Am I an employee or contrator?

[odaroloc]

What is the name of your state (only U.S. law)? CO

Can someone tell me if I am considered an employee or a contractor in this situation?

I will be doing marketing for an established company that is owned and operated by one person. I will be working on Tuesdays and Thursdays from 9-5 to develop a marketing campaign. I have no company of my own. The business owner is providing all the materials or is paying towards the materials. He has the final say in all things, but I have a lot of input as he knows very little about marketing. For example, in our discussion of what the job would entail, I indicated that I didn't like some of his ideas and he took my advice. There is no signed contract or oral contract yet. He said that he would like to come in and work with me in the mornings, then turn me loose to work in the afternoons. I asked him how long he expects to work together and he stated, "Indefinitely, ideally." I am paying no out-of-pocket expenses.

It's an odd situation in that I work M, W, F in the same office for a different company as an employee. He will be coming in T/Th to meet me in the office (he and the owner are friends) and will be paying my boss a portion of the utility bill/rent for me to work on his projects in my regular office. I am paying my other boss nothing to work in the space on those days. If I work here, I have two part-time jobs for two different companies that make a full time job with no benefits. He will be paying me on a weekly basis for the hours worked during the week. He wants to 1099 me, which will leave me paying self-employment tax, but I feel that I would be considered an employee. He has made some comments that indicate he'd like me to act like a contractor, but he also expects me to be there at certain times, report to him, and will be paying me a regular wage. I don't know if he's trying to get the best of both worlds or is unaware of the legalities.

Can someone who has experience in this area please tell me if he is correct to treat me as a contractor? If so, then would I be free to choose my own hours, etc.? What would the implications be, besides paying both sides of the tax?

Thanks in advance for your help.

 

[swalsh411]

There is no cut and dry answer because every situation is different. Two big tests are whether you have specific hours (employee) or choose your own hours (1099) and whether you supply your own tools (1099) or the entity you are working for provides them. (employee).

The fact that he is paying you by the hour means nothing either way.

How badly do you need the work?

 

[justalayman]

I have some issues with the last response.

1. supplying your own tools does not lend much to the issue one way or another. Mechanics usually provide their own tools but almost always they are employees. An employer (in an IC situation) can contract to provide necessary tools of the job and in itself, not jeopardize the IC status. There are times the "tools" are proprietary and the employer may be the only entity that can actually obtain the necessary tools.

many construction tradesmen supply their own tools, even when they are employees. In fact, that is the norm more than the exception.


2. scheduled hours; doesn't lend much, in itself, to the situation either. As an example: in construction, there is often a construction management company. They set the hours for when the contractors work. They can refuse to allow the contractors on the job site any time they choose to.

in that same vein, if a person is an IC and the employing company is "hiring" the IC to work some specific hours, then that can be included in the contract between the parties.






there are other more dependable basis for making a determination. Following is a couple links that will provide you some education on the matter.


http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Independent-Contractor-(Self-Employed)-or-Employee%3F


http://www.dir.ca.gov/dlse/faq_independentcontractor.htm



http://www.colorado.gov/cs/Satellite?blobcol=urldata&blobheader=application%2Fpdf&blobheadername1=Content-Disposition&blobheadername2=MDT-Type&blobheadervalue1=inline%3B+filename%3D172%2F211%2FColo+Lawyer_Feb2010_IndContr+v+Emp.pdf&blobheadervalue2=abinary%3B+charset%3DUTF-8&blobkey=id&blobtable=MungoBlobs&blobwhere=1251764467654&ssbinary=true

 

[odaroloc]

OP responses

Thank you both for your feedback. I appreciate the links; I read the IRS one before, but it didn't clarify much, so I appreciate your analysis.

In response to the question about how badly I need the job, I would say I need it in order to create a livable wage, meaning, a wage where I could get housing and stop living with family.

 

[swalsh411]

Whether or not you choose your own hours or supply your own tools absolutely are components of the 1099/W2 test.

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Independent-Contractor-%28Self-Employed%29-or-Employee%3F

 

[cbg]

They are components, yes. But they are not, in and of themselves, defining.

 

[Dave1952]

You've already received from Mr. JAL a number of good discussions of the employee/independent contractor issue. You do not yet have a contract and "the ball is in your court". Draft a contract and send it to your potential customer. Do not allow an oral contract to develop. Write a contract. Expect some negotiation. Remember that you will be paying for various taxes. You may need some sort of business license. These things will need to be done in your free time to start up this business.

 

[justalayman]

Whether or not you choose your own hours or supply your own tools absolutely are components of the 1099/W2 test.

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Independent-Contractor-%28Self-Employed%29-or-Employee%3F

oh , I guess that means that when I worked as a mechanic and maintained $20k+ in tools I could not have been an employee?

and when I was a Realtor/real estate agent and I was required to man the office phones one day a week I could not have been an IC?



Seriously dude, while those help in the overall decision, in some situations, they are absolutely meaningless to the equation.

 

[LdiJ]

oh , I guess that means that when I worked as a mechanic and maintained $20k+ in tools I could not have been an employee?

You very well could have been an employee in that instance, but many "employers" would have treated you as a contractor and might have been able to justify it.

and when I was a Realtor/real estate agent and I was required to man the office phones one day a week I could not have been an IC?

That is completely different. In that instance you have a bunch of IC's sharing office space (and/or renting office space) and taking turns manning the phones is a side effect to the actual work performed.

In this instance the OP's actual working hours are being scheduled by the "employer"...AND the employer is providing all of the materials and supplies. I am nearly certain that in the OP's situation the IRS would consider the OP to be an employee.

 

[justalayman]

LdiJ;3202525]You very well could have been an employee in that instance, but many "employers" would have treated you as a contractor and might have been able to justify it.

My point was that I was an employee, even though I provided my own tools of the trade. Swalsh made a very firm statement that that would demand I be considered an IC.

That is completely different. In that instance you have a bunch of IC's sharing office space (and/or renting office space) and taking turns manning the phones is a side effect to the actual work performed.

So? I had mandatory time assigned to me. swalshes argument is that if your hours are controlled by the employing entity, you are an employee. My point is; it takes much more than that to make a determination and often times, such restrictions do not add anything to the equation.

In this instance the OP's actual working hours are being scheduled by the "employer"...AND the employer is providing all of the materials and supplies. I am nearly certain that in the OP's situation the IRS would consider the OP to be an employee.

I'm not arguing the OP may or may not be an employee. All I addressed was the two items swalsh listed often have very little, if any effect on the determination. Swalsh gave them much more credit than they are generally due.

 

[LdiJ]

My point was that I was an employee, even though I provided my own tools of the trade. Swalsh made a very firm statement that that would demand I be considered an IC.



So? I had mandatory time assigned to me. swalshes argument is that if your hours are controlled by the employing entity, you are an employee. My point is; it takes much more than that to make a determination and often times, such restrictions do not add anything to the equation.



I'm not arguing the OP may or may not be an employee. All I addressed was the two items swalsh listed often have very little, if any effect on the determination. Swalsh gave them much more credit than they are generally due.

See, I disagree with you there...those are two of the most important factors. They may not control on their own, but they are the two most significant ones.

 

[Dave1952]

In your very first post you wrote, "I have no company of my own.". This is a strange attitude for an independent contractor to have. You do have a company. You need to do some research and figure out what sort of company you wish to be. You need to find out what sort of licenses you need and fees you must pay as a company. You need to learn about taxes.

 

[justalayman]

See, I disagree with you there...those are two of the most important factors. They may not control on their own, but they are the two most significant ones.

well, then I guess I was misclassified because I owned my own tools and was required to not only attend the phones for an entire day but was also required to attend a weekly meeting and cruise around to view the new listings.

dang, I hate that when that happens.

there are many issues that are more important in making the decision. On top of that, the specifics of the tool issue and time requirement issues make a huge difference in the value of the consideration. As I said before, in construction work, a contractor is often given very specific hours they can work (not must but can) but there is often verbiage within their contract that does mandate they have a certain amount of manpower on hand during those hours but yet, it does nothing to convert it to an employee/employer situation. It is simply a contractual issue. In construction, a tradesman is usually required to provide their own tools. Only due to a CBA contractual limitation do I not have to provide all of my own tools for my work yet, there is no mistaking my status as an employee. There would be no way to even begin to stretch my situation into an IC situation; but for the tool situation, there is absolutely nothing that makes my employment look like an IC situation.

More important:

is the IC/employee at risk for financial loss or are they protected by the employing entity from losses

is the IC/employee hired/contracted to perform a specific service or are their obligations variable at the will of the employing entity

is the IC/employee able to determine the means and method to achieve the desired end result or is the process controlled by the employing entity and does any alteration have to be approved by the employing entity

This can easily devolve into a pissing match. You have your opinion, I have mine. Let's just, as is often said (even though I loathe the statement) agree to disagree. and federal.

 

[justalayman]

In your very first post you wrote, "I have no company of my own.". This is a strange attitude for an independent contractor to have. You do have a company. You need to do some research and figure out what sort of company you wish to be. You need to find out what sort of licenses you need and fees you must pay as a company. You need to learn about taxes.

many people that are IC's do not understand that they are in fact their own company. The mistakenly believe that if they have not created a business entity, they have no company. It is simply a misunderstanding on their part as there is often no requirement for them to create an actual business entity while acting as an IC. Of course, there are reasons they might create a business entity but for most of the people I read about here, it would be an unnecessary, cumbersome, and wasteful ($$$) action.

 

[LdiJ]

well, then I guess I was misclassified because I owned my own tools and was required to not only attend the phones for an entire day but was also required to attend a weekly meeting and cruise around to view the new listings.

No, you were not misclassified because it is ALWAYS acceptable to treat someone as an employee.

Misclassification comes when an "employer" misclassifies someone who is an employee, as a contractor, therefore avoiding the employer's share of social security and medicare taxes, workman's comp insurance, unemployment insurance etc.

More important:

is the IC/employee at risk for financial loss or are they protected by the employing entity from losses

From what has been described here, this OP is clearly not at risk.

is the IC/employee hired/contracted to perform a specific service or are their obligations variable at the will of the employing entity

I would guess variable as the "employer" intends to work with the OP in the mornings.

is the IC/employee able to determine the means and method to achieve the desired end result or is the process controlled by the employing entity and does any alteration have to be approved by the employing entity

See the above response.

This can easily devolve into a pissing match. You have your opinion, I have mine. Let's just, as is often said (even though I loathe the statement) agree to disagree. and federal.

Yes, it certainly can and does on every thread about IC's, because you insist on every thread regarding IC's that you are the only one who knows what they are talking about.