Insure -> Ensure
As an ex-college-newspaper editor, this error always stands out to me. And the NYT should know better.... even in 1998. YC's headine is the same as the Times.
How a Tax Law Helps Insure a Scarcity of Programmers (1998)
31–40 of 100 posts
Re: How a Tax Law Helps Insure a Scarcity of Programmers (1998)
#32Here's my experience working as an independent status. Once a megacorp wanted to hire me as a consultant. The problem was that this megacorp had a list of "approved-vendors" to do consulting work for them. To get into the list was a time consuming and expensive hurdle. What did the hiring manager do? He asked me to join one of these approved vendors temporarily and billed through them. And this vendor got a cut out o…
That's not really a complete story.
Re: How a Tax Law Helps Insure a Scarcity of Programmers (1998)
#33I have dealt with this law in depth, from every angle, from its inception in 1986 and have a few observations to make about it: 1. The technical issue concerns the tax risk to an employer whether someone functioning as an independent contractor might be reclassified as an employee via an IRS audit that finds that the person is in fact functioning as an employee and not as someone who runs his own business. This risk…
I know this is really long and people when they see long paragraphs of text... but I just wanted to say the above is REALLY work the read if this situation applies to you.
Re: How a Tax Law Helps Insure a Scarcity of Programmers (1998)
#34I have dealt with this law in depth, from every angle, from its inception in 1986 and have a few observations to make about it: 1. The technical issue concerns the tax risk to an employer whether someone functioning as an independent contractor might be reclassified as an employee via an IRS audit that finds that the person is in fact functioning as an employee and not as someone who runs his own business. This risk…
Thank you. This is a great explanation.
Re: How a Tax Law Helps Insure a Scarcity of Programmers (1998)
#35Have things changed? I had no trouble working as a 1099 for a while, nor did any friends. HN and reddit are filled with posts by people claiming to be independent contractors. How is that one guy with plane is affected by this law, but nobody I've ever talked to is?
When I started my career, back in the 80s, the independent contractor was the "rock star" of software development career field. Would work at $MajorCorporation and bill directly, and make $100-$250 per hour or more. This tax code change, as well as some other regulations and tax issues mostly eliminated such direct consultants. Instead, a corporation like American Express would select several approved vendors and consultants would have to work for these firms in order to get work as a consultant.
The shift meant a reduction in rates and another middleman to carve up the billable amount. It didn't totally eliminate the independent contractor but it certainly put the kibosh on it as most of the corporate world (big employers) funneled those positions to a set of preferred vendors.
And which was exacerbated further with the rise of offshore vendors (who supplanted domestic bodyshops) and NIV workers.
Re: How a Tax Law Helps Insure a Scarcity of Programmers (1998)
#36This is rediculous, I'm just glad to see that this has resurfaced and people are taking notice.
Re: How a Tax Law Helps Insure a Scarcity of Programmers (1998)
#37Have things changed? I had no trouble working as a 1099 for a while, nor did any friends. HN and reddit are filled with posts by people claiming to be independent contractors. How is that one guy with plane is affected by this law, but nobody I've ever talked to is?
IANAL, and I might be misreading the law ( http://www.synergistech.com/1706.shtml ), but the way I understand it is that if non-tech company A needs some tech work done, and they hire tech service company B to get it done for them, company B is not allowed to farm out that work to individual contractor C without treating C as an employee for tax purposes. So if you're an independent contractor and you get your own bu…
I am individual contractor C, and company B pays me hourly as a contractor. I do most (95%) of my work for various clients of company B, but they are mainly concerned with my results, not every detail of my work. If I have questions, I usually ask the A's directly.
I believe I am operating properly here.
Re: How a Tax Law Helps Insure a Scarcity of Programmers (1998)
#38Anyone know if any laws like this exist for Canada?
They do not. Anyone is free to create a sole proprietorship/partnership/corporation provided that there is not national security implications ("Pam and Tom's Atomic Weapons" - Disallowed "Pam and Tom's Fighter Craft Displays" - Allowed) or confusion in the marketplace or depletion of nation resource (fishing companies, dairy companies, logging, etc). Actually, small business law in Canada is extremely well thought ou…
Can you as us citizen register company in Canada and provide your services in US? Is there anything against it? Import tax on services?
Re: How a Tax Law Helps Insure a Scarcity of Programmers (1998)
#39I have dealt with this law in depth, from every angle, from its inception in 1986 and have a few observations to make about it: 1. The technical issue concerns the tax risk to an employer whether someone functioning as an independent contractor might be reclassified as an employee via an IRS audit that finds that the person is in fact functioning as an employee and not as someone who runs his own business. This risk…
Reading this wall of text makes me really glad Grellas set up my company.
Re: How a Tax Law Helps Insure a Scarcity of Programmers (1998)
#40Anyone know if any laws like this exist for Canada?
They do not. Anyone is free to create a sole proprietorship/partnership/corporation provided that there is not national security implications ("Pam and Tom's Atomic Weapons" - Disallowed "Pam and Tom's Fighter Craft Displays" - Allowed) or confusion in the marketplace or depletion of nation resource (fishing companies, dairy companies, logging, etc). Actually, small business law in Canada is extremely well thought ou…
[In Canada] There is rarely a tax reason to incorporate, unlike other [countries]. For example, incorporating and paying out dividends will run you just as much tax as running as a sole proprietor. Usually.
To elaborate slightly: The tax system treatment of dividends is set up to make "company produces a profit; company pays corporate income tax; company pays out the rest as dividends; individuals pay personal tax on the dividends" approximately equivalent to "sole proprietorship produces a profit; owner pays personal income tax". Depending on how much other income the owners have, the effective tax rate can be a few % better in either direction -- things don't line up perfectly -- but on average it works out pretty evenly.
There are, however, three common situations where incorporating produces a tax advantage in Canada: 1. If you use the company to "buffer" profits, retaining some of them in good years and paying them out in poor years (either as dividends or salary), in order to keep your personal income in a lower tax bracket (many professional corporations use this approach); 2. If you reinvest profits, since avoiding personal income taxes allows you to compound more effectively; 3. If you sell the company, since capital gains are taxed at a lower rate and in some cases capital gains on the sale of a small business are entirely tax-exempt.
Of course, I am not a Canadian Tax Lawyer, etc.