Independent contractor or employee

[Mittsione]

What is the name of your state? New Mexico

I have worked for a city for four years and have been paid as an independant contractor, while I meet every IRS test as an "employee."

I am the Director of a small homeless shelter for pregnant and parenting teenage girls and have a staff who are also paid as contractors. Our positions are funded by a grant from the state. We work at the same location every day, are subject to all city policies and proceedures, work strictly assigned hours (even detailed in our contracts), etc., etc.

I have brought this to the attention, numerous times, to both the city (both of my supervisors) and the state (officials within the managing agency) and have been told on more than one occassion that I am likely correct, and then nothing! I pay gross reciepts tax to the state, self-employment tax, and since I really am an "employee" I reap none of the benifits of sef-employment. As an employee of the city I would receive mileage reimbursement, holiday, sick, and vacation time; retirement, etc.

Can my staff and I do anything about our situation?

 

[Snipes5]

Yes, you can. However, doing this may well lose you your job, so keep that in mind as you proceed.

There is an IRS form you can file, I'm sorry I don't remember the form number. Basically it asks the IRS to make a determination of your employee vs contractor status. Once that is done, if you are ruled an employee, the proverbial s*** is going to hit the fan.

The IRS will require the city to reclassify you, and they will have to pay their portion of SE tax for the time you have been working there.

As it appears to be a systemic problem, there will probably be severe monetary consequences for the city, and they are NOT going to be happy with you.

If I were going to do this I would seriously consider getting another job as soon as possible.

Snipes

 

[Mittsione]

Thanks for your reply.

I have downloaded the form your referred to (SS-8) and am currently collecting the required documentation.

I realize that the IRS can compensate me for the paid self-employment taxes but am still unsure if I have recourse to collect on the unpaid benifits that I would have received if I were an employee.

My current contract with the city expires on June 30th and I do not plan to renew for FY06. The s*** hitting the fan is ok. The situation needs to be rectified. I have staff who make $9.00 hourly, and after taxes do not even make minimum wage!

The situation is further complicated by New Mexico's required gross reciepts tax of 6% that my staff and I are required to pay as "independant contractors." We are hoping if we can reclassify that we will avoid this tax. The city, incorrectly, issued me (and others) a tax emempt certificate, to avoid the liabily of gross reciepts tax. I recently found out that the certificate is not valid and I could be charged with a large sum of gross reciets tax. I am hoping to avoid this.

 

[Snipes5]

You might consider also including a letter with the form and indicating that this problem includes a number of people, so as to draw IRS attention to the situation as systemic rather than an individual problem. Also give them a phone number so they can contact you for further information if necessary.

Snipes