irs and sub contractors

fatboy1

Veteran Expediter
hey i heard on a call in show that the irs is gonna really look hard at people who are being paid with a 1099, that are sub contractors to a contractor to a company. like most owners own the truck and lease it to fedex,panther,e-1 etc and they sub contract a driver/team to run truck. they said irs sees that as a employee of the contractor not a sub. any thoughts or info on this thanks.:cool:
 
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ts675

Seasoned Expediter
If this is true and they are really going to give the 1099's a second glance, I do believe there are going to be quite a few fleet owners disappearing from the game. I know this has been talked about a lot in the past 5 years, but will probably just turn out the way it has in the past. All bark and no bite.

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fatboy1

Veteran Expediter
most likely your right all bark no bite. if they did enforce it,then ikt would be a big game changer then,glad we got our own truck and inc. so we wouldnt be caught with a fleet owner having to decide what to do about this.:)
 

zorry

Veteran Expediter
You bought a truck and incorporated ? Is that enough ? Do you write yourself a payroll check ? If not, talk to your accountant. You may want to work this into your budget. Our accountant had us start doing a payroll, to ourselves, years ago.
 

tumbleweeds

Expert Expediter
Owner/Operator
You bought a truck and incorporated ? Is that enough ? Do you write yourself a payroll check ? If not, talk to your accountant. You may want to work this into your budget. Our accountant had us start doing a payroll, to ourselves, years ago.

Good idea. We have done this since we started. Make sure you keep separate checking accounts also. The current administration is a little cash short this season. They want to by a couple of small countries like Greece and Italy for the holidays so the IRS will make sure you give until it hurts.
 

AMonger

Veteran Expediter
Good idea. We have done this since we started. Make sure you keep separate checking accounts also. The current administration is a little cash short this season. They want to by a couple of small countries like Greece and Italy for the holidays so the IRS will make sure you give until it hurts.

Just in time to have china buy it all from us and then start buying US real estate. There is $80 billion in cash in the US, and $3 trillion in china. It's going to have to come back eventually, when china needs to dump it and when we need it. Alaska and Hawaii will be sold, then they'll start buying parts of the mainland.

--

You know the problem with bad cops? They make the other 5% look bad.
 
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Fkatz

Veteran Expediter
Charter Member
Hi All,

This is very true, but The IRS has lost a case with all of Fed EX, that there contractors are independent of them and do not have to take all loads, but the problem with this is that if you do not you go to the bottom of the list and maybe you will sit for a couple of days even though other trucks are leaving. it happens an awful lot, even since I was driving from 98-2005

The IRS auditing over 200,000 independent contractors this year. and they can go back a maximun of 3 years, So this year they can audit as far back as 2008 through April 15, 2012 or any return that was filed since the April 2008,
So If you did not file your earlier returns, 2005-2008 those can also be audited.

The Statue of Limitations is 3 years .from the Date the actual return was filed

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OntarioVanMan

Retired Expediter
Owner/Operator
Statement from a member
Yes I know a lot of drivers that are being paid by a 1099, but just because their being paid that way doesn't mean it's legal. Check the IRS rules for independent contractors and you will find out that a person driving for a contractor is a employee not a contractor.

in BOLD....can a contractor not bring in a subcontractor...?

the construction industry does it all the time....they even sub, sub, sub contract...
 

luis27501

Expert Expediter
Independent Contractor Defined From IRS website


People such as doctors, dentists, veterinarians, lawyers, accountants, contractors, subcontractors, public stenographers, or auctioneers who are in an independent trade, business, or profession in which they offer their services to the general public are generally independent contractors. However, whether these people are independent contractors or employees depends on the facts in each case. 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. The earnings of a person who is working as an independent contractor are subject to Self-Employment Tax.

If you are an independent contractor, you are self-employed. To find out what your tax obligations are, visit the Self-Employed Tax Center.

You are not an independent contractor if you perform services that can be controlled by an employer (Fleet Owner) (what will be done and how it will be done). This applies even if you are given freedom of action. What matters is that the employer has the legal right to control the details of how the services are performed. Meaning if you are a driver for a fleet owner and he micromanage you telling you what loads to take and not to take I am guessing you are consider an employee which in that case Owner should be taking taxes from your pay and paying for all expenses the truck inquires fuel, toll, etc.
 

ts675

Seasoned Expediter
Independent Contractor Defined From IRS website


People such as doctors, dentists, veterinarians, lawyers, accountants, contractors, subcontractors, public stenographers, or auctioneers who are in an independent trade, business, or profession in which they offer their services to the general public are generally independent contractors. However, whether these people are independent contractors or employees depends on the facts in each case. 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. The earnings of a person who is working as an independent contractor are subject to Self-Employment Tax.

If you are an independent contractor, you are self-employed. To find out what your tax obligations are, visit the Self-Employed Tax Center.

You are not an independent contractor if you perform services that can be controlled by an employer (Fleet Owner) (what will be done and how it will be done). This applies even if you are given freedom of action. What matters is that the employer has the legal right to control the details of how the services are performed. Meaning if you are a driver for a fleet owner and he micromanage you telling you what loads to take and not to take I am guessing you are consider an employee which in that case Owner should be taking taxes from your pay and paying for all expenses the truck inquires fuel, toll, etc.

From that definition I think you are correct. I know of at least 3 fleet owners at Panther that IF the IRS audits their drivers that will have some hard choices to make.

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chefdennis

Veteran Expediter
Been scrwing with the irs for more years then i can remember...since i am now own 2 vans and have a driver in one, i guess this will start another chapter of screwing with them...
 

BigCat

Expert Expediter
After some research I have determined we are employees because we are running a truck for an owner. Sub contractors are anyone contracted by the original contractor that uses HIS/HER OWN TOOLS to do the the job. If you drive for an owner that is NOT the case.

Also if the owner tells you what loads to take or refuses loads for you he is in control of your business you ARE an employee.

This info came from my mother who worked with IRS for 10+ years.
 

AMonger

Veteran Expediter
After some research I have determined we are employees because we are running a truck for an owner. Sub contractors are anyone contracted by the original contractor that uses HIS/HER OWN TOOLS to do the the job. If you drive for an owner that is NOT the case.

Not so sure about this part, but

Also if the owner tells you what loads to take or refuses loads for you he is in control of your business you ARE an employee.

This part I'm sure about.





--

You know the problem with bad cops? They make the other 5% look bad.
 

BigCat

Expert Expediter
Not so sure about this part, but



This part I'm sure about.





--

You know the problem with bad cops? They make the other 5% look bad.

All this info came from the pub. 17 from the IRS. That is a free manual many in this business are not aware they can obtain by calling. This manual is highly advised for anyone in the business classified as a contractor.
 

greg334

Veteran Expediter
After some research I have determined we are employees because we are running a truck for an owner. Sub contractors are anyone contracted by the original contractor that uses HIS/HER OWN TOOLS to do the the job. If you drive for an owner that is NOT the case.

Actaully I also did some research when I sued over OT and paid a lot for it.

I learned a lot about the labor laws, who actually makes the contractor/sub-contractor calls ( it isn't the IRS) and how the sub-contracting works. I have yet to have an issue with the IRS about this issue.

The one thing that is missed is that the sub-contractor does not need to provide anything but the skill of driving the truck. The means as in computer programing work, the driver is treated the same - in so much as they can be void of their own tools but use their talents to accomplish a specific task in fullfilment of their contract. I think that is the way it goes.

Just to fill some info in, there has been changes to the definitions of what a contractor and what they do. One such change that has come about is how training determines what someone is - meaning that if the training takes place on a unique aspect of a function that is part of the business, like qualcomm use, then there is no issue. But if there is training that takes place on a common thing, like say something that is part of having a CDL, than that puts the driver into the employee category. One reason why a lot of carriers will hire to train people, they would get stuck paying back taxes and fines.

Training is one of many aspects that is needed to become an employee.

Also if the owner tells you what loads to take or refuses loads for you he is in control of your business you ARE an employee.

Not true

The reason is that it isn't your business as the driver, it is the owner's and the relationship between him and the carrier/customer is not part of the work you do.

The difference is that the driver is contracted to drive, not to make business decisions which are the job of the owner and or the carrier. Determing revenue or deciding what customer to serve and when (within the HOS) is not the drivers unless they are comtracted for that work specifically.

On the other hand, an owner can not dictate what the driver can do with their HOS and other driver related decisions like routing that can put the truck, load, and the public in danger or comprimise the relationship with the customer. Securing the load is another, and so is driving technique, scheduling, and some others.

This info came from my mother who worked with IRS for 10+ years.

Not doubting your mom but the IRS is not in the practice of giving out the info about court rulings and labor law.
 
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BigCat

Expert Expediter
Actaully I also did some research when I sued over OT and paid a lot for it.

I learned a lot about the labor laws, who actually makes the contractor/sub-contractor calls ( it isn't the IRS) and how the sub-contracting works. I have yet to have an issue with the IRS about this issue.

The one thing that is missed is that the sub-contractor does not need to provide anything but the skill of driving the truck. The means as in computer programing work, the driver is treated the same - in so much as they can be void of their own tools but use their talents to accomplish a specific task in fullfilment of their contract. I think that is the way it goes.

Just to fill some info in, there has been changes to the definitions of what a contractor and what they do. One such change that has come about is how training determines what someone is - meaning that if the training takes place on a unique aspect of a function that is part of the business, like qualcomm use, then there is no issue. But if there is training that takes place on a common thing, like say something that is part of having a CDL, than that puts the driver into the employee category. One reason why a lot of carriers will hire to train people, they would get stuck paying back taxes and fines.

Training is one of many aspects that is needed to become an employee.



Not true

The reason is that it isn't your business as the driver, it is the owner's and the relationship between him and the carrier/customer is not part of the work you do.

The difference is that the driver is contracted to drive, not to make business decisions which are the job of the owner and or the carrier. Determing revenue or deciding what customer to serve and when (within the HOS) is not the drivers unless they are comtracted for that work specifically.

On the other hand, an owner can not dictate what the driver can do with their HOS and other driver related decisions like routing that can put the truck, load, and the public in danger or comprimise the relationship with the customer. Securing the load is another, and so is driving technique, scheduling, and some others.



Not doubting your mom but the IRS is not in the practice of giving out the info about court rulings and labor law.

Actually Greg what a contractor,subcontractor and employee are all defined in this manual and not being rude but I would suggest you do research in the book and see.

Subcontractors as stated in the manual use their own tools or equipment. Employees do not.

Computer programmers really? Your comparing us to computer programmers.

How do we differ from drivers at a large company who are "employees"? We don't cover fuel,repairs or pay insurance. When you are a true subcontractor/independent contractor you have these expenses.

Contractors are the ones who have the decision what loads they can take not the owner. Employees are at the owners call.

I would really look closer at this. It may keep you out of trouble from miss classifying your drivers. Older doesn't always mean wiser Greg book knowledge does though.
 
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