Independent Contractor
- Thread starterchawalang
- Start date
RickR
Well-Known Member
I have had many roles over decades including 3 partnerships. Most of my IC work was as a designer, occasionally design/TD. In those cases it was clear that I was to accomplish a goal with minimal 'corporate' direction or management. They offered nothing but cash.
You will likely find that IRS rules are the major governor of whether one is an IC or employee.
You will likely find that IRS rules are the major governor of whether one is an IC or employee.
BillConnerFASTC
Well-Known Member
After leaving university level teaching in 1982, I have been an employee of an independent contractor, though since 2005 I work form my own company. Theatre consultants - like engineering and architecture firms, simply by the business of working on projects for a limited period of time are independent contractors. IRS has simplified the rules to determine if you are an employee or independent contractor: "The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done."
BillConnerFASTC
Well-Known Member
But, as an independent contractor - your own boss - none of what you earn goes to an employer. It's all yours.
And my clearest memory of when I went out on my own is that it was much easier and more lucrative than I had imagined. A lot to balance.
In Arizona, they are making our business more definitive for IC status, especially in regard to unemployment. Or to put it another way, if you work for the IA, where you end up working for a variety of employers (the IA isn't an actual employer for stagehands), you are not considered an employee for the purposes of unemployment. This works for non-union staging companies as well. See here.
I try and avoid working as an IC. My bread and butter is touring automation and occasionally rigging. I don't want to deal with quarterly payments or providing my own workman's comp. I know guys that set up a K or S corp and deal with it that way. For my piece of mind it is worth it to have a large company standing in front of me should things go wrong.
BillConnerFASTC
Well-Known Member
For what its worth, if you are an IC - a sole proprietor - you are not required to have workers comp on yourself. Quarterly payments - that's what accountants are for. But 8 checks a year - feds and state - isn't a big deal.
But the decision is a temperament/personality thing. More responsibility, but potential for more rewards as well. I decided a long time ago to not to hang out my own shingle and well, another case of never say never, and it's worked out for the best for me at this point in my life. As a one person company it's pretty easy admin; add an employee and just hope you can add enough to justify a bookkeeper - because that does get tricky. Not an easy or trivial decision and I'd never say anyone was wrong to remain a regular W-2 employee.
Seems that this law by state of AZ. might well put employers in violation of the federal definitions.
lwinters630
Well-Known Member
Even if an employer claims your an IC and gives you a 1099, it doesn't make you one. The burden of proof is on an employer to show that you are a business, you advertise, have business type expenses, hold your company out to the public, are free of direction and control. If you are a c-corp or an s-Corp with a FEIN, that makes easier for them.
After battling with the IRS and IDES for unemployment claim by in IC, I now require IC's to provide copies of FEIN, an ad, copies of bills showing their company name, business cards, and a contract for each job.
There are many laws that an employer needs know before calling someone an IC.
To comment further on the OP'S questions, in some roles I function as an IC, (with a FEIN as a s-corp) for design, consulting, project management and more, involving lighting, sound, video and flooring. I totally love the freedom to take on projects (or not) as I choose. And for what it is worth, an s- corp is easy to set up with far more tax deduction and liability protection than a DBA name.
jcslighting
Member
I started out as in IC doing side design work for a local high school while I was in college - they paid me a check and then a 1099 in January. This same process has now grown in to $20k plus a year as an IC.
I still have a "day job" but that is also as an IC.
I get to pick the jobs I take as well as the paychecks belong to me. Is it worth that much to let someone have a percentage of your labors in return for handling some paperwork for the govt? That was why I kept going with it. There are downsides - lack of benefits, PTO, insurance, vacation, and you can't call in sick but like others have said, you keep the check. Quarterly taxes aren't hard you just have to budget for yourself vs. letting your payroll dept do it for you.
As for the AZ bill, I think it is a terrible idea. If you work under a collective bargaining agreement (IA) or directly for a venue, you are not an IC but an employee.
I still have a "day job" but that is also as an IC.
I get to pick the jobs I take as well as the paychecks belong to me. Is it worth that much to let someone have a percentage of your labors in return for handling some paperwork for the govt? That was why I kept going with it. There are downsides - lack of benefits, PTO, insurance, vacation, and you can't call in sick but like others have said, you keep the check. Quarterly taxes aren't hard you just have to budget for yourself vs. letting your payroll dept do it for you.
As for the AZ bill, I think it is a terrible idea. If you work under a collective bargaining agreement (IA) or directly for a venue, you are not an IC but an employee.
They are fighting the AZ bill. http://www.azstagehands-stop2112.com/
BillConnerFASTC
Well-Known Member
How do you figure a state run unemployment is regulated by Federal rules?
The IRS among other federal agencies, have defined sets of rules of when and how a worker is an independent contractor or an employee.
My read on the Arizona law is that aspects of it are in contradiction to federal law(s).
Typically and even though the states don't like it and enact local laws to circumvent federal law, the courts usually rules that federal trumps state.
BillConnerFASTC
Well-Known Member
I understand that and disagree in general with the intent - saving unemployment costs to business - but as I read the backup the redefinition is only for the purposes of determining unemployment insurance eligibility. The "label" for that purpose would not change the label and status for IRS purposes, etc.
I agree with Bill; I see no reason a person doing a job is considered an "employee" for state unemployment insurance cannot be considered an "independent contractor" for the same job for federal (and probably state) income taxes. It might look really wierd in the tax history if they claim unemployment after not having W2 income, but that shouldn't stop it from being possible.
BillConnerFASTC
Well-Known Member
The IRS rules are actually not very clear. They allow a case by case status to be made depending on a host of factors. https://www.irs.gov/Businesses/Smal...ependent-Contractor-Self-Employed-or-Employee
The AZ law seemingly is attempting to clarify the conditions under which a worker is IC or an employee and for reasons of status for unemployment benefits. Trouble is, the law is written so that an employer can declare a workers status as IC using these definitions and thus avoid all the other factors and potential benefits that come along with being an employee, including any other protections that would be due an employee under state and federal laws, such as overtime, among others.
Thus a bad thing for freelance technical folks in AZ.
The AZ law seemingly is attempting to clarify the conditions under which a worker is IC or an employee and for reasons of status for unemployment benefits. Trouble is, the law is written so that an employer can declare a workers status as IC using these definitions and thus avoid all the other factors and potential benefits that come along with being an employee, including any other protections that would be due an employee under state and federal laws, such as overtime, among others.
Thus a bad thing for freelance technical folks in AZ.
