their options. Something along these lines: "I don't think our expectations are lined up. I expected this to be a 1099 consultant position but you are treating it like it's a W2 position. Before the IRS gets all up in our business, how should be we fix this? Do you want to treat me as true independent consultant per IRS rules, have the subcontractor hire me on as a W2 employee and bill me out like we're doing now, or shake hands and go our separate ways?" In reality, this is why companies go through contracting agencies. The agencies don't (really) offer true employee benefits but the client companies still get the advantages of a 1099 employee (easy to "let go" at the end of the contract).
  - Spoom 9y ago
    IRS protocols very frequently override contracts in this regard. If they determine that you should be treated as an employee by the 20 Factor Test (see above), they will go after the company for their half of your back payroll taxes. The form to initiate such an inquiry is Form SS-8: https://www.irs.gov/forms-pubs/about-form-ss8 https://www.irs.gov/forms-pubs/about-form-ss8 While an SS-8 is pending, you can file your taxes as if you were a W-2 employee by filing Form 8919: https://www.irs.gov/forms-pubs/form-8919-uncollected-social-security-and-medicare-tax-on-wages https://www.irs.gov/forms-pubs/form-8919-uncollected-social-... I did this in Canada (long ago) with a former employer who contracted me but treated me as an employee, and the Canada Revenue Agency sided with me, regardless of the contract text. All I've read suggests that the IRS is similar in this regard. Keep in mind that if you do this while you're still employed, they are likely to fire you. The ideal thing to do here, if you can negotiate with the employer in good faith, is to have them void the previous 1099s and file back W-2s for you, so you can then file amended 1040s and get back your previously paid tax. Unfortunately, an employer who would do this in the first place is likely just trying to avoid payroll tax liability, so I doubt you'll see much success going this route.
    - ccajas 9y ago
      I believe the statute of limitations is 3 years, correct? I have been a case of being misclassified as an employee but paying me on 1099. But that happened over 9 years ago so I don't think I have a case anymore.
      - Spoom 9y ago
        I'm not sure. There are limits on claiming a refund (e.g. if you are filing previously unfiled returns), but I'm not sure that they apply in case of a dispute. Let us know what you find.
Sevii 9y ago
Its pretty common for consulting companies to get requests to do 'staff augmentation' and lend their employees to another company 9-5. We try to avoid that at my employer but its still happened a few times.