Passing on the burden

[ILLMAS]

A potential new client came to see about having an employee for a maintenance contract he signed with an individual that owns 70+ units. It seems the owner of the units got hit for treating it's employees as subcontractors and got into a mess with the IRS. The owner wanted to keep just one employee that was trustworthy, and somehow made an agreement with this potential new client of mine for him to get a contractor license and the trustworthy employee to become his employee and handle all the building maintenance. This is client already had the agreement and came to me for payroll services, once I started telling him how payroll taxes work and payment process works, he was pretty much okay until I told him, have you looked into how much is it going to cost you to have workmen's comp, he said no, I didn't know I need it, I told him yes in the state of IL, it's mandatory. A week later he came back after calling his insurance agent was not to happy with the quote, so he decided now to have the employee as a subcontractor and also for him to get any necessary licenses. I don't want to spend too much time researching if he should be treated as an employee or not because, it seems the client obviously doesn't want him as an employee (+ plus he might not come back) because of the cost of having an employee, your thoughts employee or okay to treat as subcontractor. The owner of the units will be communicating directly the trustworthy guy.

Thanks

[Pacun]

If I understand correctly, the manager of a building contracted your client to clean the building. Your client will hire an employee to do the actual work.

[ILLMAS]

If I understand correctly, the manager of a building contracted your client to clean the building. Your client will hire an employee to do the actual work.

Yes, but on the condition that the actual work be done by the trustworthy employee and not my client, my client will be doing other construction work now that he has a contractor license.

[Pacun]

I don't see any problem with that arraigment. Most companies contract with a cleaning company and ask the company to send trusted employees to clean. All buildings do that. The cleaning company hire the people and they ARE employees to the cleaning company and the cleaning crew are at the disposition of the building manager, even though they have cleaning routine.

[jainen]

>>the cost of having an employee<<

Did I miss something? Hasn't the building owner ALREADY been hit for misclassifying an employee? Does he think he'll get away with repeated warnings for repeated offenses? And that was just the IRS--they haven't called in the state agencies yet.

Well, he's not the client. Your client is fine. As a contractor, he can put someone else on the job. But of course HE has to pay Worker's Comp and other payroll taxes, which will presumably be passed on to the building owner anyway.

Yeah, I must be missing something.