W2 Employee/1099 Subcontractor

[Steve Gish]

Had an interview yesterday.

IF hired… I would be a W2 employee starting out at about 42% split with 5% coming off the top for FICA and Taxes, Net 37%. They provide 100% of the tools, software, clients and office space. No salary, no insurance, just the fee split.

I think that’s great, that’s not my question. Does anybody else do this?

1) What is the advantage to making a trainee a W2 employee rather than a 1099 Sub-Contractor?
2) I really need a new car, I’m not sure if as a W2 employee I can write off payments, taxes and insurance on my work car. I’d also like to write off my high-speed internet connection at home (which I’ll use for pulling comps and research in the evenings). There's also the cell phone, home office phone, gas, etc....

I’ve been self employed for 4 years so I’m a little backwards on all this. I know ya’ll are not accountants, but experience is better than book learnin’ any day.

 

[Farm Gal]

Steve;

You can in fact deduct your business car expenses... some (most) employee work expenses can be either reimbursed through the business or claimed on your taxes... Depends on how you/they set it up.

The prosepective employer is in fact proposing the 'best and most legal form of employment/association for a trainee' under IRS rules, it is up to you to decide if the final paycheck is worth it... The ability to call a 'trainee' a contractor is pretty well documented: the 'employer' would have to jump through a lot of hoops and still winds up in a very questionable state per IRS regs to call a trainee an independant contractor.

See this link:
Employee or Independant Contractor

The part you would be most interested in is the section on the lower right side indicating that you can deduct unreimbursed employee expenses to the extent that they exceed 2% of your AGI (Adjusted Gross Income) AND you itemize...

Since you are going to be working at a not too big $$ and will have expenses I am pretty sure you can at least deduct your actual appriasal related expenses!

Go get a copy of Lassers and read it in between USPAP sessions... I used it for several years to put me to sleep, (really!)

but actually learned a thing or two over time :rofl:

 

[Paul Shraga]

Hey Steve,

1) What is the advantage to making a trainee a W2 employee rather than a 1099 Sub-Contractor?

From the employer's perspective, I am not sure. For you as the employee, you do not need to send in quarterly taxes. If you do not get any kind of health insurance, retirement savings etc, it is prolly better if you were able to snag a 1099 in lieu of the W-2, imho.

2) I really need a new car, I’m not sure if as a W2 employee I can write off payments, taxes and insurance on my work car. I’d also like to write off my high-speed internet connection at home (which I’ll use for pulling comps and research in the evenings). There's also the cell phone, home office phone, gas, etc....

As an employee, you will be able to write stuff off over your 2 % Adj Gross Income limit if you itemize your deductions. HOWEVER,

it get's a little tricky:

Here's what you can definitely write off: your car miles and/or expenses (depending on if you take standard or actual) from the appraisal office to any inspection and then back to the office and/or home. Your cell phone expenses. home phone, i am not sure...

MORE HOWEVER,

Are you using your home office for the convenience of your employer AND as a stipulation/expectation for employment ?
If Yes - it is Home Business expenses galore: you can write off ALL your car miles from home to where ever the @&&@ ! (office, inspection, dry cleaners... )
AND write off your cell phone, computer usage, internet, office supplies etc, similiar to the expenses you wrote off as a self employed individual except they must go over the 2% AGI threshold on your Sked A instead of Sked C


If No - you are SOL. Just the car as explained above.

Also, here is some bed time reading: http://www.irs.gov/pub/irs-pdf/p535.pdf

hope this helps

Cheers,

Paul

 

[Steve Gish]

Thanks for the tips and notes. I've itemized to the teeth for 10+ years. Guess I need to ask some more questions, as in will they back the "required" home office angle?

Seeing as I've more or less been unemployed in 2003 my AGI is pretty low, the 2% I could hit easy enough. Hmm...

Thanks

 

[Mike Garrett RAA]

I recommend you ask a tax accountant!

 

[Patricia Dominguez]

Are you using your home office for the convenience of your employer AND as a stipulation/expectation for employment

If your employer provides you office space it is not at his convenience that you work from home, but your convience and it not a tax deduction.

As far as independant contractor or employee, a trainee is an employee and not a contrator unless, you are marketing your self as a contractor (trainee appraiser) to other appraisers and taking on the expenses to market and set up that type of business.

Even if your employer pays you as a contractor the IRS is still the final authority and if they audit and see that you are an employee all those tax deductions will be void and you will have to pay them back.

 

[Paul Shraga]

Hey Steve,

Just wonderin...has this panned out for you ?


-Paul

 

[Steve Gish]

Still waiting... <_<

Had the interview, was told to wait 3-5 days while they did background checks and such (I assume). Day came to get an answer and they did call me back, said they had recieved a few more resume's and wanted to give these other folks a chance to interview.... but I was still at the top of the list. They are supposed to have a decision to me one way or the other tomorrow.

Mean while I picked up a couple of "Not now's" today. Did get out and knock on a couple more new doors today and got 2 fresh resume packages out. Just gotta keep at it. :wacko:

 

[Mike Garrett RAA]

Hang in there Steve...it will work out for you!

 

[Steve Gish]

Well, this one didn't work out, they chose an "experienced" trainee looking to make a move. On ward and upward I say, 3 more new doors and 3 more new hand shakes and 3 more resumes passed out on Friday. Maybe next week will be my lucky week. B)

I do have a "call me in 4 weeks" to follow up on this week, nice guys, nice office, nice neighborhood. Got my fingers crossed.