Workers Comp

PressureClean

New member
I'm just curious how many guys on this board have workers compensation coverage or possibly just an exemption as an owner of the business. Or maybe you have no coverage at all. For example, in my company I'm an executive officer of the corporation, so I filed an officer declaration and exempted myself out of the workers comp system and instead I just have disability insurance on myself. It saves me money doing it this way and my disability coverage benefits are more than just workers comp coverage would be. I have work comp for my employees.

So, let's start a thread and see what kind of responses we get. It would also be a good time for any new guys to ask questions regarding workers comp if they don't know about it.

A lot of guys don't realize it but if one of your workers gets hurt on or off your customer's property, they can sue you outright because you don't have workers comp. That's kind of the deal with workers comp, by accepting it, they give up their right to sue you for getting hurt on the job, unless you are wildly negligent and kill them, then I think it's a different story. Also, if they get hurt on your customer's property they can sue your customer and many times your customer's homeowners policy won't cover a claim that involves a contractor without workers comp insurance who got hurt while working for the homeowner. So ultimately you get sued and even if you have liability insurance, that's not going to cover a work injury matter. So you put your business, house, cars, savings, everything at risk.

Now what about guys that go and get 1099 contractor agreements with the people they have working for them? Unless they have their own liability and workers comp, you are responsible for them. So if they get killed falling from a ladder while working for you and they don't have their own coverage and neither do you, then you're screwed.

I'm not posting this to scare anybody, I just think we should start a discussion regarding this stuff because I've actually received private e-mails from guys asking me about insurance type questions and I get the idea that many guys don't have a clue as to why they need insurance or what can happen if they don't have it.
 
I have Workmans Comp and Business Liability Insurance. I can't work at the companies I work for without proof of having both and they check for legitimacy of the certificates I give them.

Insurance rates everywhere are climbing and I've been in this business for over 20 years without a claim so am thinking about having my guys go the Outside Contractor route and just 1099 them. I would help them with their additional costs to be in this category and I'd still have the writeoff for their labor. I'm not to worried about the Business Liability part of it to be honest with you, and would probably just have them get workmans comp., but am still looking into this.

This thread might just be as popular Water Recovery lol, but it's a pretty important subject I think.
 
Have liability ins. on the business. As for employees as I stated before I run them through a temp service that way they are covered and so am I.

Charlie
 
Charlie do you have any problems with your guys going to work elsewhere if you get slow? Possibly going to work for the temp service on other jobs? Just curious how that works if things slow a bit and your guys decide to maybe work for some other client of the temp agency since they are employed by them?

As for the 1099 part, I actually tried that last year a bit. Just to try it out I had one of my guys get his own liability insurance and had him do an exemption on himself for workers comp because he was self employed with his own company. He loved it because I was basically putting him in business for himself. Even helped show him how to keep some books and such. This is a great idea provided you can find the right guys for it and keep them. My deal with this guy is that I will work him until I can't any longer in the year but he's able to do other jobs on the side if he wishes. I do also have a non-compete with him for the pressure washing/restoration work that we do. He can do anything our company doesn't do, but not any of our regular services unless I setup the job or give him permission. Seems to be working out well so far.

The other great thing about trying it this way is that I'm not on the hook for employment taxes on him since he really is a 1099 independent contractor. Plus anytime he uses any of my equipment even though it's on jobs I arrange I lease it out to him on a daily rental basis. I was already setup for this since I buy all my trucks & equipment myself and lease it to my corporation as a great way to write off my equipment.
 
This is a great idea provided you can find the right guys for it and keep them.


You said the key words Lance. I would only do it with guys I've had for awhile and know are going to stay. I feel that I really lagged on this one and should have done it a long time ago as it's a huge write off wasted.

I also think it's a good way for a young guy to get his feet wet in managing his money and basically learn how to be self employed without a bunch of pressure (no pun intended)
 
Hello Folks,

I have always been covered with workers compensation. We also have General Liability insurance.

The cost of Work Comp over the last 5 years has been 1.4% of gross revenue. Our total cost of insurance for the same period was 5.8%. This includes our general liability, vehicles and some AD&D. disability and life on me and health insurance for a couple of my guys.

Dave Olson
 
Lance

I have no problem with them going somewhere else in the temp service. The temp service understands that they can't put them on another job without my approval. Let me clarify something. I put a ad in the paper find the people I want then I have the temp hire them for me on there payroll. I get a bill once a week on what I owe the temp service pay it that easy. Lawn care companies do it all the time.


Charlie
 
I carry WC on employees and have declared myself out of the pool. In the threads about subbing out work I have seen no mention that you as contractor may not directly supervise the work, and you need to insure that you achieve an arms length on the issue of ownership of equipment, etc. Watch yourselves or you may end up paying WC, unemployment etc. on these "subs", or worse.
 
Bill,

I have a seperate corporation setup that owns the equipment then leases/rents the equipment to my power washing corporation or my subs as needed. I guess I wasn't specific in my post about that.

Actually the sub I was talking about trying the 1099 way last year is one of my better guys and I can just say "I need this deck cleaned/sealed with this color" and he goes to town from start to finish. In regards to IRS classifying behavioral control for a sub versus employee, as long as I don't "directly" supervise him I'm ok on this one.
 
EMP/ SUB

THERE ARE SOME VERY STRICK FEDERAL AND STATE GUIDELINES REGARDING THE CLASSIFICATION OF EMPLOYER/EMPLOYEES; CONTRACTOR/SUBCONTRACTORS (INDEPENDENT). IF YOU GOT AUDITED (LIKE I DID) AND IN COURT IT IS DETERMINED YOU ACTUALLY HAVE AN EMPLOYEE/EMPLOYER RELATIONSHIP INSTEAD OF YOUR SUBCONTRACTOR/CONTRACTOR - YOU CAN BE LIABLE FOR PENALTIES, TAXES YOU DID NOT DEDUCT ON YOUR EMPLOYEE AND THE TAXES THE EMPLOYEE DID NOT PAY. NOT A PRETTY STORY. SO......
THE INTERNAL REVENUE SERVICE USES 20 FACTORS TO HELP DETERMINE INDEPENDENT CONTRACTOR STATUS. A WORKER IS LIKELY TO BE CONSIDERED AN EMPLOYEE IF HE/SHE:
1, IS REQUIRED TO COMPLY WITH COMPANY INSTRUCTIONS ABOUT WHEN, WHERE, AND HOW WORK IS DONE.
2. HAS BEEN TRAINED BY THE COMPANY.
3. IS INTEGRATED INTO THE COMPANY'S GENERAL BUSINESS OPERATIONS.
4. MUST RENDER SERVICES PERSONALLY.
5. USES ASSISTANTS PROVIDED BY THE COMPANY.
6. HAS A CONTINUING RELATIONSHIP WITH THE COMPANY
7. IS REQUIRED TO WORK A SET NUMBER OF HOURS.
8. MUST DEVOTE SUBSTANTIALLY FULL-TIME WORK TO THE COMPANY
9. WORKS ON THE COMPANY' PREMISES
10. MUST PERFORM WORK IN A PRESET SWQUENCE
'11. IS PAID BY THE HOUR, WEEK, OR MONTH
12. MUST SUBMIT REGULAR PROGRESS REPORTS
13. IS REIMBURSED FOR ALL BUSINESS AND TRAVEL EXPENSES
14. USES COMPANY TOOLS AND MATERIALS
15. HAS NO SIGNIFICANT INVESTMENT IN THE FACILITIES THAT ARE USED
16. HAS NO RISK OF LOSS
17. WORKS FOR ONLY ONE COMPANY
18. DOES NOT OFFER SERVICES TO THE PUBLIC
19. CAN BE DISCHARGED BY THE COMPANY
20. CAN TERMINATE THE RELATIONSHIP WITHOUT INCURRING LIABILITY

REMEMBER THIS IS JUST THE FEDERAL GUIDELINE, NOT YOUR STATE GUIDELINE, OR WORKER'S COMPENSATION. IF YOU GO SUB, DO YOUR HOMEWORK. HOPE THIS HELPS YOU.
DAN COSGROVE
servicefolks@aol.com
 
Dan

Thanks for the info. I had a feeling that the IRS covered all the bases where employer/employee descriptions was concerned.

Just curious, was your audit on one specific thing? My name came up for a "Taxpayer Compliance" audit once and it was the most harrowing, nerve wracking experience I've ever been through. They started by asking me to produce birth certificates to prove that my kids were really mine. It got much worse. At one point the auditor asked me how much cash I normally carried and I was taken back by that one, and even got a little mad. My accountant was kicking me under the table and giving me the "calm down" look but I made a remark that the auditor didn't like and he looked me right in the eye and said that "small self employed business owners were the enemy of the IRS because they dealt in alot of cash". I thought that statement was indredibly brazen and told him so, and when he finally found something he could nail me on I got hammered!! In my opinion they should change that system so EVERYBODY'S EQUAL.

I wonder how many rich guys pay taxes?
 
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Chuck,

The IRS has everything going for them when it comes to most of the small business owners out there, shoddy books, improper filings, missed deadlines, out of date knowledge about tax issues and such. The object is to get organized about this stuff and it will make you a better business and bullet proof.

When I incorporated it changed how I looked at everything. Now everthing is a write off, I only pay 15% on my first $50,000 in profit as a C Corp, and it's a seperate entity that protects me from everything that could harm me personally. If we get audited I'm an officer of the company and if I screw something up bad enough at least they will be going after the corporation and not me personally, at least not at first. Officers can be held liable for taxes, so you still have to be careful about that if you go out of business, but the corporation is the entity that they are interested in. They don't ask about my personal business or how much money I have in my pocket like you point out above. Why would they since the corporation is the problem, not me. I keep meticulous books, every receipt is categorized and filed with specific notations made as to why it was spent and with whom if applicable. By the end of the year when taxes are filed we have boxes of itemized, categorized, cross referenced files listing every expense and broken down on paper for them to look up should they need it.

I learned this from a buddy of mine who makes several million a year in real estate rentals and pays a thousand dollars a year in taxes just because his accountant tells him to overpay. Every single year for the past ten years he's been audited. By this point it's a game to him. He invites the IRS agent to his office for the audit, he orders pizza and him, his accountant and the agent talk a bit, eat lunch, and the agent glances at his extensive reports, cross referenced files, indexed receipts, etc., puts everthing in his reports, does some calculating then simply thanks him for lunch and says he'll see him next year. A few weeks later he gets a check for that thousand dollars back because they figured it out and he over paid them.

They love small businesses because most of us are too small to have accountants and be meticulous in our bookkeeping and filing. I always laugh when I talk with somebody who says something with authority like "I throw everything in a shoebox, if I get audited the agent will get so frustrated he'll give up on trying to get me". Yeah, sure. These guys are like cattle waiting in line at the slaughter yards.
 
That's a great story, Lance. I too am incorporated, and keep very detailed records.......right from my business' inception. I refuse to fit that stereotype above.
 
RON P

Is it a bad idea to have 1 credit card for EVERYTHING i do in my biz.[used only for my biz.]
i collect sales tax and pay that every 1/4
and keep a list of people,work done,materials,what i charged to do the job,and how they paid.
so all i have are a disk of customers
and the reciepts from the credit card CO.
i know the IRS will never believe me but i have never recieved cash as payment.
my insurances,and collected taxes, are the ONLY thing i write checks for they make you
what more do i need to do?
DAN would it be wise to set-up a equipment leasing co.? that way your subs would be renting equipment and trucks you also get depreaction on the equipment as a write off? also repairs
i know that the big trucking co. all rent there own trucks same pair of pants,diffrent pockets.
they also set-up employee leasing co.
they have no drivers as employees just office management. maybe you have to be real big for this to be cost effective?
 
Keep good records, as we used to say at the fire station, It did not happen unless a report was made.

Leasing employees works, but may not be cost effective, as the leasing company has to make a profit. I leased until I hired a good bookkeeper to do payroll. MY labor cost went down at that time, enough to pay the bookkeeper.

The general guidline on independent contractors is no more than 90 % of the work can be for one company. You cannot supply the tools and equipment to the sub-contractor. I don't know about leasing the equipment to the sub. Nor do I know about suppliing chemicals and other parts.

All this discussion may vary as to the states ;you work in. This is one more reason to get a good accountant and attorny to help ;you. If ;you get this information from a government agency, take notes, take names and note the time of the converstation. I hve found too many times that the government agents don't know much more than I do, and will not accept liability for giving you the wrong info.

Douglas Hicks
General Fire Equipment Co of Eastern Oregon, inc
 
Ditto what Doug said on the attorney and accountant ideas, these are two must have's in any business. Develop a good relationship with your attorney and he won't ding you every time you call him with a question about something that may be a 30 second explanation from him. I brought my attorney a box of, um, well, let's just say I brought him a nice box of Canadian cigars back from a trip last year and he hasn't sent me a bill for anything but the big things we've done since then, best investment I've made in a while... :)

On the credit card question. One of the things we did which has worked out nice is get these business check cards linked to our business expense account. Basically I just keep a certain amount of funds in that expense account and because the check cards are visa cards linked to the account they can be used for supplies, tools, etc. We've got several business accounts, but the expense account has cards I've given other people in my company to use and I only fund it with a $1,000 at a time so I'm never worried one of my guys is going to go and buy a car with a credit card I've given him. Having one credit card for the business is good, you don't have any comingling of funds issues when it comes to dealing with taxes.

On the cash issue, don't worry if the IRS believes you or not, if you didn't do it then you've got nothing to be nervous about.

I can't answer the leasing of equipment questions for you, we do it because I own the equipment leasing corporation and I lease the equipment to my pressure washing company, my rehab construction company and another company. So I've got more reasons to do it. You need to meet with your accountant and your attorney and discuss the tax ramifications and legalities of your ideas with them.

On the leasing of employees, I've looked into it quite extensively over the past few weeks and I have three local companies working me up proposals for this Thurs/Fri for me to get together with them and go over their ideas. I'll report back and let you know whether or not it's an economical thing to do. I have an idea it's probably going to cost me a small fortune to do this like Doug mentioned. I might actually just look into hiring another office person to do this stuff. My accountant is telling me that these employee leasing companies can sometimes charge a 30% premium over your regular payroll to handle these things for you.

I'll let you know when I find out.
 
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