Subcontractors turned into owners????

[joshuasepitome]

Colorado
Not sure if I'm in the correct area here but here goes....

My husband works as a carpet cleaner; as a "subcontractor". The owner of this company has never paid taxes (7 years) and now is in trouble with the IRS. So now he is telling my husband (and his other 5 "employees") that they have to have their own business. They have to pay some type of fee and name their company.
So, what I'm wondering is where we need to start as far as record keeping, taxes, fees, etc.
All of the "employees" will still be using the owner's vehicles, supplies, etc so it'll technically be like they're still a subcontractor only they will be carrying a different name other than that of the company where they receive client information.
This owner is a "character" to say the least. I'm also curious if this is even legal to force your employees to have their own business name just so the owner isn't responsible for taxes...and yet still have full use of all the owner's vehicles, equipment, etc.
Also, I am curious about the taxes that the owner owes to the IRS and if he can make my husband (and his other "employees") responsible to pay them back. Any links/suggestions would be greatly appreciated!

Thank You,
Crystal

 

[fronty]

“All of the "employees" will still be using the owner's vehicles, supplies, etc so it'll technically be like they're still a subcontractor only they will be carrying a different name other than that of the company where they receive client information.”

What do you mean “they’re still a subcontractor only they will be carrying a different name?” Are they subcontractors or employees? You guys need to be really careful in this situation or the IRS may do an audit on you. I’m willing to bet they will do an audit on all of you, if this guy is saying you are independent contractors. I hope you have been reporting all of your income and paying the appropriate taxes. Your husband’s boss is trying to deem your husband as an independent contractor instead of an employee. There are incentives to claim that hired persons are not employees and are independent contractors. It is to avoid the following:

1)Taxes (social security, unemployment compensation, workers’ compensation, and other payroll taxes applicable to employers)

2)Labor Laws (which only extend protections to employees, not independent contractors)

3)OSHA, Title VII of the 1964 Civil Rights Act (he may have less liabiality under the doctrine of respondeat superior.

He probably is trying to say your not employees to get out of paying a lot of back taxes. The government doesn’t play around with this type of offense. You can do a search on companies such as IBM, Sybase, and Time Warner they had to pay huge fines for trying to do this. Let me know if you want to know the common law control test for whether or not a person is an employee. I’m not trying to scare you, but I think you should hire a lawyer before making this decision. It would be one thing if you were just starting to be an independent contractor for this guy, but your husband has been doing it for a while. I guess I feel like the IRS isn’t the person to be messing with. I know they are understaffed and let a lot of things fall through the cracks, but they are pretty close to catching you if you have something to hide.

Colorado
Not sure if I'm in the correct area here but here goes....

My husband works as a carpet cleaner; as a "subcontractor". The owner of this company has never paid taxes (7 years) and now is in trouble with the IRS. So now he is telling my husband (and his other 5 "employees") that they have to have their own business. They have to pay some type of fee and name their company.
So, what I'm wondering is where we need to start as far as record keeping, taxes, fees, etc.
All of the "employees" will still be using the owner's vehicles, supplies, etc so it'll technically be like they're still a subcontractor only they will be carrying a different name other than that of the company where they receive client information.
This owner is a "character" to say the least. I'm also curious if this is even legal to force your employees to have their own business name just so the owner isn't responsible for taxes...and yet still have full use of all the owner's vehicles, equipment, etc.
Also, I am curious about the taxes that the owner owes to the IRS and if he can make my husband (and his other "employees") responsible to pay them back. Any links/suggestions would be greatly appreciated!

Thank You,
Crystal

 

[joshuasepitome]

Thankfully, my husband has only worked for this guy just over a year. we're well aware of back taxes becoming an issue. The owner treats everyone as employees but writes subcontracter on the issued paychecks. He shuts his business down occassionally for days at a time, fires people randomly etc....like i said, he's a "character". Since no one had taxes taken out, no one pushes their luck as far as having a lawyer. He recently had everyone fill out paperwork to become a "true" employee; to have taxes taken out of everyone's pay and now has turned around (by advice of his tax lawyer) with this ...you now own your own business crap. I know he's in ALOT of tax trouble and he will do whatever possible to make his employess pay for his mistakes.

I use the term employees versus subcontractors (and i'm probably incorrect) because the owner supplies everything and sends the guys out to jobs that he booked and they do the work (and free return work) and give the owner all of the money. then the owner writes out a personal check to his workers based on a certain percentage (the new guys are at like 8% and the oldest is at like 32%). They are also required to wear t-shirts sporting the company's logo/information and drive vans that are marked with this info.

Technically, as it sits now....everything will remain the same as far as how they get paid and how they do their job and they will still be using the original company vans, etc; with the exception that they will be responsible for their own taxes (i assume) because the owner is attempting to MAKE everyone create/pay their own business name (they put their last name in front of the words 'carpet cleaning' and that's the name of their company).

Trust me, if the guys were finally ever put on payroll and considered a TRUE employee; this owner would end up without a business and in debt for life because of his extremely illegal ways of conducting a business. The only reason people work for him is because of the money.

I would love to find out about this common law control test. Thanks for the tips/info so far. I know better than to mess with the IRS. All of this is happening BECAUSE the IRS caught onto the owner and his business and total lack of paying taxes.

 

[fronty]

There are other factors you should also consider such as liability issues. Although all tortfeasors are liable for their torts, independent contractors will more likely be pursued with civil action if a person can’t go after the principal. One of the criteria in whether or not to pursue someone in a civil case is whether or not they have the ability to pay. You could always go after a bus driver if he was negligent, but most people would sue the principal through vicarious liability, respondeat superior. What will his boss do if there are damages to a person’s carpet or other tort? Keep in mind he is trying to label you an independent contractor for his own good not yours. Here is a common law control test on whether someone is an employee:

1. Whether the organization can hire or fire the individual or set the rules and regulations of the individual’s work
2. Whether and, if so, to what extent the organization supervises the individual’s work
3. Whether the individual reports to someone higher in the organization
4 whether and, if so, to what extent the individual is able to influence the organization
5. Whether the parties intended that the individual be an employee, as expressed in written agreements or contracts
6. Whether the individual shares in the profits, losses, and liabilities of the organization.

There are some other tests to determine if someone is an independent contractor such as the “Right to control” test and the “The Economic Realities Test.” Unfortunately, I do not have time write now to type them for you. If there ever comes a time when someone is trying to determine if your husband is an IC or an employee, it would be hard to say he was an independent contractor. I’m basing this on the fact that he uses the guy’s truck and equipment and all the work he does is for this guy (along with other things). Well, good luck and look at things from all angles before pursuing them.