irs and sub contractors

BigCat

Expert Expediter
Also stated is: Employees are told when,where and how to work.

So sounds to me if you are told what load to take or where you are to stop for fuel or what town to go to be closer to a better area and it is non negotiable WE ARE EMPLOYEES!
 

greg334

Veteran Expediter
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.

You're not being rude at all, I take that as someone who respects my point of view and appreciate it. My comments don't mean I'm 100% right but there is a lot of misconceptions about this issue and at my own expense I have asked legal advice by those who practice labor and tax law and passing it along.

The IRS doesn't have the power to be a labor arbitrator under the law and doesn't have the right to define anything except when collecting taxes. They can't force an owner to nullify a contract unless they take them to court and the owner has the right to address this in court when and if it happens. This is the difference and no one here seems to understand that our 'jobs' are classified under the Department of Labor and the Department of Labor by law has the final say so - not the IRS.

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

True but do you know about the exceptions and the court cases?

It isn't in "the manual" nor can an average IRS agent explain them to you, unless we are talking about a investigator specializing in commercial activity and fraud, then they can explain those things.

Nevertheless, it depends on what activity they are being employed to do.

A driver doesn't have to provide the tools but knowledge and talent to get the job done. I used a computer programmer because it is more common than not to do side jobs for IT professionals and collect a 1099. One "like" example that I can give is I have used in the past an editor who I give access to a web site for the sole purpose of cleaning up the content - the tools are mine (the website and computer), the content is "mine" (meaning not belonging to the editor) but the talent belongs to the editor (in this case a sub-contractor) who does the work. They do the work and collect the revenue which I in turn bill the owner of the site for. There is no legal ramification with that arrangement because the job is done with consideration for use of the talent the editor has.

So I contract with a driver for his talent to operate the truck in a safe and legal manner, I can not just put anyone in the seat and expect either safe or legal. My obligation extends beyond that driver to the carrier who provides me that work, not to the driver who is being contracted to drive that truck in a safe and legal manner. I have limits to what I can tell that driver which is within the confines of his talents and legal obligation on how to properly operate that vehicle in a safe and legal manner - from HOS to load securement to having proper paperwork for special loads. All of this is out of my reach and out of my control. However I can tell the driver what loads to do because of the arrangement I have with the carrier - the workflow to produce revenue.

Computer programmers really? Your comparing us to computer programmers.

Yep sure are because I have had a lot of experience in the IT field and know what goes on there as I do here as a fleet owner.

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.

Well first, we differ from them by our training and our lack of a say within the company itself. We are not represented in either the owner's company or the carrier itself but part of the service chain.

Then there are a number of little things like Uniforms, benefits, instructions, routes, quotas and so on. It isn't cut and dry but rather a number of gray areas that are looked at as a sum but individually applied to each situation.

On top of that, the expenses you mention are not the norm and are part of an agreement made by the individual and the truck owner, I don't charge for fuel or anything with my trucks because they are there to drive and nothing more. I know it sounds bad but it isn't this general freight stuff but highly specialized work they are doing.

BUT to understand further, the contract is between two parties with an interest in producing revenue, the requirements of each party are spelled out in the contract and for the trade of the use of the truck, the driver uses his talents to produce revenue. Further there is an idea that the contractor may be "responsible" for fuel and such by contractual obligation but in reality because that may come off a fuel card (common practice) that said fuel card is not part of the contract with the driver and the carrier but the owner and carrier which means that the driver is not paying for anything out of their settlement but compensated after the fact.

Hope that made sense ...

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

First off the decision is not the sub-contractors or drivers, this is a business decision. If you are a sub-contractor for construction, and have no work except through one contractor, then they are the source of the revenue, hence making a decision of what to take and what not to take (unless agreed upon in a contract) is not part of your job as a driver. I do not let my drivers chose their loads because I have an arrangement with a company to provide that work and if they refuse, it is a problem in the production of revenue for me, the company and the customer. This sounds bad but the point is that this is a business decision, not a driving decision and I don't expect for the driver of any truck to allow me to tell them what permits they need or how to bind the load to the trailer as much as I don't let them decide what business decisions to make for my business.

On call means nothing, you are compensated through producing revenue and access to the tools. What complicates this is the Hours of Service that we have to work under, it overrides the IRS because the commerce clause. But I digress, the issue is that we can't just go home, we work when the customer needs us and then we have limited options through the regulations. This is something no one can get around so if the driver is to be with the truck or near the truck for X period of time to fulfill their obligation, then there is nothing about being an employee or contractor/sub-contractor.

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.

Sorry I have had several sources on this issue, starting with my lawyers and both a state and federal judge. Not to mention a couple at the IRS, all say the same exact thing - it all depends on a case by case basis and what I have written is pretty much what I was told. With thousands of dollars at stake, I wasn't afforded the opportunity to read a manual and tell anyone what I should be or not be.

My advice for drivers is to get a lawyer to read the contract the owner puts in front of you, by law you can ask for it in advance. To owners get a lawyer and have them draw up a contract. To both, get an accountant or an EA who can actually advise you what works for your situation and talk to them often.

Thanks Jake by the way.
 

Fkatz

Veteran Expediter
Charter Member
Morning All,

There have not been any definite answer from the IRS as to this looking into 1099 Misc, Sch "C" Solepropietor. Taxpayers, right now then are only looking into the amount of taxpayers that they said they were going to check out.

You still would need a separate Checking account for the business no matter weather you are a Sole Propreitor, Your Social Security # is your ID.
Partnership, LLC, Full Corporation or "S" Corp
For these you must apply for a Employer Identification Number that is applied for by Calling the IRS or filling out Form SS-4. If you are a Fleet or have more then 1 truck there might be complications pertaining with paying a payroll to your contractors or employee's

If your a sole propreitor, you must have all of your settlements deposited into your business/or other checking account except the one you use for Personal expenses.
The to pay your personal bills you transfer what ever you need to pay them.

If you are any of the other forms of Entity's Every Asset that you have in the Business belongs to the business not your personal interest except for Single Member LLC's

If you have any other questions please do not hesitate to ask.


Frank’s Tax and Business Service
120 York Rd
Kings Mountain, NC 28086-3151
(704) 739-4039 Fax: (704) 739-3934
e-mail: [email protected]
Web Site: File Your Return Online
Franklin Katz, ATP, PA, PB,

Providing Professional Accounting, Bookkeeping, Payroll and Income Tax Preparation Services

Circular 230 Disclaimer – Any tax advice in this communication (including any attachments) is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding related
penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any transaction or tax
related matters addressed herein.
 

zorry

Veteran Expediter
Frank, Excuse me if I missed this answer earlier. If YOU were an IRS auditor would YOU classify most expeditors that drive for a fleet as contractors or employees? Be honest, I'll keep your answer secret, just between you and me.
 

Fkatz

Veteran Expediter
Charter Member
My Advice is to be honest and do the right thing instead of screwing with them,
If you are audited, or caught for doing so, it will land you possibly in Jail under the provision of Fraud.

Normally they can only audit you for 3 years, if they consider fraud, that can go back as far as they want. 2- to as long as you have been filing a tax return
Frank’s Tax and Business Service
120 York Rd
Kings Mountain, NC 28086-3151
(704) 739-4039 Fax: (704) 739-3934
e-mail: [email protected]
Web Site: File Your Return Online
Franklin Katz, ATP, PA, PB,

Providing Professional Accounting, Bookkeeping, Payroll and Income Tax Preparation Services

Circular 230 Disclaimer – Any tax advice in this communication (including any attachments) is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding related

penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any transaction or tax
related matters addressed herein.
 
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