Employee Misclassification

[nrotunda]

Hey Ya'll! Does anyone else have a problem with this? I'm on the job hunt right now, and I find that a lot of photography studios want to hire an in house retoucher, but then come to find that they want to pay you as an independent contractor….

I recently got a job offer, come to find that the guy wants me to work in his office, which is in his apartment! (I'm a female retoucher) And he said "he'd pay me in cash." I think people assume I don't pay my taxes and this is appealing to me.

Before I knew any better I was working for a studio in Miami for 6 months as an independent contractor without realizing that they were misclassifying me. Then I insisted I work from home, and they veryyyyy reluctantly agreed, even though I had better equipment at home.

I once watched a workshop for children photography, and the instructor (who is very very successful) advised that everyone file their employees as independent contractors. This woman had full time employees working in her studio! I don't know if she just forgot to mention the laws, and what she meant was any second shooters….

How does everyone feel about this? What I really want you to speculate on is if these photographers are really that uninformed, or are they trying to get around paying taxes?

[John Wheeler]

Re: Employee Misclassification

Hi nrotunda - Here are some quick thoughts.
- First, here is a link that helps define an employee vs an independent contractor from an IRS point of view: www.irs.gov/pub/irs-pdf/p1779.pdf A company can be in big trouble if they are treated as employess yet paid as an indepenent contractor. Offhand, I would suggest that you would fit in the independent contractor category yet read the pamphlet and see what you think.

- Independent contractors can have an advantage over employees from a business point of view. Do not have to pay benefits and the independent contractor has to keep track of paying their own taxes and as well must pay their own self-employment taxes. Independent contractors can be more easily hired/fired and no worries about covering for unemployment insurance. The value of being an employee benefits is somewhere in the range of 10% to 30% above their base pay. An independent contractor "in theory" and in many fields is paid more because of this to compensate for the downsides to the independent contractor. Actual pay is what the market will bear.

- The independent contractor is the one accountable for paying taxes not the business so you are on the hook for that. There are those that take "cash" or as it is called being paid under the table to illegally bypass the IRS system. That is the independent contractor bypassing the system not the business. So their nose is clean and leave it in the hands of the independent contractor

- The employment agreement should be clear about the status of employment and personally I don't think anyone should take a job without a clear contract.

- There are cases where companies use individuals as independent contractors when they acutally should be categorized as employees. In that case the company is at risk with the IRS including paying back pay/benefits to those that were categorized incorrectly (and all it often takes is a single call to the IRS from any of those mis-categorized to get the ball rolling).

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Hope the info is helpful.

[nrotunda]

Re: Employee Misclassification

Hi John, Thanks so much for your response! I actually did a lot of research into it when I was misclassified for those 6 months, so I'm actually well aware of the difference and why companies prefer to have independent contractors.

Do you think that a retoucher should have to work in-house if they are being filed as independent contractors???

Also, please read and respond to my actual question "What I really want you to speculate on is if these photographers are really that uninformed, or are they trying to get around paying taxes?"

[John Wheeler]

Re: Employee Misclassification

Hi nrotunda - Here are some incremental thoughts.

- I see the issue of in-house vs remote as a separate issue from being an independent contractor. In-house or remote should be negotiated and spelled out in the employment contract before you begin work. The contract determines location of work for the independent contractor not your employment status as an independent contractor. I one wants to change the location of work after the initial contract, then that is a renegotiation of the contract. An employee is in a weaker position here. The company can decide arbitrarily to change location of work and the employee is typically not in a position to negotiate anything.

- As far as speculation, about photographers and intentions it is possible that I misread you post. So first, I assume that we are talking about Photographers or Photography studios (the bosses doing the hiring) and ReTouchers being the employee or the independent contractor. If I am wrong about this everything below will be off base.
a) Yes of course the photographers/bosses could be uniformed as any small business can make errors in what is required by the IRS
b) Are they choosing independent contractors vs employees for good legal business reasons - quite possible for the reasons I already outline in my prior post
c) Are the photographers trying to get around taxes - I doubt it. Photographers do reduce taxes legally by hiring independent contractors as they must pay their own employment taxes.
d) Are photographers offering to pay in cash to avoid taxes. No see answer "c". Are they trying to entice a retoucher to take a job because they are paying cash where they independent contractor might not report their employment to avoid income and self employment taxes. Pure speculation yet that is a practice so companies do and there is nothing illegal about paying independent contractors in cash. It is illegal for independent contracts to not report their income, not pay income taxes, and not pay their employment taxes. So is something iffy possibly going on. Possible, yet the onus is all on the independent contractor. The photographer is only looking the other way.

So I would say what could be going on is that there may be retouchers as independent contractors that are trying to get around paying taxes with the photographers making it easier to do by paying cash.

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Hope that clarifies what I was trying to communicate yet it is possible that I am off base on understanding your question.

[John Wheeler]

Re: Employee Misclassification

Hi nrotunda - One more thing
- The company would be complicit in the avoid taxes scam if they do not provide to the IRS and the independent contractor a 1099-MISC form showing how much they were paid for the year. Pretty sure that is required. I am not a lawyer and I am sure there are nuances for which I am unaware so this is from my layman's perspective of being in a bigger business and also a 1 person LLC as independent contractor. If other words, just my opinion.

[Benny Profane]

Re: Employee Misclassification

There are some tax advantages for you as an independent contractor. You can write off your equipment purchases, working space (second bedroom?), a portion of utilities, and transportation related to your work. So go out and buy one of those new Mac Pros, and a really cool Aeron chairs.

[ku123]

Re: Employee Misclassification

This happened to me. It really sucks when you are lied to and then all of a sudden you get a 1099 misc and you realize how much you owe in taxes.

[klev]

Re: Employee Misclassification

This happened to me. It really sucks when you are lied to and then all of a sudden you get a 1099 misc and you realize how much you owe in taxes.

Huh? If you're filling out a W-4 form for the employer, meaning they will issue you a W-2 at the end of the year, you will see deductions from your checks. Otherwise you should be making quarterly payments with the appropriate schedule forms attached.

[ku123]

Re: Employee Misclassification

my situation was a weird situation that would give you and me a headache trying to discuss. Long story short, what happened in my situation wasn't legal.

[klev]

Re: Employee Misclassification

You can always report the employer.

[Benny Profane]

Re: Employee Misclassification

Yeah, the IRS loves to hear about these things. Really.