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EMPLOYEE OR INDEPENDENT CONTRACTOR?
By Chuck Wells

Small contractors (carpenters, electricians, plumbers, etc.) like to hire additional people to help them with their jobs but don’t want them classified as employees because they would then have to pay for Social Security and Workers Compensation insurance. They call these additional helpers “independent contractors” and think they can get away with it. That is fine until they are audited by I.R.S. or a state agency. The government will probably re-classify these helpers as employees and charge all the back taxes, worker’s compensation insurance, plus penalties.

Want to make a better case for yourself if you are audited? Here are some hints:

  • Get Certificates of Insurance from anyone who works for you showing they have their own insurance.
  • Get a copy of their Doing Business As papers or Articles of Incorporation
  • Get one of their business cards, copy of their Yellow Page ad, or other advertisements showing they work for other people.
  • Document what special skills they have which your business does not have.
  • Make sure they provide their own equipment, supplies, and base
    of operation.
  • Spell out clearly in writing that they will not file unemployment or worker’s compensation claims.
  • File 1099’s for all payments you make to independent contractors.
  • Check with your accountant to see what other documentation is recommended.

Just saying that someone is an independent contractor doesn’t cut it. I have seen many situations where someone is hurt on the job and goes back after the contractor saying they were an employee and they usually win. If your sub-contractors can’t provide this documentation for you, don’t hire them. It’s not worth getting that job.

THE PAJAMA LAWSUIT

Erminia Kirshy sued Lady Ester Lingerie Corp. after sustaining burns to more than half her body when her pajamas started on fire. Kirshy dropped a lit cigarette on herself which started the fire but she thought the lingerie manufacturer should be liable for her stupidity. Kirshy stated that the weight of the fabric in her pajamas was lighter than what was in the manufacturer’s catalog. No mention of the dropped cigarette. The jury awarded Kirshy $2.2 million which was later reduced to $1.75 million.

INSURANCE FROM GOD?

Want cheap car insurance? You don’t need to call those 800 numbers who promise you the world and deliver nothing. Just get a policy from God.

An Oklahoma City salesman was selling car insurance under “God’s Insurance Policy” for only $285 per year. It was issued by the Father, Son, and Holy Ghost. Really. The salesman said since most accidents are caused by fear, this policy would protect its purchasers. Filing a claim could be deadly though.

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