For Those Of You That Use Telemarketers...

[CHUMPS FROM OXFORD]

Do you withold and pay ss taxes? It suddenly occured to me that I don't.

Should I?

And finally...if you respond to this question tonight (this morning!)...why aren't you sleeping?

Thanks.

 

[J.R.]

Do you withold and pay ss taxes? It suddenly occured to me that I don't.

You are only required to submit a form if you pay a telemarketer $600+ and they are required to do their own taxes.

Should I?

I am not an accountant, but I spoke with an IRS rep and she told me that I do not have to worry about a 1099 employees doing their own taxes. I just have to report it to the IRS that's all. I imagine w-2's are different.

And finally...if you respond to this question tonight (this morning!)...why aren't you sleeping?

Because I couldn't sleep and thought it was a good idea to calculate my 1st self-employment estimated tax payment. Pain in the ass I tell you.

Anybody know where I can put costs down for advertising and all the money I spent starting up my agency???? I am using the turbo tax estimated taxes software. Thanks.

 

[somarco]

Do you provide a place for the telemarketers, such as in your office or do they work independently from home? If from your office, they are considered W2, not 1099.

 

[djs]

If your calling them a 1099 contractor to avoid payroll taxes, or if they want to be a 1099 contractor to prevent having taxes taken out, they are probably an employee and you need to pay the payroll taxes.

To me, the deciding factor is if they have their own business license. If they do, than this really helps in the argument that they are 1099, not W2. Now, a lot of people working from their house or out in rural areas, don't bother to go get a business license.... If you setup the deal, similar to how you would set it up with a business, such as they can hire someone to do it for them, as long as the job gets done, then they are still 1099.

As a 1099 contractor, you get to say what gets done, they get to say how it gets done, such as you hire them for 40 hours of telemarketing per week, under a 1099 arrangement, they would use their own phone lines, their own location, and their own employees (if they choose not to do it themselves), and they can be contracted to work for others at the sametime.

I recommend if you want to go the 1099 route, that you have a contract that states what they are to do, and that you have a start date and an end date for the contract, with rights to extend. Just be careful, because you can word the contract in such a way that the IRS will say it's an employment offer, but without the contract, it's hard to prove you have a contractual relationship, rather than an employee relationship, unless they run it as a full business for several other companies, in which case, you probably signed their contract.

Dan

 

[NHB_MMA]

John Petrowski mentioned in another thread about his friend that owns the Pepperidge Farm business, as a 1099 situation. Even though he's 1099, his friend has to be at XYZ Grocery at 10:00 or he's is trouble. So, there are times when they can have a great deal of control over you.

If you're concerned about requiring a minimum number of hours worked, instead require a minimum number of leads per week.

 

[Crabcake Johnny]

What does a McDonalds owner "own" or control? Nothing. Can they change the menu? Set their own prices? Implement a different system of making the food? Choose another distributor for their supplies? If they don't hit goals can they have the location yanked back from them? Yet they are not employees and are probably controlled more then any employee you've even met. My sister's 1st husband owned one. Never met anyone who had more rules and regulations to follow.

 

[arnguy]

As salpro22 indicated, if you pay an independent contractor ore i$600 or more in a tax year you must file a Form 1099 with the IRS and give the contractor a copy. The contractor is then responsible for filing their own income tax returns and, in additiob, may be required to file a Quarterly Estimated Income Tax Form. Even if they do not meet the criteria for filing a Form 1040, they will still be required to file a Form 1040 if they have a net income of $400 or more and pay the Self-Employment Tax (which consists of the entire FICA and Medicare taxes.

One can still exercise a certain degree of control over independent contractors such as the type of work, quality of the work, time for completion, etc.

If the telemarketer must report to your office at a specified time and stay until a specified time he/she definitely is an employee and you would be responsible for withholding the income tax and 1/2 of the contribution for FICA and Medicare. In addition, you must file Form 941 and pay the other half of the FICA and Medicare contributuion as well as submitting the total withheld from the employee for income taxes, FICA, and Medicare.

You also must file a Form 942 for FUTA (Federal Unemployment Tax). In other words, you as an employer have to be a bookkeeper for Uncle Sam.
If you do not set hours but provide the telemarketer with office space, telephone, etc., it looks like it may be a gray area. It is best to err on the side of caution and assume an employer-employee relationship unless you can provide strong evidence to the contrary.

The illustration John P. gave is different because a franchisor-franchisee relationship is goverend by a contract that explicitly states that it is not an employment contract despite certain contractual obligations. Agent/Broker contracts for independent agents also spell out that the agent/broker is an independent contractor.

 

[arnguy]

OOps....my bad! The FUTA form is Form 940 not Form 942. The Form 942 is for filing withheld taxes and employer contributuins for domestics, nannys, etc.

 

[arnguy]

P.S. There is a special circumstance involving the withholding for insurance agents, but it is time for me to put on the feedbag so I will discuss that tomorrow.

 

[CHUMPS FROM OXFORD]

Just got back from Pa, so I didn't get to respond.

Here's my situation:

The telemarketer works about 10 hours per week at $15 per hour. At least two leads per hour are guaranteed.

They are out-of-state so I never met them. I believe there are others on the Board that use this company.

Thanks.