Need to source the vast knowledge of the OT...

As some of you may know I have been furloughed since the Rona destroyed the economy etc.

My boss has a tentative approval to bring me back, but only as a Independent Contractor due to a hiring freeze. He suggested it would help his case (and mine) if I had my own independent contractor status. There is a company that they use to handle contractors, however they apparently levy fees etc to do so. Fees that he suggested could be added to my salary rather paid to the "company" that handled the IC's prior to all this if I handled it on my own.

It seems there were associates working there in this manner prior, however the institutional knowledge of how this was done was lost with the layoffs/furloughs.

It was suggested that the party (me) would perhaps need their own tax ID, an independent contractor "status", and I may need to register a business name with the state?

Google has TO much info and its hard to make heads or tails of some of it... some is even contradictory.

Anyone have experience with this? Or can maybe give me the best place to start?

Appreciate any insights! Thanks.

ICA for me and what I do is more about liability insurance coverage.

Run.

Being 1099/IC is great in theory. It sounds like he wants to bring you back in the same role but as a 1099. The only winner there is your boss as that is just a tax write off for him.

I would balk at it - not sure what you do for a living but here's why (more so if its the same position):

-Your tax burden goes up substantially - you're fully responsible for all taxes - including self employment tax.
-Unless you're going to office out of your house - sounds like you'll still be at his office, using his equipment, and his supplies - you will NOT have any deductions to write off to balance out the increased tax burden
-If you're going to HIS location to work every day - technically that mileage is NOT deductible.

Basically - unless there are drastic changes in the scope of your duty - and you have much more freedoms - you'll get [censored] in the end. Mark my words.

The IRS has very clear cut guidance on who is and is not a 1099 contractor - if you were laid off as an employee - and you are being brought back in the exact same role (and under the same direction and control of your job) - you are NOT a 1099 contractor.

ask him why the change in status, ask what type of raise you will get for increased bookkeeping and things associated with being "your own business".

were it me I would do an llc and pay myself a salary if possible. 1099 sucks, been there, done that.

As an IC your FICA taxes will double and you will not have company benefits. You should factor this into your rate. You may also want to incorporate if any concerns about legal liability. An advantage is that there are retirement savings options for self-employed that can enable you to defer tax on much more income than a corporate 401(k); you will need a tax ID for these (look at solo 401(k) as something to consider). You can potentially deduct mileage, cell phone, internet and other expenses from revenue to reduce taxable income.

Thanks mate!

I am aware of the tax implications. Our office is closed by in large, it would be remote work.

Certainly appreciate the advice, but I'm definitely not going to run. I love the company, I love the work, the people and culture.

After 4 months of being a highly qualified individual applying for dozens of jobs a week, many of which I'm well over qualified for... Let's just say it's a pretty tough job market out there.

And contrary to popular belief, EVERYONE is not making more money on unemployment than when they were working, trust me.

Gotta do work son!

After my retirement(forced) the company wanted me to come back as a company employee. I said no way. We eventually agreed that I would come back as a contractor but with a 60% raise, per diem and mileage. Why did they agree to such a big raise you say? Well as a contractor you are just a write off. No benefits and they can stop your services anytime and don't have to have a reason. If you thought you were a number as a employee well you really will be as a contractor

I don't blame you. Tough times for sure.

I've been self employed for 13 years now - but with the freedoms that should go along with it - as well as the ability to make deductions to keep the taxes in check.

A lot of people go in to it seeing a high pay scale - but in the end realize they're getting screwed because the company is having their cake and eating it too - as in paying as a 1099 and the person still treated exactly like they were as an employee.

if you go IC get you the best cpa you can find, this will be what saves you.

also have an atty on your rolodex, one that knows tax law and labor law preferred.

get ready to spend a lot of 12 hr days getting it all set up. and good luck.

Yup I'm aware that federal taxes are not taken out and benefits of any kind are not provided. I've already cared for that.

That is good information about the retirement savings. I was unaware of that.

However how does one go up setting themselves up as an individual/ independent contractor on their own?

When I did it in the past the company handled all of that for me. That was a PT gig. Can an individual set themselves up as an independent contractor and what would be required to do that?

I don't think all that is needed. Keep good records and you can do your taxes yourself with zero problem. Just file your schedule C, keep good records, and you'll be fine.

do EVERYTHING via text or email, paper trail is extremely important for keeping track of what they expect and require.
look at the recent uber/lyft cases on IC vs employee.

Nothing is needed. You'll receive a 1099 and you will file a schedule C. It is simple. Keep good records. A separate business account can help to track expenses, but if you keep excellent records even that isn't needed. If you're not selling goods - it truly is as simple as you want to make it - as long as you keep good records.

Thx C Boone. Helpful.

This is a pretty big organization though. I don't think payroll is just going to cut me a check every few weeks.

We had contractors there prior, and there was a third party company that handled that relationship and payroll excetera. Almost like a temp agency but not.

My task is to establish that mechanism, minus the middleman... Could be it's not even possible. But I've heard enough rumors to think it was done prior and can be done.

From the employer's perspective, there are many reasons they would prefer to hire a contractor rather than add a FT or PT employee. Contractors hit the books as an operating expense rather than as a part of G&A. The company saves a lot of money in benefits, employment taxes, etc. It is also significantly easier to fire a contractor than it is an employee. There could also be internal policies they have to deal with through their HR department. A contractor is a temporary position and may not count against the department's head count during a hiring freeze.

To the individual worker, working under the umbrella of a temp or contract firm comes with both benefits and drawbacks. First off, the agency will receive between 20-30% of your hourly rate. If you bill out to the company at $50/hour, you will end up taking home $30/hour. In turn, you would generally receive legal indemnification and possibly a health insurance plan from the agency.

If you choose not to go through the agency, you definitely need to set up an LLC. If your spouse works for a company with a health insurance plan, this may be the best option.

Regardless of whether you go through an agency or through your own LLC, you will be responsible for both sides of the payroll taxes, your quarterly income tax payments, and you will need to track all of your expenses. It would be a very good idea to employ a seasoned CPA and/or lawyer for this.