Wait.
Does this mean that my dream of starting a side business of writing kernel code for hire in SV is DoA?
How a Tax Law Helps Insure a Scarcity of Programmers (1998)
71–80 of 100 posts
Re: How a Tax Law Helps Insure a Scarcity of Programmers (1998)
#72Earlier quoted context omitted.
Does the employee get any say in whether he contests his status, or does the IRS tend to do this unilaterally? (This has obvious and multitude implications w.r.t. risk and reputation.)
Generally, the employee faces no risks arising from an employer audit. In fact, the employee is often pushing for a reclassification, e.g., when applying for unemployment benefits (available to employees only) after having been terminated as a "contractor." In practical terms, employees do have input at hearings in which an employer will challenge the results of an audit because it is the employees who are often the…
So if you actually want to be a contractor because you prefer the freedom of owning your own business and the IRS tries to come in and classify you as an employee, then you get to tell them "no I really am a contractor" and they have to stick with that?
Re: How a Tax Law Helps Insure a Scarcity of Programmers (1998)
#73Earlier quoted context omitted.
That's not really a complete story.
In particular, did the middleman vendor take a cut?
I'm sure the middleman vendor took a cut above my rate. I'm not sure how much though. I won't reduce my rate to give them a cut. The megacorp had to cough up the difference.
Re: How a Tax Law Helps Insure a Scarcity of Programmers (1998)
#74Earlier quoted context omitted.
Generally, the employee faces no risks arising from an employer audit. In fact, the employee is often pushing for a reclassification, e.g., when applying for unemployment benefits (available to employees only) after having been terminated as a "contractor." In practical terms, employees do have input at hearings in which an employer will challenge the results of an audit because it is the employees who are often the…
So if you actually want to be a contractor because you prefer the freedom of owning your own business and the IRS tries to come in and classify you as an employee, then you get to tell them "no I really am a contractor" and they have to stick with that?
This whole area is, in a sense, like a rigged game because the tax laws are so heavily weighted in favor of wanting to classify people as employees.
Therefore, if you try to claim you are a contractor, this will be given only the slightest weight, if any at all - in other words, in your words, they don't have to stick with what you say, and indeed normally won't (they will just apply their multi-part test and come to whatever determination they feel is justified).
On the other hand, if you claim you are an employee, they will give that a lot of weight and will ask you considerable detail about all the factual points that tend to confirm that you are an employee (in order to nail your employer with the taxes/penalties that result from the reclassification).
Everything is basically stacked against the person claiming to be a contractor. You can win on the issue but it is usually a tricky proposition. In most contested situations, you might win in two or three out of ten at most.
Re: How a Tax Law Helps Insure a Scarcity of Programmers (1998)
#75I 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…
This seems to directly affect programming contractor rates. Let's say you can contract yourself out directly to a company at $200/hour in 1985. After 1986 if, for all practical purposes, you have to go through an agency for the same work, that agency now wants their cut. This cut could be 50% or more of the actual rate to account for expenses and profit. So you end up going from an effective contract rate of $200/hou…
There are contracting firms that take a far smaller cut. However, they won't find work for you, so if you don't find it on your own then you won't be paid.
Re: How a Tax Law Helps Insure a Scarcity of Programmers (1998)
#76Re: How a Tax Law Helps Insure a Scarcity of Programmers (1998)
#77The movie "Brazil" premiered in 1985, the year before strutting beasts wrote this statute in defiance of common law. Many wilt helplessly at the sound of such braying -- but not Tuttle, who embraces the dangerous life of peaceful production.
Re: How a Tax Law Helps Insure a Scarcity of Programmers (1998)
#78I 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.
In situations like that, I hit the "link" field and then use Readability to make it easier on the eyes - http://lab.arc90.com/experiments/readability/
Re: How a Tax Law Helps Insure a Scarcity of Programmers (1998)
#79Earlier quoted context omitted.
So I'm thinking this applies to me but I'm not sure. I work part time at a company and they pay me directly as a contractor. I do all my work there and am subject to their workplace regulations. Could the company and I potentially be at risk?
Are you at risk? The law exists to protect you from exploitation - worst case they'd have to pay your self employment tax (7.5%), give you benefits, etc. right?
some would say that the law exists so that i have to go through some contracting house which eats 50% or more of my wage up front. To me, it seems more like ensuring exploitation than preventing it.
Re: How a Tax Law Helps Insure a Scarcity of Programmers (1998)
#80Earlier quoted context omitted.
Does the employee get any say in whether he contests his status, or does the IRS tend to do this unilaterally? (This has obvious and multitude implications w.r.t. risk and reputation.)
Generally, the employee faces no risks arising from an employer audit. In fact, the employee is often pushing for a reclassification, e.g., when applying for unemployment benefits (available to employees only) after having been terminated as a "contractor." In practical terms, employees do have input at hearings in which an employer will challenge the results of an audit because it is the employees who are often the…
the problem is that most people who want to be classified as independent contractors want to be so classified because they want to spend their pre-tax income on business expenses; for example, the first years that prgmr.com existed, I worked as an independent contractor and spent most of my earnings on servers. If I had been reclassified as an employee, I would have had to pay taxes on that money before spending it on servers.