Message Font: Serif | Sans-Serif
 
No. of Recommendations: 0
Can a person work as an employee and contract labor for the same company?


For example, can a person be contract labor for special projects and an employee as a relief receptionist?

Can a contract labor person qualify for the employer’s health/dental insurance?

Jean
Print the post Back To Top
No. of Recommendations: 0
Can a person work as an employee and contract labor for the same company? For example, can a person be contract labor for special projects and an employee as a relief receptionist?

In theory, you generally have to be one or the other. Practically, it depends on who's doing the reporting. And if you ask the IRS, they'd tell you it's a nonsensical question, because they've never met an independent contractor. They regard the concept as science fiction, even though recent changes in the economy have an awful lot of people working as freelancers, including at their old jobs. They want everyone to be an employee subject to withholding.

THAT WAS true, until about a year ago, when IRS issued Info Letter 2012-0069, in response to an inquiry from a congressman, who was trying to intervene on a constituent's behalf.
http://www.irs.gov/pub/irs-wd/12-0069.pdf
In that case they said yes. A person could be a consultant for a specific project, and an employee for something else. Like the situation you describe.

Keep in mind that is not a general ruling, and only directly pertains to the parties in question. AND the IRS lawyer who came up with it may have been a friend of the congressman or his staff.

It's more common for a person to change from one status to the other, but not be both at the same time. A person could be a freelancer who gets hired permanently. Or a former employee does odd jobs as a freelancer. The IRS is more skeptical of the latter situation. But it happens.

And they don't like it when a company gives an employee a 1099-MISC just because they forgot to report some odd taxable benefit on his W-2, and they don't want to bother changing their W-2,W-3 and 941 reconciliations. But that happens all the time. Somebody gets a 1099 for personal use of company car, or taxable life coverage, etc. That happens all the time, but it's not right.

Can a contract labor person qualify for the employer’s health/dental insurance?

That depends on the terms of the company health plan and group policy, etc. It's not unusual for corporate board members to be on the health plan. (Even IRS agrees they're self-employed. That's a law.)

Bill
Print the post Back To Top
No. of Recommendations: 0
Thanks Bill.

The employee/independent contractor helped a lot. It's easier in WA than in most/some states because here all people paid as independent contractors have to have a business license. Our state charges a B & O tax to all businesses. One of the companies I worked for had a cleaning lady that came in for 3 hours per week. They had been paying her as a independent contractor. Since she didn't have a business license the state after an audit by State Industrial Insurance made them put her on payroll. They didn't contact her. I wonder if the audit had been done by the Department of Revenue or IRS if it would have triggered an audit of the cleaning lady.

It was a time consuming audit. They went through every check. The ones that were made out to people they had the company verify they either had a state license or were on payroll. They even questioned the payments to the paper boy. At the time it was $8.00 per month.

That depends on the terms of the company health plan and group policy, etc. It's not unusual for corporate board members to be on the health plan. (Even IRS agrees they're self-employed. That's a law.)

I wonder if being on the company plan wouldn't be a reason for the state or federal folks to say they really are an employee not an independent contractor.

Jean
Print the post Back To Top
No. of Recommendations: 0
The employee/independent contractor helped a lot. It's easier in WA than in most/some states because here all people paid as independent contractors have to have a business license.

Keep in mind that the states and the feds can - and sometimes do - have differing opinions on this issue.

It's quite possible to be an employee for state purposes and an independent contractor for federal purposes, or the other way around.

--Peter
Print the post Back To Top
No. of Recommendations: 0
It's quite possible to be an employee for state purposes and an independent contractor for federal purposes, or the other way around.

--Peter
======================================

See, Peter, now you've given me a headache.

It's really the differing rules...but you mentioned them.

Jean...taking an aspirin.
Print the post Back To Top
No. of Recommendations: 0
See, Peter, now you've given me a headache.

Sorry about that. Go ahead and take that aspirin. Then when you get a minute, I've got one more question.

Are you asking as the employee or the employer?

--Peter
Print the post Back To Top
No. of Recommendations: 0
Neither, it was a discussion on another board. I've been reading that board for awhile so know more background then is given in this thread.

http://boards.fool.com/contractor-or-employee-30924535.aspx

I linked to this thread.

But if it was me. As an employer or an employee.

I'd go for employee and independent contractor they really are two separate jobs. I wouldn't risk the dental insurance would be okay...but then I don't know how the employer insurance plan reads.

If the insurance covers what would stop companies from signing up their accountant, window cleaner, etc. They are independent contractors, right?

A few years ago there was a logging company that had all their employees as independent contractors. In part because State Industrial insurance was about $10.00 per hours per employee.

It ended up a real mess, partly because the employees didn't realize that made them responsible for their federal taxes. Then some of the employees/independent contractors filed for unemployment and listed the company as the last employer, which they weren't, sorta. The worst was when one of them was injured and no state industrial.

It ended up that the employer had to pay a lot more money than if they had just been employees in the first place.

We repaired their equipment and they were whining about it. Good grief, they tried to sidestep the law and then complain because they got caught.

Jean
Print the post Back To Top
No. of Recommendations: 0
So the initial discussion was from the employee's perspective. Frankly, I'd go for employee status. There's nothing preventing an employee from working from home at various odd hours. Plus employees are covered by unemployment insurance and Worker's Compensation (or State Industrial) insurance. Those are very significant benefits.

Dental insurance is generally a waste of money. Stick the $20 or $30 a month into a savings account instead, and brush and floss daily. Get cleanings twice a year that include a quick exam by the dentist (mine run about $80 a cleaning). Xrays every other year (maybe $100) to look for hidden problems.

As an employer, I wouldn't give an option. If you're on-site for 30 or more hours a week, you're an employee, not a contractor. If you don't do significant amounts of similar work for other businesses, you're an employee.

Trying to squeeze into an independent contractor situation generally isn't worth the effort.

--Peter
Print the post Back To Top
No. of Recommendations: 0
Dental insurance is generally a waste of money. Stick the $20 or $30 a month into a savings account instead, and brush and floss daily. Get cleanings twice a year that include a quick exam by the dentist (mine run about $80 a cleaning). Xrays every other year (maybe $100) to look for hidden problems.


That's okay if you teeth are currently okay, but if you've been putting things off for awhile...which, I think, is why she wants into a group policy.

Trying to squeeze into an independent contractor situation generally isn't worth the effort.

Generally I would agree. However, in this case, I think, it's partly (on the employees part) to prevent the employer from demanding set hours at the place of work and expanding the duties beyond the special projects.
Print the post Back To Top