Mike DeTuri

[ 01-05-2002: Message edited by: Mike ]

2. TRAINING: An employee may be trained to perform services in a particular manner. ICs ordinarily use their own methods and receive no training from the purchasers of their services.

3. INTEGRATION: An employee's services are usually integrated into the business operations because the services are important to the success or continuation of the business. This shows that the employee is subject to direction and control.

4. SERVICES RENDERED PERSONALLY: An employee renders services personally. This shows that the employer is interested in the methods as well as the results.

5. HIRING ASSISTANTS: An employee works for an employer who hires, supervises, and pays workers. An IC can hire, supervise, and pay assistants under a contrat that requires him or her to provide materials and labor to be responsibel on for the result.

6. CONTINUING RELATIONSHIP: An employee has a continuing relationship with an employer. A continuing relationship may exist even if work is performed at recurring, although irregular, intervals.

7. SET HOURS OF WORK: An employee usually has set hours of work established by an employer. An IC generally can set his or her own work hours.

8. FULL-TIME REQUIRED: An employee may be required to work or be available full time. This indicates control by the employer. An IC generally can set his or her own work hours.

9. WORK DONE ON PREMISES: An employee usually works on the premises of an employer, or works on a route or at a location designated by an employer.

10. ORDER OR SEQUENCE SET: An employee may be required to perform services in the order or sequence set by an employer. This shows that the employee is subject to direction and control.

11. REPORTS: An employee may be required to submit reports to an employer. This shows that the employer maintains a degree of control.

12. PAYMENTS: An employee is paid by the hour, week, or month. An IC is usually paid by the job or n a straight commission.

13. EXPENSES: An employee's business and travel expenses are generally paid for by an employer. This shows that the employee is subject to regulation and control.

14. TOOLS AND MATERIALS: An employee is normally furnished significant tools, materials, and other equipment by an employer.

15. INVESTMENT: An IC has a significant investment in the facilities he or she uses in performing services for someone else.

16. PROFIT OR LOSS: An IC can make a aprofit or suffer a loss.

17. WORKS FOR MORE THAN ONE PERSON OR FIRM: An IC is generally free to provide his or her services to tow or more unrelated persons or firms at the same time.

18. OFFERS SERVICES TO THE GENERAL PUBLIC: An IC makes his or her services available to the general public.

19. RIGHT TO FIRE: An employee can be fired by an employer. An IC cannot be fired so long as he or she produces a result that meets the specifications of the contract.

20. RIGHT TO QUIT: An employee can quit hir or her job without, at any time, incurring liability. An IC usually agrees to complete a specific job and is responsible for its satisfactory completion, or is legally obligated to make good for failure to complete it.

According to A. R. Sumutka, CPA, the following is convincing evidence that a person has employee status. If the person doing the paying:

1) requires compliance with significant instructions

2) sets the hours of work

3) sets the order or sequence of services to be performed

4) can discharge the service provider

5) can hire, pay, and supervise assistants as the nature of the work requires

or if the service provider:

1) has no ability to realize a profit or loss

2) has no investment in significant tools, materials, and other equipment when such items are necessary to accomplish the task and are usually provided by the service provider

3) has no significant in facilities when they are necessary to accomplish the task, and they are customarily provided by the service provider.

Typed this quickly without spellchecking so if there are errors, I apologize.

#17 and #18 Are we required to work for more than one firm, and do we have to show proof that we have offered our services to the general public?

Would placing an add be offering services? What if I don't want to work for more than one firm? If that firm and I agree on enough lines to suit my needs then do I have to find additional work?

Thanks for the additional information. First year doing the taxes as an IC!

George

The only way you can be sure is to have more than one client, even if that second and third client don't give you work every day (or even every week).

Some of the precautions for MTs would be:

1) Have an office, business cards, stationery, billing forms, letterhead, all with your company name on them. (Everything I send out of my office has my company name.)

2) Make your services available to other companies by advertising (telephone directory, newspapers, and/or journals are suggested, but I only use direct mail and keep a log).

3) Taking on a partner and contracting as a single business eliminates the presumption that only one person will do the work. (My contracts are written so the client is hiring my company, not me personally, but I would never want a partner.)

4) Own and use the tools and euipment needed for the job. Do not borrow from the client nor allow the client to be the legal owner of tools and equipment that are being purchased.

5) Provide the materials for the job. Do not use materials provided by the client. Purchasing materials from the client is probably not sufficient to show independence. (However, I require the client to provide client-specific "specialty" items such as sticky paper, their letterhead or envelopes with their company name, etc. All other materials I provide.)

6) Make your services available to more than one person or company. A larger customer base frees you from provider dependence on business from one customer, and limits the control a single company can have over you.

7) File and pay quaraterly income and self-employment taxes on income earned.

8) Fill out a W-9 Form for each client.

It isn't what we want that counts, it is what the IRS has deemed they will allow. If an MT only wants to work for one company, he or she can do so, but shouldn't be surpised when the IRS comes after them. Since they can freeze my bank accounts, put a lien on my house, confiscate my automobiles, and close my business, I don't take any chances.

I conduct my business as a business and have since day one because, to paraphrase an old saying, "If the IRS ain't happy, ain't nobody happy."

Success involves following the rules and once those are mastered, you can spend your time focusing on making your business grow to whatever point you choose.

[ 01-07-2002: Message edited by: Phyllis Nilsson ]

Any state that collects employee payroll taxes may also want to give you the once-over. The State of California, in particular, is notorious for being far more aggressive in this area than the Internal Revenue Service.

George

Since the employer is liable for penalties, does he or she need to make sure that the person desiring to be paid as an independent contractor have more than one client, for example?

Advice appreciated, please...

Patty

The contract would include that the IC is responsible for all taxes and health insurace, setting hours and days of work, setting the contract price for services, invoicing on a weekly basis, providing their own office space, equipment, and training, and will only be doing transcription.

I would never assign work full time, and the contract would have to delineate under what conditions it could be terminated. I would never require a noncompete clause and would never give a bonus (those things smack too much of "employee").

I would exert control only over the accuracy and timely return of work, and the rest of it would be left to the IC. If they couldn't perform to my standards (not control), the contract would be terminated.

Here I have to humbly say that I wish the women in this industry would conduct business more as George does (although we charge differently). He doesn't let sentiment rule his business and he doesn't get "hurt" if he loses a client. He doesn't expect more and isn't disappointed if he doesn't get it. He is a businessman, runs his service accordingly, and most of us could take some real lessons from this man.

My other main concern, in terms of the list of 20, is that I had planed to provide both employees and ICs (if they are averaging more than 16 hours a week) with a computer with the software loaded onto it. We'll be using an ASP and my IS department does not want to be in the position of providing troubleshooting or technical support on a machine they are not familiar with. It also seems like a good idea from the standpoint of the future HIPAA security rules (which are not final yet) to have some security measures on the computers used to do our work and of course we have no control over that if people are using their own machines.

Speaking of HIPAA, it came up at one of the HIPAA conferences I've attended lately that if an IC has subcontractors, then that IC is responsible for privacy and security measures, etc. Discussed was putting language into the business associate contract limiting use of subcontractors in some way in order to protect the covered entity, either by mandating specific privacy practices or having the IC carry some sort of liability coverage. Some felt that it would be better just to eliminate subcontractors altogether. I guess from looking at the list of 20 rules, that this wouldn't fly.

They would be responsible for their own technical support. If you provide the equipment, you're in murky waters with the IRS and I wouldn't chance it. As ICs they shouldn't allow anyone to control their machines.

I wouldn't worry about trying to protect the covered entities, they are pretty good at coverning their own backs and that is their responsibility, not ours. We aren't covered entities, so our responsibilities are different than theirs, and don't extend beyond our contracts with them.

The problem could be solved I suppose if you have no ICs and have all employees. It might even make your bookkeeping easier.

You are right that the subcontract restriction would not fly. If I could train a monkey to do some of my work and it met your standards, you really wouldn't have anything to say about it.

You also may get into trouble by offering ICs the same line rate across the board. ICs have a right to negotiate their own line rate or anything else in the contract for that matter. Using a cookie cutter contract for everyone may be a red flag for the IRS.

From what you are describing, it sounds as if you would be better off having different levels of employee and pay a little bit more for those who don't require the benefits. You could also tie in the line rate to production levels paying a premium for those producing more than X number of lines in a pay period.

Patty

[ 01-07-2002: Message edited by: pattyB ]

Even if you are a covered entity, everything Phyllis, George, and I have mentioned still applies. You are, in essence, becoming a MTSO, albeit an in-house hospital department, but you have to follow all the rules regarding ICs if you use ICs. I think a lot of MTSOs think they can save some money (not having to pay their share of employment taxes) by calling their MTs ICs but then treat them like employees nonetheless. In your case, if you treat your MTs like TRUE ICs, you may lose much of the control you will need (especially regarding HIPAA compliance) to keep your department running smoothly and safely, and it may be more trouble than it is worth trying to go the IC route.

Patty

[ 01-07-2002: Message edited by: pattyB ]

I understand that I'll be functioning as an MTSO - that's why I came here for everyone's good advice! I'm looking at doing this well, with quality work produced and happy people doing it. I've been an MT and understand some of the frustrations.

I guess I need to rethink the idea of offering equipment to the ICs.

1. The issue of CONTROL is what makes or breaks an IC relationship. And the big mistake many MTSOs make is treating ICs as if they are employees and, when it is inconvenient for them to treat them as ICs, assuming that the IC should be willing to act like an employee. Don't go down that road or you will get burned.

2. With regard to equipment. If you furnish the equipment at no cost, then you are exerting excessive control over an IC and that can lead to an employer/employee relationship. If, however, you LEASE the equipment to them for a nominal fee (say $10 a month), that pretty much offers you a loophole.

3. Thanks for the compliments on how I run my company. It is a business -- not a boyfriend situation. Clients come and go. Transcriptionists come and go. The business must remain viable. I do think that, as gay men, Tom and I have a different perspective on some of this. I've noticed far too many women attacking other women as a result of internalized self-loathing.

George

"Statutory employee services rendered from 12/01/01 through 12/15/01 for **********, Soc. Sec. #**********.

I understand that I am to pay all Federal, State and Social Security taxes, etc. myself for monies paid to me by ************* and that I contract myself out to other services."

How does "statutory employee" fit into the above rules?

Nutter