Art Alexion on 8 Dec 2005 14:26:27 -0000


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Re: [PLUG] [OT] Career opportunities


William H. Magill wrote:

>
> This 1099 ploy has been used by shyster organizations -- both profit 
> and non-profit for many years to avoid paying Social Security and 
> other Wage related taxes (as well as minimum wage, and other wage 
> hour issues).
>
Falsely categorizing employees as independent contractors is a step up
from paying employees "under the table".  The for the employer are the
same; better actually.  The company who employs independent contractors
can deduct their "fees" as expenses, employers who pay employees "under
the table" cannot.  (Employees getting paid "under the table" generally
do not report their wages.  This illegal practice allows the employer to
pay about 1/3 less than prevailing wages, while the employee takes home
the same amount.  While the employer must forgo the deduction, he
generally makes up for that by avoiding employment taxes, workers
compensation, unemployment compensation, and the required bookkeeping. 
The employee generally benefits, not only in getting the same "take
home" pay, but is usually hiding the income from the payer of some other
source, like unemployment compensation or disability.) 

Employers on independent contractors not only get the deductions, but
also get to avoid those same employment taxes and expenses.

The independent contractors themselves, though, get fewer benefits from
the arrangement.  The expenses avoided by the employer are usually borne
by the employee: higher employment taxes, layoffs without the ability to
collect unemployment compensation, expensive personal health and
disability policies covering job-related injuries instead of workers
compensation.  (It is amazing how many employers of independent
contractors, on a small scale, are willing to admit the categorization
"error" when faced by a personal injury claim from a contractor injured
on the job -- under workers compensation laws, employees give up the
right to sue employers in exchange for the no-fault workers comp.)

Sorry for this long, OT drivel, but after getting so much help on
computer issues through this list, it feels good being able to provide
info on something I know, and which may be of help to others on the list.


-- 

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Art Alexion
Arthur S. Alexion LLC

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