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Old 07-01-2015, 04:06 PM   #1
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"Busted"


I'm not sure if this is the proper section to post this but I think it is.
I am a NY based contractor all legal and such (or so I thought).
We have just started a big reno job in VT. About a week into it I had a visit from the VT dept of labor, one of their investigators. She threatened to shut me down because I didn't have WC in VT. I explained to her that I didn't know I needed it, the people that work for me are 1099 subs and they want it that way. That info didn't matter to her! I told her I was willing to comply but didn't know where to start. I contacted two local (VT) insurance agents that have both been in the business their entire lives and didn't know how to handle it. Both these agents are in VT. My agent in NY didn't know anything either ( I do have the necessary 2 mil liability in NY)
Short story long and 10K later I now have WC however, she issued us a stop work order yesterday at around 11:00 am even though she knew we had the proper insurances. She had to "verify it with the carrier" so we couldn't work today. At 4:00 pm she sent me an email and then called me to tell me the stop work order had been rescinded.
Of course I had to call the HO's yesterday and tell them what was transpiring, they are understanding as long as it doesn't drag out. I called them back ASAP when I got the news this afternoon.

Now before any of you start ragging on me for not knowing the rules in VT, I plead ignorant. We all have used the 1099 thing at one time or another i'm sure. I won't again.

I am posting this more as a warning to any of you doing business like I was in VT using 1099 subs, in the eyes of VT they are employees plain and simple.

I grew up in VT and do 90% or more of my work in VT, I live 4 miles from the border. Most people know me or of me, and know we do quality work.

Now to add insult to injury, the next day we had a visit from VOSHA, i know enough to run a safe workplace. She was there because she was looking for lead paint etc. She took some samples and will get back to me in a couple of weeks. She also took some samples of the plaster to have that tested for asbestos.

Apparently there is some one running around the city where I'm working turning people in, they tell me I can't find out who it is.
I don't owe anyone any money and have no enemies that I know of.

As I say, this is more of a warning to play by the rules, wish I had known I needed the VT insurance, it would have been in place before I ever took out a board.

Dave
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Old 07-01-2015, 05:15 PM   #2
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Re: "Busted"


Let's assume that you're using bonafide subs.

They carry their own insurance and licensure. And, if they have employees, said employees are covered by their worker's comp.

What is the problem? Or, do your "subs" not carry their own licensure? If they don't ... Vermont ain't your only problem ... look to Uncle Sugar (Mr./Ms. IRS, often referred to as "Uncle Ira").

As far as lead paint ... Is this work performed in a pre-1978 residential home? If so, then wouldn't RRP requisites be in place?

However, if you were following RRP guidelines (assuming a pre-1978 residence) and your subcontractors carried their own licensure ....

I'd tell those b-tches to bite.

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Old 07-01-2015, 05:31 PM   #3
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Re: "Busted"


Exactly!
His subs must not have licenses, insurance or vehicles.
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Old 07-01-2015, 06:05 PM   #4
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Re: "Busted"


There is NO licensing in NY or VT, they do have their own liability insurance, only work for me when needed. Don't be so hasty to jump to conclusions.

I'm a big boy and know I screwed up but I have taken the necessary steps to correct things.

As far as the lead goes, when I took the class they said if it tests negative it was business as usual, it tested negative. She never asked if we even did the work, there was a lot of work already done when we took over.

I am just posting my scenario to hopefully help others to not continue to make the same mistakes/decisions.
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Old 07-01-2015, 06:08 PM   #5
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Re: "Busted"


VOSHA may be doing the same thing the EPA is doing - getting lists of permits from the towns, then comparing to building construction date.

If it's a person harassing other contractors, they won't tell you who it is.
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Old 07-01-2015, 06:16 PM   #6
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Re: "Busted"


if they don't have comp you will be paying it
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Old 07-01-2015, 06:55 PM   #7
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Re: "Busted"


That must hurt not knowing about VT's insurance requirements and taking a 10K hit. There goes the bottom line.

Three agents didn't know what to do? Maybe a call to the NYSIF was the call to make.
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Old 07-01-2015, 07:25 PM   #8
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Re: "Busted"


I bet you weren't legal in NY either.
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Old 07-01-2015, 07:59 PM   #9
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Originally Posted by Anti-wingnut View Post
I bet you weren't legal in NY either.
To the best of my knowledge I was. Water under the bridge now though.
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Old 07-01-2015, 08:01 PM   #10
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Re: "Busted"


1099 legality is also a Fed thing.
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Old 07-01-2015, 11:04 PM   #11
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Re: "Busted"


Quote:
Originally Posted by dave_dj1 View Post
There is NO licensing in NY or VT, they do have their own liability insurance, only work for me when needed. Don't be so hasty to jump to conclusions.

I'm a big boy and know I screwed up but I have taken the necessary steps to correct things.

As far as the lead goes, when I took the class they said if it tests negative it was business as usual, it tested negative. She never asked if we even did the work, there was a lot of work already done when we took over.

I am just posting my scenario to hopefully help others to not continue to make the same mistakes/decisions.
Is this commercial?

http://www.nyc.gov/html/dob/html/dev...or_guide.shtml
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Old 07-02-2015, 12:37 AM   #12
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Re: "Busted"


Quote:
Originally Posted by dave_dj1 View Post
I'm not sure if this is the proper section to post this but I think it is.
I am a NY based contractor all legal and such (or so I thought).
We have just started a big reno job in VT. About a week into it I had a visit from the VT dept of labor, one of their investigators. She threatened to shut me down because I didn't have WC in VT. I explained to her that I didn't know I needed it, the people that work for me are 1099 subs and they want it that way. That info didn't matter to her! I told her I was willing to comply but didn't know where to start. I contacted two local (VT) insurance agents that have both been in the business their entire lives and didn't know how to handle it. Both these agents are in VT. My agent in NY didn't know anything either ( I do have the necessary 2 mil liability in NY)
Short story long and 10K later I now have WC however, she issued us a stop work order yesterday at around 11:00 am even though she knew we had the proper insurances. She had to "verify it with the carrier" so we couldn't work today. At 4:00 pm she sent me an email and then called me to tell me the stop work order had been rescinded.
Of course I had to call the HO's yesterday and tell them what was transpiring, they are understanding as long as it doesn't drag out. I called them back ASAP when I got the news this afternoon.

Now before any of you start ragging on me for not knowing the rules in VT, I plead ignorant. We all have used the 1099 thing at one time or another i'm sure. I won't again.

I am posting this more as a warning to any of you doing business like I was in VT using 1099 subs, in the eyes of VT they are employees plain and simple.

I grew up in VT and do 90% or more of my work in VT, I live 4 miles from the border. Most people know me or of me, and know we do quality work.

Now to add insult to injury, the next day we had a visit from VOSHA, i know enough to run a safe workplace. She was there because she was looking for lead paint etc. She took some samples and will get back to me in a couple of weeks. She also took some samples of the plaster to have that tested for asbestos.

Apparently there is some one running around the city where I'm working turning people in, they tell me I can't find out who it is.
I don't owe anyone any money and have no enemies that I know of.

As I say, this is more of a warning to play by the rules, wish I had known I needed the VT insurance, it would have been in place before I ever took out a board.

Dave
They are employees in every state!

Very few business owners who know about the laws and penalties do not use 1099's for workers. You had better read up on the laws and fines regarding 1099's because what they call 'mis-classifying' a worker as a sub results in so many fines and penalties you will wish that you never started your business.

It is not fair to the workers to have them work without being covered by worker's comp, unemployment, disability and cheat them from contributing into their social security accounts for the sake of saving a few dollars. Eventually, you will get bit in the butt if a worker is injured and even if a worker is not injured. You can hire your best pals you knew from grade school and if something happens to one of them, even if it happens off the job and that person is not insured and cannot collect unemployment when it comes to his not having money for a bowl of soup and you still own your company you can bet that he will do what it takes to feed his family.

I've been running my business for 43 years and I usually had small employee injuries about every 5 years. Last year, I had 5 worker's comp claims since October of 2014, about 5 unemployment claims and 2 disability claims. My point is; you cannot stop workers from filing claims and you do not have the ability to say that your workers will not file a claim.

Sometimes, you may think you are getting by with 1099's but you usually only find out about most employee's injuries at the time you receive a letter from an attorney and the attorneys file the forms your employees need to file with the state so your employee can get the benefits he is entitled to. Then, when the state sees that you did not pay taxes for the employee the state is coming to your office with a microscope and you will lose sleep and a lot of weight worrying about losing everything you have because attorneys and ex-employees can be ruthless.

Many years ago, I had workers who demanded 1099's for various reasons. Later, after I filed their 1099's some of these employees filed their taxes for reasons i.e. to purchase a house. Since they owed for their taxes they came to me and demanded that I pay all their back taxes. According to the law, I was obligated to pay their taxes, or their next stop was the IRS and state because an employer cannot mis-classify a worker and employers are legally required to deduct and report the proper taxes.

Just recently, I terminated my door-to-door canvassing supervisor because he was earning a lot of money working for me and he decided that he wanted a 1099 vs. my taxing him as an employee. He actually had a separate business with a TIN (tax identification number), but I will not play that game because since he worked solely for me, under my direction and would not legally be classified an independent contractor. I will lose a lot of sales at my company because I terminated him, but I know the consequences of using 1099's and I know I will sleep better every night since I don't have to worry about him changing his mind so that I have to pay the portion of the tax money I already paid him plus interest, penalties, attorney fees and maybe even lose my license.

The worse part of paying an employee with a 1099 is you are committing a crime and for many years your employees can hold a gun to your head and you can't do a thing about it. I never put myself in a position where my employees can blackmail me.

Last edited by pcplumber; 07-02-2015 at 12:48 AM.
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Old 07-02-2015, 09:55 AM   #13
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Re: "Busted"


That was well said. That's not saying they're not legitimate subs, but the fact you are now paying w/c on them puts that in question.
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Old 07-02-2015, 03:38 PM   #14
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Re: "Busted"


Quote:
Originally Posted by trussme View Post
Nope, residential.
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Old 07-02-2015, 03:43 PM   #15
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Re: "Busted"


Yup, I'm only playing by their rules now. In the eyes of the IRS the 1099 thing is legit. The times they are a changin and I want to change with them.

The problem we have in this area is guys are so used to having their own insurance and want to be 1099'd. There are benefits for them to do so. But as I said earlier, I am done with that.
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Old 07-02-2015, 05:49 PM   #16
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Re: "Busted"


Quote:
Originally Posted by trussme View Post
That is New York City.
As he lives above Albany those rules do not apply.
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Old 07-02-2015, 06:00 PM   #17
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Re: "Busted"


Quote:
Originally Posted by dave_dj1 View Post
Yup, I'm only playing by their rules now. In the eyes of the IRS the 1099 thing is legit. The times they are a changin and I want to change with them.

The problem we have in this area is guys are so used to having their own insurance and want to be 1099'd. There are benefits for them to do so. But as I said earlier, I am done with that.
If you're telling your workers what time to start each day when they have to take lunch how they are to do your jobs and when to go home. They are employees in the IRS eyes.

Common Law Rules:
Facts that provide evidence of the degree of control and independence fall into three categories:
Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?
Businesses must weigh all these factors when determining whether a worker is an employee or independent contractor. Some factors may indicate that the worker is an employee, while other factors indicate that the worker is an independent contractor. There is no “magic” or set number of factors that “makes” the worker an employee or an independent contractor, and no one factor stands alone in making this determination. Also, factors which are relevant in one situation may not be relevant in another.
The keys are to look at the entire relationship, consider the degree or extent of the right to direct and control, and finally, to document each of the factors used in coming up with the determination.
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Old 07-02-2015, 07:50 PM   #18
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Re: "Busted"


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If you're telling your workers what time to start each day when they have to take lunch how they are to do your jobs and when to go home. They are employees in the IRS eyes.
Sounds simple, but it's not that simple. There can be jobsite constraints to account for each one of those conditions, and you being the GC to lay out those conditions does not automatically make a sub your employee.

Nor does it prevent him from paying his proper taxes and contributing to social security.

The whole thing is ill-defined and ultimately comes down to the judgement of the IRS auditor vs your tax professional, if you have one. Good luck with that.

Too bad everyone chooses to pile on condemning Dave rather than taking his well-meant warning at face value.
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Old 07-02-2015, 08:05 PM   #19
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Re: "Busted"


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Sounds simple, but it's not that simple. There can be jobsite constraints to account for each one of those conditions, and you being the GC to lay out those conditions does not automatically make a sub your employee.

Nor does it prevent him from paying his proper taxes and contributing to social security.

The whole thing is ill-defined and ultimately comes down to the judgement of the IRS auditor vs your tax professional, if you have one. Good luck with that.

Too bad everyone chooses to pile on condemning Dave rather than taking his well-meant warning at face value.
What part of my post condemned? I don't have a clue what the details of his situation his. I was adding to the post and pointing to some facts that I found on the IRS website.

Because you think my post was "piling on" doesn't make it so. Because I wasn't. I got the common law part of my post directly from the IRS website.

Here's another excerpt from their website.

People such as doctors, dentists, veterinarians, lawyers, accountants, contractors, subcontractors, public stenographers, or auctioneers who are in an independent trade, business, or profession in which they offer their services to the general public are generally independent contractors. However, whether these people are independent contractors or employees depends on the facts in each case. The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done. The earnings of a person who is working as an independent contractor are subject to Self-Employment Tax.

You are not an independent contractor if you perform services that can be controlled by an employer (what will be done and how it will be done). This applies even if you are given freedom of action. What matters is that the employer has the legal right to control the details of how the services are performed.
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Old 07-02-2015, 08:12 PM   #20
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Sorry Mike; I didn't mean to say you were piling on. The part of your post I didn't quote makes that clear.

I just used you as a starting block to deliver my sermon.

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