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Am I an employee or contractor?

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Oct 18, 2019 - 11:22:04 PM
1182 posts since 11/3/2008

My wife works at a gas station/convienient store as a cashier/stocker. She gets paid hourly. Its a privately owned store not a big chain. she is paid weekly with cash no taxes of any type are taken out of her pay. I/We dont want to have to pay the employer part of taxes From what I understand its 6.2% match by employer. What is my recourse? From what I have read she isnt a contractor she is an employee.

Oct 19, 2019 - 4:08:27 AM
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52632 posts since 12/14/2005

Ah, to live in a town named after such a NICE songwriter as TOM PAXTON!
(I own a banjo case which once belonged to him!)

Since you ARE in Illinois, I would suggest asking somebody who makes a living explaining the local laws to other residents OF Illinois, rather than asking 115,000 banjo pickers.

We might give you our Sincerely FELT Opinions, which may influence you to make a decision which might all too quickly upfucculate the entire situation.

It's about MONEY, and that is DESIGNED to be complicated., by people who want some of  YOURS.

Oct 19, 2019 - 4:47:28 AM
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Texasbanjo (Moderator)

USA

23392 posts since 8/3/2003

No, she's not an employee. She's paid in cash, no taxes taken out and that means she's not an employee. She could be considered a contractor, self-employed or just someone paid under the table.

I had my own business for years. Had to pay in my taxes quarterly. I paid, if I remember correctly, about 13% which covered income tax, Social Security and other taxes. If she does that, she needs to designate herself as self-employed.

I'm not a lawyer, but I think what the boss is doing is not exactly legal and, if caught, might get both him and your wife in trouble.

Oct 19, 2019 - 5:56:43 AM
Players Union Member

wizofos

USA

5246 posts since 8/19/2012

In my experience as an independent contractor and an employee in Illinois and Wisconsin, here is what I had to deal with.
1. the employer has to withhold both state and federal income taxes and file quarterly.
The amount is a percentage calculated by the number of employee dependants listed on the Fed Form W4. Not sure what the state form is.
2. the employer has to match the employee's Social Security contribution, not sure what percentage that is right now.
3. an independent contractor has to file both of these quarterly income taxes and make up the employers Social Security contribution as well.

As an independent contractor I would not work as a 1099 contractor which is #3 above, not interested in doing all the paperwork and dealing with the IRS and Social Security Admin.
The 1099 is a form that an employer is supposed to send to the employee and IRS annually reporting the amount that was paid an independent contractor.
The only difference between a W2 contractor which is #1 and #2 and an employee is that I was not an employee and did not get any benefits such as health and retirement or access to 401k program. I also could be terminated without cause at any time and could not file for unemployment benefits if terminated.
Terminated could mean that the customer ran out of money or pretty much any other reason and did not have to be for cause.

Oct 19, 2019 - 6:22:19 AM

399 posts since 8/14/2018

quote:
Originally posted by Texasbanjo

No, she's not an employee. She's paid in cash, no taxes taken out and that means she's not an employee. She could be considered a contractor, self-employed or just someone paid under the table.

I'm not a lawyer, but I think what the boss is doing is not exactly legal and, if caught, might get both him and your wife in trouble.


Yes, this sounds not so much like someone being a freelancer or independent contractor, but an employer trying to dodge tax and benefit laws. I think in most states this would not pass the smell test for someone being considered a contractor instead of an employee. Is the employer reporting what they pay to the IRS via a 1099? If the answer is no, you may have a problem.

Oct 19, 2019 - 6:42:06 AM
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Lynne (Moderator)

USA

4955 posts since 3/3/2003

It is an employer that is saving himself a lot of money and hassle in paying under the table.
This is not legal. It's great because your wife gets more money but she is not paying into social security
or any other funds. In Calif we also paid into disability insurance and of course unemployment
which is handy should you ever need those.

Strictly speaking your wife is not employed by anyone because there is probably no record of her anywhere.

Oct 19, 2019 - 6:57:09 AM

1182 posts since 11/3/2008

quote:I know the owner is crooked. He will sell cigarettes as food for foodstamp recipients. The other people who work there are paid under the table. One guy a slow guy is suppose to make an hourly rate but the owner pays him 80$ a week no matter how many hours he works. From what Ive read being paid cash with no taxes withheld doesnt make you a contractor. A contractor isnt paid for hourly work but by a contract to do a specific job. The boss/owner I believe is commiting tax fraud. She likes her job but she has a pretty shady boss. We we will find out at tax return time.
Originally posted by wizofos

In my experience as an independent contractor and an employee in Illinois and Wisconsin, here is what I had to deal with.
1. the employer has to withhold both state and federal income taxes and file quarterly.
The amount is a percentage calculated by the number of employee dependants listed on the Fed Form W4. Not sure what the state form is.
2. the employer has to match the employee's Social Security contribution, not sure what percentage that is right now.
3. an independent contractor has to file both of these quarterly income taxes and make up the employers Social Security contribution as well.

As an independent contractor I would not work as a 1099 contractor which is #3 above, not interested in doing all the paperwork and dealing with the IRS and Social Security Admin.
The 1099 is a form that an employer is supposed to send to the employee and IRS annually reporting the amount that was paid an independent contractor.
The only difference between a W2 contractor which is #1 and #2 and an employee is that I was not an employee and did not get any benefits such as health and retirement or access to 401k program. I also could be terminated without cause at any time and could not file for unemployment benefits if terminated.
Terminated could mean that the customer ran out of money or pretty much any other reason and did not have to be for cause.


Oct 19, 2019 - 7:16:22 AM
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14356 posts since 12/2/2005

quote:
Originally posted by DENNISNDODIE
quote:I know the owner is crooked. He will sell cigarettes as food for foodstamp recipients. The other people who work there are paid under the table. One guy a slow guy is suppose to make an hourly rate but the owner pays him 80$ a week no matter how many hours he works. From what Ive read being paid cash with no taxes withheld doesnt make you a contractor. A contractor isnt paid for hourly work but by a contract to do a specific job. The boss/owner I believe is commiting tax fraud. She likes her job but she has a pretty shady boss. We we will find out at tax return time.

Dennis, I'm not an attorney, nor do I play one on TV. But this strikes me as a really problematic situation. Your wife will have no W2 or 1099 to verify the source of her income.

I don't know what your wife's exposure is on this; it could be that if push comes to shove she'd only be responsible for the appropriate state and federal taxes on her income, plus her share of FICA and Social Security (and note that social security benefit amounts are tied to the amount of income made over the course of one's career).

I don't know if your wife has other employment options but if if I was in her situation I'd look for something else in a hurry. A business owner this shady will get caught eventually, and when he does, things could get messy. And if you can afford to spend an hour or two with a tax attorney to get some guidance on this, it might be a good investment. Because if/when the tower collapses, you'll probably need to pay one anyway.

Oct 19, 2019 - 7:23:24 AM

1182 posts since 11/3/2008

quote:I have found banjo pickers to be intelligent people that give straight and honest answers. Much better than facebook. 
Originally posted by mike gregory

Ah, to live in a town named after such a NICE songwriter as TOM PAXTON!
(I own a banjo case which once belonged to him!)

Since you ARE in Illinois, I would suggest asking somebody who makes a living explaining the local laws to other residents OF Illinois, rather than asking 115,000 banjo pickers.

We might give you our Sincerely FELT Opinions, which may influence you to make a decision which might all too quickly upfucculate the entire situation.

It's about MONEY, and that is DESIGNED to be complicated., by people who want some of  YOURS.


Oct 19, 2019 - 7:31:17 AM
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Owen

Canada

4232 posts since 6/5/2011
Online Now

Dennis, "...better than Facebook" is setting the bar pretty low, IMNSHumbleO.   wink

Oct 19, 2019 - 7:42:38 AM

rcc56

USA

2307 posts since 2/20/2016

The bottom line is that if you wanted to keep her part legal with the feds, she would have to fill out schedule C [income from self employment], and schedule SE [self-employment tax], and pay the appropriate federal tax and social security tax for her income every year.

The up side of that is that she will be putting away money for social security and keep herself out of trouble for not paying her taxes; and that she will be legal no matter what happens to the employer. The down side is that she will have less money in her pocket.

I'm now eligible for social security. I learned a long time ago that if you don't pay in enough over the years, your checks will be much smaller when you start to collect.

Oct 19, 2019 - 11:26:11 AM

52632 posts since 12/14/2005

The Gummint folks got Al Capone for income tax evasion.

That's not the worst thing he ever DID; just the one thing they could PROVE.

If they can get Capone, they can get Mrs. Dodie.

Oct 19, 2019 - 11:41:40 AM
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70299 posts since 5/9/2007

I worked most of my life as a self-employed lobsterman.
I found out years later that I hadn't acquired enough "quarters" to qualify for social security disability payments even though physically qualifying for them.

I never knew what a quarter was until I was told I didn't have enough of them.

Edited by - steve davis on 10/19/2019 11:45:16

Oct 19, 2019 - 12:23:13 PM
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Bill Rogers (Moderator)

USA

22455 posts since 6/25/2005
Online Now

 am an attorney, but my license is inactive and I’m not in Illinois. So this is not legal advice. That said, your wife needs to contact an employment attorney ASAP.  Getting paid under the table as a regular employee at a business is illegitimate and surely illegal. Your wife needs to understand her rights and risks before the excrement hits the fan—and it will. 

Edited by - Bill Rogers on 10/19/2019 12:24:03

Oct 19, 2019 - 2:03:16 PM

1182 posts since 11/3/2008

She asked him today if she would get a w2 or a 1099. He told her she wasnt on the payroll yet. She has worked there since July. Something fishy going on with him.

Oct 19, 2019 - 7:03:34 PM

Paul R

Canada

11751 posts since 1/28/2010

quote:
Originally posted by DENNISNDODIE

She asked him today if she would get a w2 or a 1099. He told her she wasnt on the payroll yet. She has worked there since July. Something fishy going on with him.


No, I;m not a lawyer, this is just a personal opinion. While getting legal advice and getting the law involved would most likely end her employment, this guy needs to be taken down. He's hurting the lives of his employees. How many people has he messed with and gotten away with it? Fishy? It stinks.

Oct 20, 2019 - 5:45:50 AM
Players Union Member

wizofos

USA

5246 posts since 8/19/2012

You might find some interesting information here but like anything on the internet take it with a grain of salt and find others sources that might apply to your state.

https://www.thebalancesmb.com/what-is-the-definition-of-an-employee-398246

Oct 20, 2019 - 9:07:27 AM
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figmo59

USA

29412 posts since 3/5/2008

Dude...
Strait on the up n up deals...
Are just that...

Your better half.. is.. in perrel..if audited..
Unless..
She saves $.. for strictly taxes.. n declares.. her earnin to the irs..
N pays thos taxes...

Go ask a friendly..Accountant... ;0)

Oct 20, 2019 - 11:43:52 AM

rcc56

USA

2307 posts since 2/20/2016

Yes, cover thy tail.

Keep a record of your earnings. File them on schedule C, and fill out schedule SE. Pay the required amount. If you do this, you will not get into tax trouble. Tax trouble is something you really don't want.

If she isn't making a large amount of money, she can save 10% of her earnings to pay her taxes with, and that will probably be fairly close to the amount that is due on April 15.

Edited by - rcc56 on 10/20/2019 11:44:19

Oct 20, 2019 - 12:25:24 PM
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Buddur

USA

2687 posts since 10/23/2004

This is a cut and paste regarding getting paid under the table....

PROS:
- full amount to be given
- no tax and other deductions

CONS
- no prospect for promotion or going up the ladder
- no health care benefits
- no social security benefits
- you cannot report it in your income tax, which is a disadvantage when you want to show that you're earning X amount but cannot since you're working under the table
- no job security and you can be kicked out anytime
- If you get fired, you can't collect unemployment
- It's illegal
- When (not if) you get caught, you will have to pay the original tax plus a hefty penalty
- You will not be able to purchase any high-ticket items (car/house/electronics) because the IRS will be able to track that you had no income so how can you afford these items
- You shouldn't use roads, schools, public transportation, or any of the other services the government provides, since you haven't paid your fair share of taxes.

Can you put it on your resume? It's under the table, so no. Some employers will call to check your previous employers, and if you're working under the table, they may deny that you work there so that could be a big slap for you as the prospective employer will think you're lying in your resume
.
 

I'd have my wife move on asap, imo.

Oct 20, 2019 - 4:08:16 PM

rcc56

USA

2307 posts since 2/20/2016

It has occurred to me that if somehing bad happens at work and your wife is injured, she will not be covered by workman's compensation or any liability insurance that her employer might or might not have.

Run away.

Oct 20, 2019 - 4:19:36 PM

52632 posts since 12/14/2005

In the event of an injury, or of an inquiry by the LAW ENFORCEMENT people, I would trust Buddur's DOG to do the right thing, before I'd trust your wife's employer.

Workplace injuries happen ALL the time.

Is there ANYPLACE ELSE she can work?

Attach some bells to a washboard, and have her accompany your banjo, as you busk on the street corners.

Oct 20, 2019 - 4:34:33 PM
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52632 posts since 12/14/2005

quote:
Originally posted by DENNISNDODIE

She asked him today if she would get a w2 or a 1099. He told her she wasnt on the payroll yet. She has worked there since July. Something fishy going on with him.


Hmmm...

More than 3 months?

That's a QUARTER of a year.

She COULD maybe download the self-employment quarterly filing forms, fill them out, send them to  the IRS, thereby establishing a paper trail that she HAS a job, if she goes looking for another one.

BUT--- more better you and she should have a brief chat with a local lawyer

Probably cheaper ( in the LONG run) than having the IRS put her on the NAUGHTY list.

"You think I see you when you're sleeping and know when you're awake??

Well, you sure don't want to find out the HARD way, what the IRS knows about you!!"

-S. Claus-

 

IRS

Oct 20, 2019 - 8:54:54 PM

9037 posts since 1/15/2005

quote:
Originally posted by Bill Rogers

 am an attorney, but my license is inactive and I’m not in Illinois. So this is not legal advice. That said, your wife needs to contact an employment attorney ASAP.  Getting paid under the table as a regular employee at a business is illegitimate and surely illegal. Your wife needs to understand her rights and risks before the excrement hits the fan—and it will. 


Bill, I am not an attorney either, but she would probably not get in any trouble if she has been paying taxes on her income.  Her employer would be the one getting in trouble if he is not paying all of what an employer is required to pay, like workman's comp.  Her hourly wage would probably not look near as good once the taxes are taken out.  I am self-employed and pay my taxes quarterly.  I have one client who never sends me a 1099.  I have no idea how he reports the money that he pays me, but I always report it just like my other income.

Edited by - BanjoLink on 10/20/2019 20:56:03

Oct 20, 2019 - 10:14:51 PM

Bill Rogers (Moderator)

USA

22455 posts since 6/25/2005
Online Now

The OP said they don’t want to pay self-employment tax. If she files, IRS will catch up to the employer. If she doesn’t file, there’d be trouble for her also. Classic whistleblower situation.

Oct 20, 2019 - 10:22:23 PM

rcc56

USA

2307 posts since 2/20/2016

Durn. I read banjolink's post and suddenly realized that I forgot to pay my quarterly in September.  I better get a check off in the morning.

I'm not worried about your wife getting into trouble with the gov as long as she declares and pays. But I don't think I would be comfortable with her working at a convenience store that is not taking care of its insurance obligations.

Edited by - rcc56 on 10/20/2019 22:23:06

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