jbart19
Ok so I just started training with a company that provides dj/mc services for events in my area. They have about 25 DJ's they send to events in multiple states since we live near the border of 3. The company is setup as an LLC with a single member ( the owner) and was created as pass-through entity for a sole-proprietor. All of the contracts refer to the LLC as the main party and list the name of the DJ selected to be used at the event. The company collects a $300 deposit and the balance is paid to the DJ directly by the customer 2 weeks before the event. Here is where It gets tricky. This would be a classic independent contractor arrangement and the individual DJ's would then need their own business license and insurance etc... Except the business owner provides the equipment, sales leads, training, office facilities for client meting, advertising, and is very particular about the way the jobs are run. He also insists that his liability insurance for the company covers the DJ's at their events. Those details -according to form ss-8 from the IRS would classify the relationship as employer/employee especially since the owner is very adamant that no DJ perform at events not related to his company. The problem with both classifications is that I and no-one i know that works there has ever filled out a w-4, an I-9 or received a 1099 or W-2 at the end of the year. I am pretty sure that the insurance policy would only cover true employees, ones listed with I-9 and W-4 forms with the IRS if it was ever called into use. From what I can tell The owner claims the $300 deposit as the only income from the business and the individual DJ's claim the remainder as Self-employment income. However none of the DJ's i know have their own business license or contractors license. I don't think the designation of self employed would hold up to an audit either since the company provides the majority of the resources and the DJ's pretty much just show up. Hopefully someone with more insight into the legal ramifications can chime in here. I can't bring myself to work for someone I feel is deliberately cheating the tax system. This company is not new and if these are violations are reported they would likely put them out of business.
Posted Tue 22 Mar 11 @ 1:51 pm
DJ Marcel_1
I'm not sure how it works in the States but It can;t be that different:
Claim the income as "Self Employed Income" on your Tax Forms, Keep any receipts For Gas/Clothing/music purchased/thumb drives/etc, and claim them as expenses towards the self employed income.
Talk to an accountant there's usually a lower limit that doesn't require reporting & if you keep under that limit, your good.
You can set up a sole proprietor - home based business and treat yourself like a independent contractor, might be easier around your tax time.
Above all, first stop - talk to an accountant or tax lawyer.
Claim the income as "Self Employed Income" on your Tax Forms, Keep any receipts For Gas/Clothing/music purchased/thumb drives/etc, and claim them as expenses towards the self employed income.
Talk to an accountant there's usually a lower limit that doesn't require reporting & if you keep under that limit, your good.
You can set up a sole proprietor - home based business and treat yourself like a independent contractor, might be easier around your tax time.
Above all, first stop - talk to an accountant or tax lawyer.
Posted Tue 22 Mar 11 @ 3:17 pm
J-Snip
I second the CPA suggestion! CPA CPA!! Can't recommend it enough, PLUS you should be able to deduct their fee on your 2011 taxes!
Posted Tue 22 Mar 11 @ 3:49 pm
jbart19
yeah the limit not to report is like $600 per year.
I understand the concept of independent contract work and how to claim that as personal business income. I have owned my own company as an LLC with my own business license, tax ID and credit card merchant accounts in the past - Not in the DJ business - so I am somewhat familiar with those guidelines.
My issue is that under the guidelines set forth by the IRS to determine if work can be classified as being performed by an independent contractor or an employee there are 11 guidelines.. These guidelines are surmised in the form SS-8. below I have pasted the contents of a summary of that form and how it relates to properly classifying the relationship in the eyes of the federal government.
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There is no set definition of the term "independent contractor" and as such, one must look to the interpretations of the courts and enforcement agencies to decide if in a particular situation a worker is an employee or independent contractor. In handling a matter where employment status is an issue, that is, employee or independent contractor, DLSE starts with the presumption that the worker is an employee. Labor Code Section 3357. This is a rebuttable presumption however, and the actual determination of whether a worker is an employee or independent contractor depends upon a number of factors, all of which must be considered, and none of which is controlling by itself. Consequently, it is necessary to closely examine the facts of each service relationship and then apply the law to those facts. For most matters before the Division of Labor Standards Enforcement (DLSE), depending on the remedial nature of the legislation at issue, this means applying the "multi-factor" or the "economic realities" test In applying the economic realities test, the most significant factor to be considered is whether the person to whom service is rendered (the employer or principal) has control or the right to control the worker both as to the work done and the manner and means in which it is performed. Additional factors that may be considered depending on the issue involved are:
* 1. Whether the person performing services is engaged in an occupation or business distinct from that of the principal;
NO
* 2. Whether or not the work is a part of the regular business of the principal or alleged employer;
YES
* 3. Whether the principal or the worker supplies the instrumentalities, tools, and the place for the person doing the work;
PRINCIPAL
* 4. The alleged employee’s investment in the equipment or materials required by his or her task or his or her employment of helpers;
NO MONETARY INVESTMENT BY INDIVIDUAL
* 5. Whether the service rendered requires a special skill;
YES- TRAINED BY PRINCIPAL
* 6. The kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision;
* 7. The alleged employee’s opportunity for profit or loss depending on his or her managerial skill;
PAYMENT BASED ON BY THE JOB - DETERMINED BY THE PRINCIPAL
* 8. The length of time for which the services are to be performed;
ONGOING RELATIONSHIP - JOB BY JOB BASIS - SOME RELATIONSHIPS OVER 10 YEARS IN LENGHT
* 9. The degree of permanence of the working relationship;
NOT SURE HOW TO ANSWER
* 10. The method of payment, whether by time or by the job; and
BY THE JOB
* 11. Whether or not the parties believe they are creating an employer-employee relationship may have some bearing on the question, but is not determinative since this is a question of law based on objective tests.
I BELIEVE MOST WOULD SAY THEY ARE EMPLOYED BY THE PRINCIPAL IF ASKED
Even where there is an absence of control over work details, an employer-employee relationship will be found if (1) the principal retains pervasive control over the operation as a whole, (2) the worker’s duties are an integral part of the operation, and (3) the nature of the work makes detailed control unnecessary.Other points to remember in determining whether a worker is an employee or independent contractor are that the existence of a written agreement purporting to establish an independent contractor relationship is not determinative (Borello, Id.at 349), and the fact that a worker is issued a 1099 form rather than a W-2 form is also not determinative with respect to independent contractor status.
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I filled in the answers to these questions in CAPS above based on my situation.
Based on these factors I do not believe this situation qualifies as an independent contractor relationship. If anybody with more experience can verify this or rebuke it please point me in the right direction.
I understand the concept of independent contract work and how to claim that as personal business income. I have owned my own company as an LLC with my own business license, tax ID and credit card merchant accounts in the past - Not in the DJ business - so I am somewhat familiar with those guidelines.
My issue is that under the guidelines set forth by the IRS to determine if work can be classified as being performed by an independent contractor or an employee there are 11 guidelines.. These guidelines are surmised in the form SS-8. below I have pasted the contents of a summary of that form and how it relates to properly classifying the relationship in the eyes of the federal government.
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
There is no set definition of the term "independent contractor" and as such, one must look to the interpretations of the courts and enforcement agencies to decide if in a particular situation a worker is an employee or independent contractor. In handling a matter where employment status is an issue, that is, employee or independent contractor, DLSE starts with the presumption that the worker is an employee. Labor Code Section 3357. This is a rebuttable presumption however, and the actual determination of whether a worker is an employee or independent contractor depends upon a number of factors, all of which must be considered, and none of which is controlling by itself. Consequently, it is necessary to closely examine the facts of each service relationship and then apply the law to those facts. For most matters before the Division of Labor Standards Enforcement (DLSE), depending on the remedial nature of the legislation at issue, this means applying the "multi-factor" or the "economic realities" test In applying the economic realities test, the most significant factor to be considered is whether the person to whom service is rendered (the employer or principal) has control or the right to control the worker both as to the work done and the manner and means in which it is performed. Additional factors that may be considered depending on the issue involved are:
* 1. Whether the person performing services is engaged in an occupation or business distinct from that of the principal;
NO
* 2. Whether or not the work is a part of the regular business of the principal or alleged employer;
YES
* 3. Whether the principal or the worker supplies the instrumentalities, tools, and the place for the person doing the work;
PRINCIPAL
* 4. The alleged employee’s investment in the equipment or materials required by his or her task or his or her employment of helpers;
NO MONETARY INVESTMENT BY INDIVIDUAL
* 5. Whether the service rendered requires a special skill;
YES- TRAINED BY PRINCIPAL
* 6. The kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision;
* 7. The alleged employee’s opportunity for profit or loss depending on his or her managerial skill;
PAYMENT BASED ON BY THE JOB - DETERMINED BY THE PRINCIPAL
* 8. The length of time for which the services are to be performed;
ONGOING RELATIONSHIP - JOB BY JOB BASIS - SOME RELATIONSHIPS OVER 10 YEARS IN LENGHT
* 9. The degree of permanence of the working relationship;
NOT SURE HOW TO ANSWER
* 10. The method of payment, whether by time or by the job; and
BY THE JOB
* 11. Whether or not the parties believe they are creating an employer-employee relationship may have some bearing on the question, but is not determinative since this is a question of law based on objective tests.
I BELIEVE MOST WOULD SAY THEY ARE EMPLOYED BY THE PRINCIPAL IF ASKED
Even where there is an absence of control over work details, an employer-employee relationship will be found if (1) the principal retains pervasive control over the operation as a whole, (2) the worker’s duties are an integral part of the operation, and (3) the nature of the work makes detailed control unnecessary.Other points to remember in determining whether a worker is an employee or independent contractor are that the existence of a written agreement purporting to establish an independent contractor relationship is not determinative (Borello, Id.at 349), and the fact that a worker is issued a 1099 form rather than a W-2 form is also not determinative with respect to independent contractor status.
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
I filled in the answers to these questions in CAPS above based on my situation.
Based on these factors I do not believe this situation qualifies as an independent contractor relationship. If anybody with more experience can verify this or rebuke it please point me in the right direction.
Posted Tue 22 Mar 11 @ 4:05 pm
SuperAceMan
I don't know what the laws are in the USA, but in Canada you'd be classified as an employee. The fact that you're flat rate has no bearing on being an independent contractor.
1) You are representing his company
2) He has full control of the event by the sounds of it
3) You use his office space for meetings
4) He supplies all the music and equipment
That screams employee to me, but I may be mistaken. Does he tell you when you are working or can you decline an event? Are you responsible for your own vehicle? Who's business cards do you hand out when asked for one at an event?
As many have said prior to me, a CPA or lawyer would know best. The topic has me intrigued though.
Hope this helps a bit,
AC
1) You are representing his company
2) He has full control of the event by the sounds of it
3) You use his office space for meetings
4) He supplies all the music and equipment
That screams employee to me, but I may be mistaken. Does he tell you when you are working or can you decline an event? Are you responsible for your own vehicle? Who's business cards do you hand out when asked for one at an event?
As many have said prior to me, a CPA or lawyer would know best. The topic has me intrigued though.
Hope this helps a bit,
AC
Posted Tue 22 Mar 11 @ 4:27 pm
jbart19
@Super
1 - yep
2- yep
3- yep
4- yep
While it is possible to decline an event he makes it difficult and will hold it against you and lower the number of events you are selected for.
Business cards list the company and their contact information but are personalized for each DJ with their name. There is a corporate website that lists all DJs and and a corporate phone number for bookings. Personal vehicles are used.
I am 99.9% sure the way this is being run is totally illegal and all the DJ's should be listed as employees with I-9 forms, W-4 and should receive payment form the company instead of the client. In which case they would be responsible for things like unemployment insurance, payroll taxes, workers compensation, and liability insurance for the employees. Then at the end of the year each DJ should receive a W-2.
Another of my main concerns -and this is more of a concern for the DJ's that work there - I don't think the Liability insurance that the company has would technically cover any of them currently since they are not listed as lawful employees. Granted I haven't seen the policy - plan to ask for a copy - but independent contractors would typically be required to carry their own insurance and not be covered under such a policy.
1 - yep
2- yep
3- yep
4- yep
While it is possible to decline an event he makes it difficult and will hold it against you and lower the number of events you are selected for.
Business cards list the company and their contact information but are personalized for each DJ with their name. There is a corporate website that lists all DJs and and a corporate phone number for bookings. Personal vehicles are used.
I am 99.9% sure the way this is being run is totally illegal and all the DJ's should be listed as employees with I-9 forms, W-4 and should receive payment form the company instead of the client. In which case they would be responsible for things like unemployment insurance, payroll taxes, workers compensation, and liability insurance for the employees. Then at the end of the year each DJ should receive a W-2.
Another of my main concerns -and this is more of a concern for the DJ's that work there - I don't think the Liability insurance that the company has would technically cover any of them currently since they are not listed as lawful employees. Granted I haven't seen the policy - plan to ask for a copy - but independent contractors would typically be required to carry their own insurance and not be covered under such a policy.
Posted Tue 22 Mar 11 @ 4:42 pm
SuperAceMan
If someone tripped over a speaker cable and were seriously injured, an insurance company would be very quick to point out that an agent or employee of the company did not set-up and/or operate the equipment in question. Both the company and the DJ could be held personally liable.
Insurance companies don't pay if they don't have to and will search for any loop hole to prove that they don't have to.
Insurance companies don't pay if they don't have to and will search for any loop hole to prove that they don't have to.
Posted Tue 22 Mar 11 @ 4:53 pm
Tear Em 'Up
Consult a good CPA with knowledge of musicians/DJ applicable tax laws. Contact a local lawyer concerning who is liable for what. Local laws vary greatly from county to county. In most cases the first visit with a lawyer is free, to allow you to decide if you want to work with them. The accountant should have knowledge of any tax rules for your specific career field. Talking to an accountant that is well versed in say,... farming would do you no good if the I.R.S. decides to audit you.
Posted Tue 22 Mar 11 @ 5:29 pm
jbart19
Luckily I have only taken part in 2 training events so far - unpaid :( - Things felt pretty shady from the start so I did some research on my own - now opening it up to the community for insight form seasoned pros. I have meeting Scheduled for tomorrow with the owner and plan to bring up my concerns - worst case he can't explain it and I walk. It would be nice to have a well known name behind me to get gigs, but it isn't worth committing tax fraud! :)
@tear - these are federal statutes I am concerned about primarily right now. yes local laws can vary from place to place - I haven't yet determined all of the possible local issues yet since it could get very complicated. This company books events in about a 50 mile radius that encompasses 3 states, 10 counties and numerous localities.
@tear - these are federal statutes I am concerned about primarily right now. yes local laws can vary from place to place - I haven't yet determined all of the possible local issues yet since it could get very complicated. This company books events in about a 50 mile radius that encompasses 3 states, 10 counties and numerous localities.
Posted Tue 22 Mar 11 @ 5:45 pm
SuperAceMan
Let us know what he says during the meeting. You've peaked my interest.
Thanx
AC
Thanx
AC
Posted Tue 22 Mar 11 @ 7:06 pm
Tear Em 'Up
jbart19 wrote :
these are federal statutes I am concerned about primarily right now. yes local laws can vary from place to place - I haven't yet determined all of the possible local issues yet since it could get very complicated. This company books events in about a 50 mile radius that encompasses 3 states, 10 counties and numerous localities.
Crossing state lines, on someone else's dime? Talk to a lawyer versed in interstate transit law. Sounds to me like he is setting you up to be his fall guy, should things go wrong.
Posted Tue 22 Mar 11 @ 7:50 pm
jbart19
I am currently taking an accounting class for my MBA and have contacted my professor who has a PHD in accounting and is a CPA with my concerns - I will report back with his advice.
Posted Tue 22 Mar 11 @ 8:06 pm
jbart19
As of this afternoon I am no longer associated with this organization
Posted Wed 23 Mar 11 @ 4:25 pm
coach k
jbart19 wrote :
As of this afternoon I am no longer associated with this organization
After reading this post, I have to say smart move JBart! Also you seem like a smart enough guy to start your own company for DJ's and I'm not saying you must do it, but I would say, just something to think about!
Best wishes
Posted Wed 23 Mar 11 @ 5:34 pm
jbart19
Yep - just filed my incorporation papers with my state this evening and have secured a web domain with credit card processing and other features tonight. Just need to get some ad slicks and business cards along with a couple of days to set up the website ( that's what I do for a day job) Luckily I have owned my own company in the past and have run a retail website for the last few years as the director of operations so I am more prepared than most to take that step. Now i just need to get my paperwork for my local business license filed and secure a Federal tax ID number.
Primetime Promotions LLC is born !
Primetime Promotions LLC is born !
Posted Thu 24 Mar 11 @ 12:18 am
jbart19
IF anyone else is in a similar situation you can get a free ruling from the IRS on your designation by filling out and sending in a form SS-8
http://www.irs.gov/pub/irs-pdf/fss8.pdf
http://www.irs.gov/pub/irs-pdf/fss8.pdf
Posted Thu 24 Mar 11 @ 12:21 am
SuperAceMan
Best of luck with your new venture sir! I'm certain it's for the best.
Regards,
AC
Regards,
AC
Posted Thu 24 Mar 11 @ 1:25 am
DME-CEO
I'm NO LEGAL or TAX professional by any means however, I'm the owner of my entertainment company & as you stated above for tax purposes I can and do pass through as a Sole Proprietor (I don't have any employees) . From what you've stated, the owner of that company is NOT in compliance with the law, plain and simple. He's "passing" the jobs off as a "sub-contract" when in actuality he should be reporting you guys as EMPLOYEES! I also sub-contract at times but the difference in sub-contracting and having employees has a SIGNIFICANT impact on the business with regards to workers comp, payroll taxes, health insurance, tax withholding of employees etc, etc. just to name a few.... If he's audited and this is found to be true HE/SHE will PAY the price, that I can promise.
As a small business owner I also understand and know why they are doing it, but if they have 25 or so DJ's on working the way you say they do under the terms you mentioned they that really isn't cool and it's just a matter of time before their business practices catch up with them. Some of the MAIN reasons why a smaller company can't afford to be employers vice the sub-contractors have to do with the aforementioned things I've already spoke about, they simply can't afford it...
As a small business owner I also understand and know why they are doing it, but if they have 25 or so DJ's on working the way you say they do under the terms you mentioned they that really isn't cool and it's just a matter of time before their business practices catch up with them. Some of the MAIN reasons why a smaller company can't afford to be employers vice the sub-contractors have to do with the aforementioned things I've already spoke about, they simply can't afford it...
Posted Thu 24 Mar 11 @ 12:31 pm
jbart19
Exactly and it hurts everybody that is doing it the right way for these guys to shirk their responsibilities. I was pretty sure I was right from the start but had never seen a thread like this before so wanted to get the information out there along with vent a little bit at my frustration that this guy has been in business for over 20 years this way with the biggest company in our area.
Proper paperwork and filing for that many employees would take a huge chunk of resources.
As far as I am concerned I have washed my hands of the situation. In the last 24 hours i have obtained my federal tax ID number, incorporated my own business, applied for my local business license, registered several domain names, obtained a merchant credit card processing account, a web hosting agreement and a marketing company to help promote my new venture.
I am currently entertaining quotes for my liability insurance - anybody have a good lead for that?
I like being my own boss anyway. :)
Proper paperwork and filing for that many employees would take a huge chunk of resources.
As far as I am concerned I have washed my hands of the situation. In the last 24 hours i have obtained my federal tax ID number, incorporated my own business, applied for my local business license, registered several domain names, obtained a merchant credit card processing account, a web hosting agreement and a marketing company to help promote my new venture.
I am currently entertaining quotes for my liability insurance - anybody have a good lead for that?
I like being my own boss anyway. :)
Posted Thu 24 Mar 11 @ 2:45 pm
DME-CEO
jbart19 wrote :
Exactly and it hurts everybody that is doing it the right way for these guys to shirk their responsibilities. I was pretty sure I was right from the start but had never seen a thread like this before so wanted to get the information out there along with vent a little bit at my frustration that this guy has been in business for over 20 years this way with the biggest company in our area.
Proper paperwork and filing for that many employees would take a huge chunk of resources.
As far as I am concerned I have washed my hands of the situation. In the last 24 hours i have obtained my federal tax ID number, incorporated my own business, applied for my local business license, registered several domain names, obtained a merchant credit card processing account, a web hosting agreement and a marketing company to help promote my new venture.
I am currently entertaining quotes for my liability insurance - anybody have a good lead for that?
I like being my own boss anyway. :)
Proper paperwork and filing for that many employees would take a huge chunk of resources.
As far as I am concerned I have washed my hands of the situation. In the last 24 hours i have obtained my federal tax ID number, incorporated my own business, applied for my local business license, registered several domain names, obtained a merchant credit card processing account, a web hosting agreement and a marketing company to help promote my new venture.
I am currently entertaining quotes for my liability insurance - anybody have a good lead for that?
I like being my own boss anyway. :)
GOOD on you bro, whatz done in the dark will always make it's way to light... then we'll see if they can "dance to the music"As for the insurance, check with R.V. Nuccio, http://www.rvnuccio.com/. I'd also recommend calling them after you take a look around their website as I had added things I really didn't need and instead of trying to "up-sell" me the lady was explaining that I didn't need it and why I didn't need a particular "rider".
Also, I don't know if you use or are planning on using Quickbooks but if you are then check out Intuit's (owners of Quickbooks) merchant account programs, I love it, the rates are lower than most other merchants with NO recurring monthly charge unless you go over certain dollar amounts and again they still come out cheaper but the main reason I like them is for their "Go payment" service, take cards anywhere right on your phone and depending on what you want to do you can even print a receipt, email and txt it to a customer all at the same time...
Good luck on your new adventure and welcome back to the joyous "headache" that comes along with being your own boss! :)
Aloha
Posted Thu 24 Mar 11 @ 10:55 pm