I would not work for a company that was so stupid they didn't know the rules, or so dishonest that they know them and disobey them. The IRS is not to be trifled with. I'd find another job immediately and ask the IRS for a clarification of status.

djh1: Beware of hiring untrained personnel as ICs. According to the IRS, ICs are already trained and cannot be trained by the buyer of their services. Since they are also supposed to have legal ownership of their equipment, renting may not hold up under close scrutiny either.

Since there are different rules for employees and ICs, I can see how hiring both would double the complexity of running this department. Of course, any employees would have to be given the same benefits (not just tax withholding) as other employees, so maybe it would be less expensive to hire ICs.

Seems like a lot of work ahead of you, just in information gathering alone.

I have my hot dogs ready for the flames to follow.

Mary

Also, Patty made a good point. I am new to this profession and to the IC status. Yes, it was my responsibility to educate myself, but quite frankly, thought I had. I look at this IC thing, and I feel totally overwhelmed! I had wished the company I was working for now had maybe given me a heads up, especially knowing I was new to the business.

Originally, I was looking at being an IC as when I ran my own daycare business. I needed a license, I had my business set up with contracts, I filed taxes, I sent out notices to each client on what I was claiming for the year, but whether I watched 1 child or 10 children was entirely up to me. When I set up the preschool, I purchased my own equipment, and I had the state laws to follow, but no one told me how to operate, when to operate, and what to do with the children. I looked at going into this working relationship with this company the same way.

Also, I noticed in a previous post above there was made mention of subcontracting. What distinguishes an IC from a subcontractor? Or am I just reading that post incorrectly?

I appreciate all of the information on this board. Thanks to all of you willing to so freely share it!

Oh, and I did see an accountant prior to the end of this year. When giving her my information, she did not tell me there could be IRS red flags, and she knew I only had one client. Is this a red flag for me to get another accountant?

An easy way to do this is to build a simple web page with an email link so that potential clients can contact you. You should also have a listing in the Yellow Pages under "Transcription Services" or "Secretarial Services."

However, you do not have to have two major accounts that keep you busy all year long. You can have a couple of pick-up jobs here and there that show that other people have used your services. Even if your income is totally from transcribing, at least there is some diversification in the income sources. Not all clients offer the same volume of work. So even if you type an occasional term paper for someone and they pay you $50 for your work, go ahead and record that as income and include it in your taxes.

The idea is to build a paper trail that shows an auditor that from January to December you were open and receptive to business offers. There could be all kinds of reasons why you could not accept certain contracts (you were going on vacation, you had the flu, you were overwhelmed with work from another client, etc.) but at least your business was open and running. That also makes it easier to justify expenses such as new equipment (computer, scanner, etc.,) that were purchased at different times of the year.

It's very much like cruising for sex. You can flirt and wink and have a cup of coffee with anyone. While that doesn't necessarily mean you're going to spend the night with the person, it doesn't mean that you're completely unavailable, either.

George

Look at it this way. If you are an employee and you quit work, you are obviously not going to depend on your previous employer to keep paying you a salary if you're no longer working there.

If, however, you are an independent contractor and you lose a major client, that means you have to expend time, money and energy to replace that client with new ones.

That's part of the risk you take of being in business. There are no guarantees.

George

I have to tell you how much I enjoy your posts! You are too funny.

Additionally, you give very sound advice. Thank you.

JK

The usual dr office scenario is that the MT is not in the office, has her/his own equipment/software, has business expenses such as courier services and office supplies, has no benefits, has no guarantees of work, provides an invoice from which the dr pays.

That MT should have a business license and all the other items mentioned before that make a business legitimate. However, even without a license,etc., the dr office is relatively safe giving the MT a 1099, even if the MT is only transcribing for that one office.

It is completely different looking at the relationship between an MTSO and an MT performing transcription duties. The risks for getting caught misclassifying become greater when going from employee, to statutory to IC.

Definitely, any training involved makes an IC an employee immediately. An IC is a business owner, already qualified to perform a professional job.

As far as equipment, my understanding is an IC comes already "equipped" to do the contracted job. George is right, the MTSO can "lease" equipment to an IC and have a lesser degree of risk.

Our criteria for being classified as an IC:
1. Business license 2. Own equipment/ software. 3. Actively soliciting new business, meaning business cards, listing in yellow pages, etc. 4. I do prefer that less than 30% of income comes from us, but I am flexible on that. 95% of the time we have no ICs on staff; but we have part-time employes who may also have their own accounts. There is an understanding that our work deadlines come first as the employer.

DJH1, if the goal is "insourcing", having scheduled coverage with ICs who are not employees, have you looked into developing a "leasing" relationship with those ICs? I believe you then become a manager of the leased ICs, but you are not the MTSO. Or, you become the MTSO, but "lease" the ICs from another company. I do not know if this would be feasible in your situation; I have never done this with MTs, only with clerical positions.

I am very glad this is being discussed; it is about time. In previous posts I have said that misclassifying MTs is one of the elements making a drastically uneven playing field between competitors. An illegally run business can always undercut line rates, because their expenses are lower without employer costs.

Then, of course, there is the HIPAA BACs (bus. assoc. contracts)..that's another story
Carole/gmts

[ 01-09-2002: Message edited by: Carole Gilbert ]

Let's say you have a situation where, following an audit, an independent contractor gets reclassified as an employer/employee relationship. If this involves a sole contractor working offsite for a doctor's group, essentially the doctor's group would only be suspect for that one person's business relationship.

HOWEVER -- if this happened with an MTSO, you can be sure that the IRS or state labor department -- which felt it was being cheated out of tax revenues -- would seek to investigate each and every MT working for that MTSO to see whether or not there was an employer/employee relationship. The penalties attached to such discoveries could put a small MTSO out of business.

That's another reason why an MTSO has to be very careful not to treat an IC like an employee. You're sitting on a time bomb if you do.

George

If I was dealing directly with an individual who wanted to work for me, who would I be leasing her services from? Would I have to find a local MTSO and lease the employees they already have working for them? If I was paying the MTSO, how would this be any better than just using a service directly? If I paid the IC, what would be in it for the MTSO? I'm guessing I don't understand what you're suggesting.

After all this I am rethinking my decision to have both employees and ICs. The trouble is, I have had the experience of trying to hire employees for production work and have had many experienced MTs tell me that because they get healthcare through their husbands or from another source, they aren't interested in benefits and would like a higher line rate instead.

I'm afraid that if I pay an experienced MT what I think he/she is worth and also pay the taxes, I won't be able to compete (on a cost basis) with the national services, and the bean counters at the company I work for will decide that getting the quality they want is just not affordable.

I'd like to discuss the rates I was planning to offer to both employees and ICs, but maybe it would be more appropriate to take that discussion to e-mail. Carole and George, would you be willing to look at my rates and tell me if I am in the ballpark? Pretty please? I would appreciate your advice.

I know there are companies who go through leasing companies for workers, rather than have a staff of their own. I don't know if it would work with MTs. I was trying to think of a solution around the issue of employees versus ICs.

As far as the issue of pay for ICs, pay for employees with benefits and employees without benefits, here are my thoughts. An IC should know what they need to make to cover expenses and make a profit. You have to know the same thing. If you both can negotiate a price that benefits you both AND you have to do NOTHING but send the work to the client, it's a good deal.

However, if you have to proof, reformat, etc then your profit is being eaten into, and you have to negotiate a lower price or let the IC go.

For us, I make no distinction in line rate between employees with or without benefits. Any opportunity is presented equally to all to take or not to take. Differences in line rate is determined by experience, differences in category of work (we have 2 categories) and amount of QA needed before the work is client ready.

Of course you can contact me; but there are vast differences in the way of counting lines, and acceptable line rates vary from region to region, for both MT and client. On our web site we have some compensation information regarding MTs and it does make reference to the Hay study of AAMT and their findings relative to our industry. Not everyone agrees with the findings, not surprisingly.

It will come as no surprise either that quality does not come cheap, so I hope your dictators are not expecting cheap, fast and perfect.

A lot depends on the dictators also and how far they are willing to become team players in order to cut costs. If they dictate well so that a qualified MT can be productive and accurate the first time around, then your QA staff can do a quick once over and be move on. But if your dictators are sloppy and careless, and if the dictation environment is full of background noise or poor phone equipment, your MTs AND QA dept will be struggling and costs will rise. I believe costs could go down 1/3 if dictators would do their part. If not costs, then at least productivity would rise 1/3.

Carole/gmts

Carole/gmts

[ 01-09-2002: Message edited by: Dither ]

If, as an MTSO, I decide not to renew a subcontractor or IC's contract then -- per your request for small words -- tough titty.

If an employee quits a salaried position, then in most states, the employer must pay the remainder of any salary due either on the day of departure or within something like two weeks.

If an IC or subcontractor QUITS, then an MTSO has every right to wait until s/he receives an invoice from the IC or subcontractor and take as long as they want to pay it.

If an employee QUITS after his company has been acquired by a larger competitor, there may be a noncompete clause in his/her contract which prohibits the person from going to work for a competitor (think trade secrets, etc.). Medquist's attorneys are notorious for enforcing such contract provisions.

If, however, a contractor QUITS after an MTSO has been acquired by another company, it's quite probable s/he won't be hired by the new company.

It may sound like I'm splitting hairs, but you need to look at these situations through the lens of "who has control." Once you take that approach, it tends to clarify things significantly.

George