I quit the restoration shop.

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DaveBonds

DaveBonds

Garage Trash
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Not exactly thrilled, but it had to be done.

Just in case anyone else is in a similar boat, if you've been working under a 1099 on a single source of taxable income, the IRS isn't gonna hit your employer, the Department of Labor will, to the tune of fines that can easily exceed a home mortgage.

http://www.dol.gov/whd/workers/misclassification/

$5,000 to $25,000 max penalty per employee, per year for having an employee on a 1099 when they only qualify for a W2.

After talking with a group of tax preparers and the IRS, I found out that it's $5,000 the first time and it multiplies, across the board, with each reported 1099 form.

1 employee @ 1 year = $5k
1 employee @ 2 years = $10k per, $20k total in fines
2 emloyees @ 2 years $20k per, $80k total in fines

It adds up quick.

At the rate I've been there, along with friends who worked there, the penalties for my employer exceed $250k.

So, if you've been at the same job, with only one source of income, beware. They aren't screwing around with this. I'm not at risk, but I'd put my employer at risk if I continue working there. Even if I were put on a W2, it would still raise a red flag with the IRS and the DOL would get the misclassification task force involved.

If you are an actual independent contractor with multiple sources of income, you can be on a 1099. If you have been punching a clock at one place, you should be on a W2.

Just a heads-up. This **** cost me my job, so I thought I'd pay it forward to the automotive industry folks, here.

Dave
 
I have been preparing taxes for over 40 years. You are correct the irs is starting to get real serious about using a 1099 instead of a w2. I haven't seen any fines that were near the amount you stated but they have put a lot of extra agents on the problem.
Stan
 
Just curious why it cost you your job? Why can't the shop just hire you as an employee if that's what you've ben doing anyway?
 
They can, technically.

The thing is, this isn't going through the IRS. Its going through the DOL, so its an investigation thing, not necessarily an audit by the IRS.

The problem is that if they see a continued paycheck trail from the same exact source with a W2 filed, they will investigate prior 1099 years and risk the fines.

That's why it cost me my job. I could do it, but without the DOL knowing would be nearly impossible at this point, after the IRS looking in to my personal taxes, it would raise a red flag and my employer would still be looking at risking the fines.

We could do it, but my employer would be sticking his neck out, risking investigation from the DOL.

I'm current on my taxes, even thought they are technically wrong. I'm not looking at any penalties. The DOL would be after my employer.
 
Sorry to hear about losing your job Dave, but I bet there's something better around the corner for 'ya :thumbup:



moper said:
Just curious why it cost you your job? Why can't the shop just hire you as an employee if that's what you've ben doing anyway?
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The shop is avoiding payment of FICA taxes of almost 8% by using 1099 employees....
 
Joe Biden set up a federal task force with the DOL in cooperation with each state, under a memorandum of understanding (MOU) to stop contracted worker/ employee misclassification. So I kind of understand why they did this and why the fines are so heavy.

Its not fair to me, to the state, city or other fair employers in the same industry, as an unfair advantage to cut operation costs. Screws me out of my social security, unemployment, workman's comp, paid breaks, OSHA standards in working environment, etc., as well as half of the taxes that I have been paying, should have been paid by my employer, so I've been double taxed for the past six years, not to mention the 20-30 minutes of pay, from not taking breaks, every day that I've worked for the shop.

I'm not happy about losing my job, but ultimately, I'm not happy that I've been played like a golf course by everyone, knowingly or not.
 
Yeah, I've got some better gigs in the barrel already.

This isn't new news to me, so I've been doing what I can to try and set things up.

I'm likely going to start working for the railroad as a locomotive mechanic. Railroad retirement is not taxed. I don't pay into SSI, I pay into rail retirement instead and I don't get penalized if I take my retirement out early, cuz it ain't gub'mint, because RXR>GOV and was firsties.
 
DaveBonds said:
Joe Biden set up a federal task force with the DOL in cooperation with each state, under a memorandum of understanding (MOU) to stop contracted worker/ employee misclassification. So I kind of understand why they did this and why the fines are so heavy.

Its not fair to me, to the state, city or other fair employers in the same industry, as an unfair advantage to cut operation costs. Screws me out of my social security, unemployment, workman's comp, paid breaks, OSHA standards in working environment, etc., as well as half of the taxes that I have been paying, should have been paid by my employer, so I've been double taxed for the past six years, not to mention the 20-30 minutes of pay, from not taking breaks, every day that I've worked for the shop.

I'm not happy about losing my job, but ultimately, I'm not happy that I've been played like a golf course by everyone, knowingly or not.
Click to expand...

Timing is interesting..... Affordable Care Act enforcement?
 
I doubt I'll ever get away from it. I'm one of a few people in Colorado that restores trim and I do everything else.

I've got an extensive portfolio on this and a hand full of cars that people want me to do, but I'm likely only going to do it as I'm solicited.

The Railroad gig pays better than what I was making and I know the owner, as well as the security/ safety manager. He's Amy's step dad, super cool people. I went to the same trade school for auto body that the owner went to and we are both friends with the teachers that retired from there.

While this news is sort of new to me, I knew that I wasn't quite where I should have been with taxes, although I don't think my employer was prepared to put me on a W2, it would have made the difference.

I own a business, now, and I'm actually working a metal casting foundry and building custom furniture, as well as car parts, bike parts and completes.

It would be nice if I could afford to start my own restoration shop, but I don't have the capital to even start one car. If I did, it wouldn't be an issue. I can get a car completed, rotisserie resto in about 6 months. I'm also busy with my illustration work, getting set up with two friends of mine, screen printing, which will be tied in with the other manufacturing work that I'm doing.

Right now, I'm prototyping a few parts and getting some side work done, as well as getting my garage sorted out for my work station/ sand pit for casting, metal spinning, vacuum bagging and assembly work.

For now, I'm just going to work rail and locomotive upkeep, keep my toolbox at home and do side work, while I get enough inventory stocked up from manufacturing, before I open my website and hit some trade shows in August that I paid for.

The only difference is that I'm working a different daily, now. Thankfully, with some friendly people that I've known equally as long, so it won't be like going blind into a new field.
 
Bridges are always nice, but not always needed. To be honest, I've never had my income hurt by prior employers, nor have I ever attempted to travel down those avenues, after I quit the places that I had worked for. I've been at this shop for almost six years.

I did leave on good terms with my employer. He understood the problem I was facing, but I don't know that I'm really going back in that direction for much, if anything, I'll just be tying up loose ends, cash on the head or in a way that the IRS and DOL won't red flag him for and burn him, but until I talk to my tax preparer and the IRS about it, I'm not touching it with a ten foot pole.

The thing is, I know he can set up shop legit with me, but I think it would have to go through the DOL at this point, because of the task force looking into my case. That means he'd likely have to pay at least some sort of fine and all of the back taxes on my behalf, which I'm not sure he can even do at this point.

I mean, if he gets stomped by them, well, I guess that's the way the chips fall, but I'm not out to ruin anyone. It kind of pisses me off, because it put me out, two fold, but I'm fine with simply cutting my losses and moving on.

I'll keep screwing around with cars. I want to get at least one in a magazine. You may see that soon.
 
Sounds like a case of covering his *** while hanging your *** out in the wind.
He's been saving a small fortune in Social Security taxes for you and screwing you in the process. You may think he's a great guy now, but when you have this huge hole in your work years when it comes time to retire he'll be a S.O.B.
I wouldn't hesitate to ask for unemployment, if he gets fined, then he should have been doing things legal. The kicker is, he's known since 2010 and kept working you illegally for the past 4 years. It's one thing to not know, but to continue after the fact, he needs to be busted.
 
I don't see why you didn't just list your garage as the place of business , as a 1099 sub -contractor you could show a separate business address from his shop , claim a couple of the cash side gigs you do to show other sources and carry on , heck you can even dedicate the sq footage in your garage shop and deduct as an expense as long as its dedicated space , as a builder/ carpenter I have been down this road a few times and learned claiming a couple of small jobs that only paid a couple of hundred bucks is worth a hell of a lot more than the tax saved by not claiming them in the long run .I'm glad to hear you were able to transition into a suitable plan B sounds like it's all working out .
 
gunbunny said:
Sounds like a case of covering his *** while hanging your *** out in the wind.
He's been saving a small fortune in Social Security taxes for you and screwing you in the process. You may think he's a great guy now, but when you have this huge hole in your work years when it comes time to retire he'll be a S.O.B.
I wouldn't hesitate to ask for unemployment, if he gets fined, then he should have been doing things legal. The kicker is, he's known since 2010 and kept working you illegally for the past 4 years. It's one thing to not know, but to continue after the fact, he needs to be busted.
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I've been underpaid with the glimpse that the shop would eventually bring in more money. I'm not really on bad social terms with the owner, we've gotten along for as long as we have, but believe me, I know a bad business relationship when I can see it all. The prior shop that I worked for, the owner had me cleaning up the other two technician's botched flag time jobs on my weekends. I didn't see a day off, during my entire 8 month run with that guy and when I left, the last thing he told me before he sold the franchise back was that his shop was sunk without me.

Oklacarcollecto said:
It is closer than you realize. Most of the states show the MOU Signed: September 19, 2011 while Colorado shows MOU Signed: December 5, 2011 so the program was put together some time before then.
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It's been illegal a long time running. The DOL only signed an MOU with each state based on the task force put in place, because it's been such a long running problem. The states that have signed on were targeted, due to their reports and back tax return reported.

cannucky said:
I don't see why you didn't just list your garage as the place of business , as a 1099 sub -contractor you could show a separate business address from his shop , claim a couple of the cash side gigs you do to show other sources and carry on , heck you can even dedicate the sq footage in your garage shop and deduct as an expense as long as its dedicated space , as a builder/ carpenter I have been down this road a few times and learned claiming a couple of small jobs that only paid a couple of hundred bucks is worth a hell of a lot more than the tax saved by not claiming them in the long run .I'm glad to hear you were able to transition into a suitable plan B sounds like it's all working out .
Click to expand...

I haven't done any work on the side that I can even claim. I have people who want to do business with me, but I have nothing to show, other than his 1099 as a source of income. Its the paper trail that they're flipping out over.

And the truth is, it would only excuse the BS. If I made more money, say I had other work coming to me and I made a decent living as a legitimate contracted worker or independent business owner, I wouldn't mind it so much, but knowing what I know about it now, there are more reasons for me not to perpetuate a problem, than to try and find a way around the law.
 
Sometimes you've got to put it all in a big ol' pile, cover it in gasoline, light a match, toss it in and walk away.. Time to move on to bigger and badder things! :D
 
Seems to me you have thought this through pretty through'ly. Too bad it came to that, but sounds like your employer was somewhat out to screw people, anyhow. I wasted a good part of my life working for people on the edge. Three of them went broke, two of them after I left. Only one happened while I was there, that was right after my big "crash." I was still recovering with a broken leg among other things. I got stuck with over 10 grand in med bills the insurance would not pay. Fortunately, there was some 50K that they DID pay before the company went under.
 
DaveBonds said:
Yeah, I've got some better gigs in the barrel already.

This isn't new news to me, so I've been doing what I can to try and set things up.

I'm likely going to start working for the railroad as a locomotive mechanic. Railroad retirement is not taxed. I don't pay into SSI, I pay into rail retirement instead and I don't get penalized if I take my retirement out early, cuz it ain't gub'mint, because RXR>GOV and was firsties.
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Dave,

You better look into the RR Retirement a bit more. First off, RR Retirement pensions are paid by the government through the US Treasury. Secondly there is no such thing as collecting an early pension through RR Retirement other than a disability which you need 20 years service to qualify for. If you should happen to leave railroad service more than 18 months before your eligible retirement age which is currently 60 years old and with no less than 360 months of credited service, then you will only be eligible for retirement benefits through Social Security under their rules and regulations.
 
67Dart273 said:
Seems to me you have thought this through pretty through'ly. Too bad it came to that, but sounds like your employer was somewhat out to screw people, anyhow. I wasted a good part of my life working for people on the edge. Three of them went broke, two of them after I left. Only one happened while I was there, that was right after my big "crash." I was still recovering with a broken leg among other things. I got stuck with over 10 grand in med bills the insurance would not pay. Fortunately, there was some 50K that they DID pay before the company went under.
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Yikes!

Yeah, the tables have never really been even. I've been the only bodyman/ painter there for 3 years. Maybe longer. I wouldn't say he's out to cause trouble, but it definitely finds him. The business formula that I've always seen fail is starting a business in an industry that you don't have enough experience in, to complete all the necessary tasks on your own.

PoisonDart74 said:
Sometimes you've got to put it all in a big ol' pile, cover it in gasoline, light a match, toss it in and walk away.. Time to move on to bigger and badder things! :D
Click to expand...

Yep. I was going to give it a little longer, but I couldn't wrap my head around the logic of keeping a problem going like that. Left me without a choice, but it will be better off.

Russ H said:
Dave,

You better look into the RR Retirement a bit more. First off, RR Retirement pensions are paid by the government through the US Treasury. Secondly there is no such thing as collecting an early pension through RR Retirement other than a disability which you need 20 years service to qualify for. If you should happen to leave railroad service more than 18 months before your eligible retirement age which is currently 60 years old and with no less than 360 months of credited service, then you will only be eligible for retirement benefits through Social Security under their rules and regulations.
Click to expand...

Will do. I don't know much about it, like if it is any different through each state, or how this particular setup works, but I will find out. I was told by 3 people, including the owner, that there was no penalization to take out early. I'm not really concerned with it, to be honest. Knowing how SSI works and how inflation and the US treasury works, I'm not actually planning on retiring. I'll likely own a business and die with a blueprint on my desk for the next month's work. Anything is better than what I've got, but thank you for the heads up!

805moparkid said:
f*ck....
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Sh*t....

Stack.

I'll be happier, knowing that I won't owe taxes every year and work in a place where I will see raises based on my input into the company, instead of being based on my employer's needs and/ or wants.
 
im already talking with my employer and tax guy about this to see if im in the same boat...
 
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