Why would a Home Health Agency require a 1099 Contractor to get an EIN#

[matilda654]

I just started working part time and the Agency that hired me signed me on as a 1099 Contractor. I've worked as a 1099 Contractor before for other companies, but this Agency also signed me up for an EIN number. My previous employers always used my Social Security number. This Home Health Care Agency I just started with got me an EIN#. This agency schedules me to work at their clients' homes, sets my hours, and my rate of pay. At the end of the week I turn in my reports along with my hours and this agency pays me.

From everything I've read online, it seems this Agency should be hiring us as employees, not 1099 Contract Workers. I started thinking they are hiring me as a 1099 so that incase something were to happen to their client while I am working, then I will be held liable instead of the agency. I asked the owner about this and told me that she has excellent insurance that will cover us in case something were to happen while working there with the elderly clients.

She then texted me to call her if I still have questions about the EIN#.

I really don't feel comfortable with this, yet am not knowledgeable enough in law to know if I should check into this further? Please send your advice if knowledgeable in this area of the law. Thank you in advance.

 

[Zigner]

You don't need an EIN: https://www.irs.gov/faqs/small-business-self-employed-other-business/form-ss-4-and-employer-identification-number-ein/form-ss-4-employer-identification-number-ein-1

With that said, they can require it if they want.

From a liability perspective, it makes no difference either way.

What US state?

 

[adjusterjack]

You may be an employee based on the details you have provided. However, you note that you have been 1099 for other companies so it could be said that you are in business for yourself and the agencies are referral services that set you up with a client and you control what you do for that client in the client's home.

There's a fine line. My advice to you, regardless of the argument one way or the other, is that you should buy your own professional liability insurance and keep it permanently. If you get sued personally, the agency is not likely to help. And if you get injured at a client's home you might not be covered for worker's compensation.

As for any kind of insurance that "protects" you, I'd want to see that insurance before commenting.

Meantime I hope you have been paying self-employment tax on your earnings.

Read this:

Home-Care-Misclassification-Fact-Sheet.pdf (nelp.org)

It's from 2015 but it's probably good for today.

That they got you an EIN could be a dodge. If anything goes wrong the agency can point to the EIN and say that you are running an independent business.

Several other resources at:

irs independent contractor home health care at DuckDuckGo

 

[Taxing Matters]

I really don't feel comfortable with this, yet am not knowledgeable enough in law to know if I should check into this further? Please send your advice if knowledgeable in this area of the law. Thank you in advance.

Assuming you are classified correctly as an independent contractor and you operate as a sole proprietor then you only are required by the IRS to have an EIN if you need to file forms with the IRS that require it, like payroll tax returns for employees, returns for certain retirement plans, etc. However, you are permitted to have an EIN and it can be a good idea for privacy — there is less risk of someone stealing your identity with your SSN if you use your EIN instead of the SSN for your business purposes. There is no real downside to having the EIN even if you don't really need it. You just need to remember to include it on your tax returns when you file.

If you are properly classified as an employee, the EIN by itself isn't going to change that.

 

[Taxing Matters]

That they got you an EIN could be a dodge. If anything goes wrong the agency can point to the EIN and say that you are running an independent business.

If the agency thinks that simply pointing to the EIN will be enough by itself to persuade any person truly knowlegeable about that the OP is an independent contractor then the people running the agency don't understand the EIN very well. It's really not that helpful in determinations of employment status.

 

[LdiJ]

If the agency thinks that simply pointing to the EIN will be enough by itself to persuade any person truly knowlegeable about that the OP is an independent contractor then the people running the agency don't understand the EIN very well. It's really not that helpful in determinations of employment status.

While I agree wholeheartedly, there are indeed a segment of "employers" who think that if the worker is using an EIN number that it makes it less likely that the IRS will question the subcontractor status.

I may have mentioned it before but I know specifically of one employer who made all of his employees set up S-corps so that he could pay the S-corps rather than them.

I just had an argument with an employer a couple of weeks ago. One of our clients called and said that her employer wanted her to work out of state for a couple of months and said that she would be "paid on a 1099 instead of a W2" for those months and she wanted to know what that meant for her (outside of her employer's explanation). I was completely honest with her. Her employer then called me and argued with me for over 30 minutes about it. He refused to believe that it wasn't his choice how to treat his employees in that respect.

 

[adjusterjack]

her employer wanted her to work out of state for a couple of months and said that she would be "paid on a 1099 instead of a W2" for those months

Further evidence that employers can be stupid or shady.

 

[LdiJ]

Further evidence that employers can be stupid or shady.

Oh yes, and it is far more common than you might realize. However, in all fairness some of them honestly don't understand that they are being shady or stupid. Some of them honestly believe that it is a choice they can make. Of course, that is basically where alot of the "stupid" comes into play...sigh.