How a Tax Law Helps Insure a Scarcity of Programmers (1998) • Hacker News Board

Re: How a Tax Law Helps Insure a Scarcity of Programmers (1998)

#81

Post by ynniv » Sat, Feb 20, 2010, 7:00 AM UTC

adharmad wrote: post #76

CulturalNgineer wrote: post #61

Earlier quoted context omitted.

Nope, I'm an anthropologist. Extremes in wealth are not compatible with a stable free society. Though I'm open to contrary evidence.

So was the soviet society stable and free?

Your statement attempts to show evidence that a society with no wealth diversity is unstable. That has no bearing on the original hypothesis that high diversity is unstable. Still it fails in this attempt because the historical instability in Communism has always been due to high wealth diversity that arises from political corruption, which ironically supports the original hypothesis.

So... try again?

Re: How a Tax Law Helps Insure a Scarcity of Programmers (1998)

#82

Post by danlavatan » Sat, Feb 20, 2010, 8:34 AM UTC

grellas wrote: post #30

I 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've worked as an IC before without much difficulty. I did have to pay $500/year in employment practice insurance and go through validation. The validators seemed most intersted in a statement-of-work and an employment agreement between myself and my company. I had my own equipment and came in about once a month for meetings. Paid my taxes, used the legal deductions, and never got audited.

I can't imagine why anyone would believe a contractor is an employee if they apply for unemployment.Such a person has admitted they willfully lied under oath to the IRS when filing their 1099. People with so little integrity should never be hired or contracted with; I hope all such people are indited for fraud.

Re: How a Tax Law Helps Insure a Scarcity of Programmers (1998)

#83

Post by danlavatan » Sat, Feb 20, 2010, 8:38 AM UTC

grellas wrote: post #30

I 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…

Also, MS never lost a case/ruling on contractors. They settled with a man named Vincento, who they would have defeated at trial. At the same time, they litigated antitrust an cases they had no chance of winning. MS has among the worst legal representation in the world.

Re: How a Tax Law Helps Insure a Scarcity of Programmers (1998)

#84

Post by hero_of_canton » Sat, Feb 20, 2010, 9:45 AM UTC

grellas wrote: post #30

I 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…

Long time lurker, first time commenting, but I think this may apply to me.

The company I work for now has me classified as an independent contractor (I do web development work) but you would think that I'm an employee by the way they treat me. My pay is salary based, I have to be available between the times they specify, I speak directly to a "supervisor", I have paid holidays/vacations and sick days, and I'm not allowed to take on other work, even if they're not direct competitors.

Is what they're doing wrong? This seems like a pretty sweet deal for them because they don't have to give me any real benefits or pay any employee taxes. I on the other hand, who really isn't an "Independent Contractor", have a tax-lien against me now because I can't afford the huge amount of taxes the IRS wants at the end of each year and have no idea what I'm going to do about it.

Re: How a Tax Law Helps Insure a Scarcity of Programmers (1998)

#85

Post by lsc » Sat, Feb 20, 2010, 12:16 PM UTC

sown wrote: post #71

Wait. Does this mean that my dream of starting a side business of writing kernel code for hire in SV is DoA?

No.

It just means that it will be quite difficult to find people who will hire you without going through a headhunting firm that will take half your pay, and that if you do manage to find a small corp that will hire you directly as an independent contractor, and you write off business expenses against that income, there is a chance the IRS will invalidate those writeoffs, which often results in big debit that can't be discharged by bankruptcy.

Re: How a Tax Law Helps Insure a Scarcity of Programmers (1998)

#86

Post by windsurfer » Sat, Feb 20, 2010, 2:56 PM UTC

nazgulnarsil wrote: post #63

grellas wrote: post #30

I 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 seem to recall that at one point in american history^1, courts could and would strike down laws that were deemed unnecessarily esoteric to the point that they were incomprehensible to the "common man". when you see a system with decades or even centuries of regulations built up via 'regulation, loophole, regulation etc.' you have to wonder if we don't need a clean sheet design. 1. inherited from european common law…

That is still possible in th US, but the case needs to come before the supreme court.

Re: How a Tax Law Helps Insure a Scarcity of Programmers (1998)

#87

Post by grellas » Sat, Feb 20, 2010, 3:17 PM UTC

retro wrote: post #46

grellas wrote: post #30

I 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…

With an agency, you need to consider the following:

1. As you note, they take a percentage of your billable rate, sometimes as high as 50%.

2. In most cases, you need to be a W-2 employee in relation to them and this means you get all of the drawbacks of being an employee without any of the benefits (agencies normally do not offer vacation time, health insurance, profit sharing, stock options, or other perks of employment).

3. You are regarded, in a sense, as an "asset" of the agency. In other words, the agency has a contract with the customer-company and that contract will prevent the company from hiring or contracting with you directly without paying the agency a "non-circumvention" fee. (I know - we have represented many such agencies over the years and protecting this area is always one of their foremost concerns). Thus, your future opportunities with the company you do work for are made dependent on the company's willingness to pay the agency, e.g., a fee equal to six month's of your services before they can do anything with you directly, making you far less marketable.

4. Though they classify you as an employee, some agencies insert a clause in your written contract stating that you get paid only when they get paid. This is plainly illegal if you are their employee but they do will sometimes do it anyway. In that case, or in the case where you are a contractor in relation to them, the effect of such a clause is to put the compensation for your services at collection risk. That is, the agency might decide to string you or stiff you even after they get paid on account of your work for the customer. None of this would happen, of course, if you were allowed to contract directly with the customer.

All this and more is pretty negative for the tech service provider and leaves him vulnerable to getting used and manipulated in various ways. Of course, agencies will vary and some are better than others but inherent problems remain even with the best of them. In a sense, the tax laws have made them a toll gate between you as a service provider and your true customer and there is no way of getting to your customer without paying a price of some kind, one that would not need to be paid but for the arbitrary quirk in tax laws.

Re: How a Tax Law Helps Insure a Scarcity of Programmers (1998)

#88

Post by tpyo » Sat, Feb 20, 2010, 4:36 PM UTC

CulturalNgineer wrote: post #61

tpyo wrote: post #49

Earlier quoted context omitted.

[1-6] Is this an ironic joke? [6] Are you jealous?

Nope, I'm an anthropologist. Extremes in wealth are not compatible with a stable free society. Though I'm open to contrary evidence.

Well, it was more your 6th point that bothered me.

Re: How a Tax Law Helps Insure a Scarcity of Programmers (1998)

#89

Post by apotheon » Sat, Feb 20, 2010, 7:27 PM UTC

windsurfer wrote: post #86

nazgulnarsil wrote: post #63

Earlier quoted context omitted.

I seem to recall that at one point in american history^1, courts could and would strike down laws that were deemed unnecessarily esoteric to the point that they were incomprehensible to the "common man". when you see a system with decades or even centuries of regulations built up via 'regulation, loophole, regulation etc.' you have to wonder if we don't need a clean sheet design. 1. inherited from european common law…

That is still possible in th US, but the case needs to come before the supreme court.

That's not strictly true. Any court can decide that a law is not enforceable within its jurisdiction -- but a higher court can overturn that decision. The Supreme Court comes into it because at that point there's no higher court that can overturn a decision. All that can happen at that point is passage of a different version of the law that doesn't suffer the same issues or an amendment to the Constitution.

Re: How a Tax Law Helps Insure a Scarcity of Programmers (1998)

#90

Post by apotheon » Sat, Feb 20, 2010, 7:27 PM UTC

bd_at_rivenhill wrote: post #69

nazgulnarsil wrote: post #63

Earlier quoted context omitted.

I seem to recall that at one point in american history^1, courts could and would strike down laws that were deemed unnecessarily esoteric to the point that they were incomprehensible to the "common man". when you see a system with decades or even centuries of regulations built up via 'regulation, loophole, regulation etc.' you have to wonder if we don't need a clean sheet design. 1. inherited from european common law…

That would be a great idea, but I don't think the courts would ever make a ruling that would cause the entire tax system to collapse, which would be the only logical result of eliminating laws that are unnecessarily esoteric.

Too bad. The tax code needs to be nuked and paved.