Misc.jobs.contract: Welcome to misc.jobs.contract
Mark Linimon
Version: 1.08 (December 1993)
Last-Modified: Fri Dec 17 19:46:16 EST 1993
This periodic posting serves as an introduction to newsgroup misc.jobs.
contract for new readers. A companion posting, "Misc.jobs.contract:
Frequently Asked Questions" <contract_fa...@nominil.lonesome.com>,
summarizes some of the past discussion in the group.
Misc.jobs.contract is a Usenet newsgroup created to foster exchange of
information about employment on a contract basis, as opposed to employment
on a full-time basis. Postings of interest to full-time employees should
instead be directed to misc.jobs.misc.
Although the group is not _specifically_ dedicated to computer-related
contract work, most of the discussion in the group has related to it.
Postings of contracts WANTED, contracts OFFERED, and general discussion
are welcomed. To help readers distinguish between these, please consider
using descriptive Subject: lines (and other headers). For instance,
examine these examples:
Subject: OFFERED: X Windows contract @ Frobozz, CA, USA
Summary: 6 month contract offered
Subject: WANTED: contract involving Unix internals, device drivers, C++
Summary: CA or MA, USA, 4 months or up
Subject: What experiences have you had with Section 1706?
Past experience in misc.jobs.offered may be relevant to the OFFERED
postings. An excerpt of the periodic posting to misc.jobs.offered
follows:
Experience has shown that the following style of "Subject:" line
is found to be most useful to many potential readers:
Subject: Systems Administrator @ Someone's Computers Inc, CA, USA
The style shown above has a number of features. The first field gives
a 2 to 3 word job description: this summary phrase allows the readers
to skip the offer if there is an obvious talent/aspiration mis-match.
The second field announces the company name, which also gives the
potential reader some idea of the flavor of the contract. The third
and fourth fields give the approximate geographic location, and allow
the reader to skip those offers which have an obvious geographic
mismatch. The fields are separated by punctation characters ('@'
signs and commas) to help the reader to spot the four fields quickly
by eye.
Also please consider setting the Followup-To: line to another group
whenever conversation drifts away from contract work; and also consider
reading the periodic postings in news.announce.newusers before posting.
As a final note, frequent repostings of a single article (contracts wanted
or available) may be considered weak net.etiquette by some readers.
This posting, like much of Usenet, is maintained on a purely volunteer
basis. It is subject to comment and improvement by sending email to
lin...@nominil.lonesome.com.
--
Mark Linimon / Lonesome Dove Computing Services / Roanoke, Virginia
{chinacat,uunet}!nominil!linimon || lin...@nominil.lonesome.com
"It's a small town, son, may I ask what you're doing here?"
I am coming to believe that Netnews is the digital equivalent of junk food...
Mark Linimon
Version: 1.09 (December 1993)
Last-Modified: Fri Dec 17 19:46:16 EST 1993
This periodic posting summarizes some of the past discussion in
misc.jobs.contract. A companion posting, "Welcome to misc.jobs.contract"
<contract_welc...@nominil.lonesome.com>, serves as an introduction
to the group for new readers.
Misc.jobs.contract is a Usenet newsgroup created to foster exchange of
information about employment on a contract basis, as opposed to employment
on a full-time basis. Postings specifically addressing full-time employment
should instead be directed to misc.jobs.misc.
Although the group is not _specifically_ dedicated to computer-related
contract work, most of the discussion in the group has related to it.
Please see also the Frequently Asked Question (FAQ) periodic postings
in misc.jobs.misc, misc.jobs.offered, and misc.jobs.resumes, for further
information about the various misc.jobs groups.
------------------------------
Subject: Table of Contents
Subject: What's the charter of misc.jobs.contract?
Subject: Should I consider contract work?
Subject: Don't contract workers make a lot of money?
Subject: What is telecommuting?
Subject: What is a job shop?
Subject: What is Section 1706?
Subject: What are the tax implications of contract work?
Subject: Are there other guides for tax questions?
Subject: Should I incorporate?
Subject: How can I learn more about computer contract work?
Subject: What organizations deal with computer contract work?
Subject: What magazines deal with computer contract work?
Subject: What books deal with computer contract work?
Subject: Is there an archive site for misc.jobs.contract?
Subject: Where can I find the current version of these FAQs?
Subject: Contributions to this posting.
------------------------------
Subject: What's the charter of misc.jobs.contract?
When originally chartered, it was for postings of contract jobs available,
contract jobs offered, and discussion of contracting in all its forms.
At the time it was felt that one group would be sufficient, and if
traffic mandated, it could later be subdivided along the lines of
misc.jobs.contract.[offered,resumes,misc], to mirror the upper-level
groups. [This latter was never official, and from my own anecdotal
recollection -- mcl.] [Further note: as of 06/01/93, I had issued a
formal RFD (Request For Discussion) to ascertain interest in just
this split; I haven't done much to follow up on it, however -- mcl].
------------------------------
Subject: Should I consider contract work?
Contract work appeals to a certain type of individual. Although it's
somewhat risky to generalize, the most important traits would include:
being a self-motivated individual; willingness to trade personal security
for risk; dealing well with people; and technical ability. You may well
find that the first three issues are more important to success than the
latter.
You should seriously consider getting advice from a qualified CPA and a
qualified lawyer _before_ making the move. The issues involved are
complex, the risks significant, and advice you get on the net (while
some of it is excellent) should be taken with a grain of salt. This
explicitly includes this posting.
Akkana <akk...@netcom.com> adds:
One other item which many people overlook is that a contractor needs to
be someone who likes change and adapts quickly -- I've seen people try
contracting and fail miserably because their learning curves weren't
steep enough or they took too long to get settled in at a new company,
even though they may be technically very good once they get settled.
(Conversely, I've seen long-time contractors accept a permanent job and
get restless after six months and go back to contracting.) To me, this
is one of the biggest draws of contracting, but I'd hate to see someone
take the plunge and fail because they didn't think about the constant-
change aspect.
------------------------------
Subject: Don't contract workers make a lot of money?
Yes, but the expenses are much higher. An oft-quoted rule of thumb is
that one should make about 2x the amount one would expect as a full-time
employee, just to break even. Factors such as the self- employment tax,
paying for one's own medical expenses, equipment, sick time, vacations,
and time between jobs consume the difference.
You may encounter resentment from some full-time employees who under-
estimate the value of these things as well as other intangibles, such
as the (very real) risk of not being paid.
------------------------------
Subject: What is telecommuting?
This is an arrangment with a company where one maintains equipment at
one's own residence or office and works remotely, by modem. Tele-
commuting is not widespead as of yet but may be on the increase. Both
contract work and full-time work have been known to be done this way.
As above, intangibles such as one's personal relationship with the
company and communications skills with others take on a much more
important role than one might expect.
------------------------------
Subject: What is a job shop?
A job shop is a company that hires employees who are themselves on either
a contract basis or full-time basis, and contracts them out to other
companies. Some operate merely as referral services, who get a cut of
the employees' hourly rate; some have such amenities as sick time,
vacations, and 401k plans; most fall somewhere in between. Before you
go to work at a job shop as a contract employee (as compared to full-
time employee), be prepared to consult a CPA or attorney about the
implications of Section 1706.
------------------------------
Subject: What is Section 1706?
This is a section of the U.S. tax code that makes it difficult for anyone
receving employment through a job shop to be considered as a contract
worker. Instead it presumes that such individuals are full-time employees
unless a set of criteria are met. A companion posting to this one,
"Misc.jobs.contract: Text of IRS Section 1706; the Twenty Questions"
<contract_s17...@nominil.lonesome.com>, contains the entire text.
------------------------------
Subject: What are the tax implications of contract work?
Some brief guidelines for taxes in the United States are presented in
the following paragraphs. Again, it is mandatory that you get advice
from a qualified CPA or tax practitioner, of which your current humble
Poster is neither.
The general concepts of tax for small business are explained in Internal
Revenue Service Publication 334, "Tax Guide for Small Business".
As a self-employed person, you will need to file estimated taxes.
The concept of estimated tax is explained in IRS publication 505,
"Tax Withholding and Estimated Tax". You will need to file estimated
taxes on form 1040-ES every quarter to avoid incurring hefty penalties.
If you are self-employed, each client will send you a Form 1099 at the
end of the year, not a Form W-2.
If you are self-employed, you pay double FICA (Social Security) tax,
currently 15.3%. This is paid with your estimated taxes and on your
regular form 1040.
If you are self-employed, you will possibly also want an Employer ID
Number to give your clients, rather than your own Social Security Number;
the EIN is assigned by the IRS when you apply on form SS-4 (available
from the IRS, not the Social Security Administration). Using an EIN
rather than your SS is apparently only a _necessity_ in certain cases.
Arthur L. Rubin <art...@pnet01.cts.com> clarifies:
You only need an EIN (and state ID number) if you have employees,
have a "qualified retirement plan", or want to qualify for certain
other tax credits, which I would think most consultants wouldn't be
able to qualify for anyway.
If you incorporate or form a consulting partnership (I don't see any
advantage to a partnership, but it is legal), you need an EIN.
IRS forms and publications are available free by calling 1-800-TAX-FORM.
Service is normally pretty prompt: one to two weeks.
Also, check with the Secretary of State of your home state. You may
have to pay worker's compensation or unemployment taxes, and possibly
obtain other business licenses and permits.
------------------------------
Subject: Are there other guides for tax questions?
There is an annual tax guide for just about all engineering tax questions,
recommended by Pete Holzmann <pe...@Octopus.COM>. It is put out by
Academic Information Service, Engineeing Order Department, P.O. Box 400,
Greenbelt MD 20770 (+1-202-347-0079), and is called "Tax Guide for
Engineers". Here's a few key aspects:
If it doesn't save you at least $200 in taxes, you're welcome to
ask for your $$$ back ($32.80 list; minus $4 if a past customer).
It is specifically oriented towards technical professionals who
may or may not have a side business.
They actually research tax court cases to find out what the courts
think, rather than just what the IRS says.
They provide a really good framework for filling out taxes that
tends to minimize audits.
Also, if you've got the stomach for it, there are numerous publications
from the Internal Revenue Service that go into great detail. Depending
on where you are, you ask for them from the Western Area Distribution
Center (Racncho Cordova, CA 95743-0001), Central Area Distribution Center
Box 8903, Bloomington, IL 61702-8903), or Eastern Area Distribution Center
(Box 85074, Richmond, VA, 23261-5074). Of particular interest are
Publication 334 "Tax Guide For Small Business", Publication 505 "Tax
Withholding and Estimated Tax", Publication 533 "Self-Employment Tax",
and Publication 937, "Employment Taxes and Information Returns"
(including the section "Who Are Employees").
The ICCA [see below] publishes its "Tax and Business Handbook for
Consultants and Clients" by Jonathan Wallace for $27 for non-ICCA
members. Their address is ICCA, 933 Gardenview Office Parkway, St.
Louis, MO 63141.
------------------------------
Subject: Should I incorporate?
Again, as above, the best thing you can do is to get advice from a
qualified CPA and a qualified lawyer.
Opinions are divided on this issue: Some consultants believe incorporation
is a waste of time and money; others believe it is necessary. Opinions
also vary as to whether incorporation protects you from Section 1706
(see below).
------------------------------
Subject: How can I learn more about computer contract work?
This newsgroup is only one source of information. There is a moderated
SIG on Compuserve run by ICCA [see below]. There is also a CONSULT forum
on Fidonet [details please? -- mcl.] [There are bound to be other such
resources -- please email me -- mcl].
Other sources of information include organizations, magazines, and books.
------------------------------
Subject: What organizations deal with computer contract work?
There is a group that works specifically with this clientele, the
Independent Computer Consultants Organization, 1-800-GET-ICCA. In
addition to yearly meetings, they publish an informative newsletter.
Also, the IEEE Consultants' Networks are a "grass roots" effort of IEEE
consultants who organize to help each other to become better consultants
and to market their services.
As of November 1992, there were CNs established in Long Island (the
longest-established one), New York State, Boston, Connecticut, Washington
(D.C.), Philadelphia, New Jersey, Los Angeles, Florida, and San Diego.
Each CN has a referral service. In addition, calls requesting consulting
services are coming into the IEEE Washington office, and an interim
procedure has been set up to respond to them. A study is underway
to define a longer term solution for a national referral service.
The Washington office is making mailings to the CN's regarding tax
issues, particularly Section 1706 of the Tax Reform Act of 1986. The
PPTF (IEEE Private Practitioners Task Force) has formed a committee
aimed at the repeal of the law.
There is also a Coalition to Repeal Section 1706. They can be contacted
via snail-mail at 1250 Connecticut Avenue, N.W., Suite 700, Washington,
D.C. 20036.
An Anti-1706 mailserver, continaing many files, can be accessed by sending
a message containing only the body "get help" to mail-...@vacuum.cts.com.
It is maintained by Jay C. Bowden <j.bo...@ieee.org>, Co-Chairman of the
Alliance of IEEE Consultants' Networks (AICN) Committee to Repeal 1706.
Contact him for further information.
------------------------------
Subject: What magazines deal with computer contract work?
Three magazines that deal mainly (but not exclusively) with listings
of jobs available through job shops are:
CE [Contract Employment] Weekly
C.E. Publications Inc.
P.O. Box 97000
Kirkland, WA, USA 98083-9700
phone +1 206 823 2222
fax +1 206 821 0942
Technical Employment News (formerly PD News)
Publications & Communications, Inc.
P.O. Box 399
Cedar Park, TX, USA 78613
phone +1 800 678 9724 or +1 512 331 3918
fax +1 512 331 3900
NTES Hot Flash
published by National Technical Employment Services
P.O. Box 217
Scottsboro, Alabama, USA 35768
phone +1 205 259 1828
fax +1 205 574 2079
[There are bound to be others. As above, email me and I'll include them
in future editions of this message.]
------------------------------
Subject: What books deal with computer contract work?
Netters Dale Ollila <da...@SSD.intel.com> and Robert G. Renes have
written a book that is called "Independent Contracting -- A Primer",
which seems to be a good self-help book. Chapter titles are: Introduction;
Examine Your Situation; Preparation; Establishing Yourself as a Business;
Marketing Yourself and Your Services; Accounting Practices; If Things Go
Wrong; Tax Laws; Bibliography; Index. It goes into much more detail than
this FAQ can.
From their introductory material:
After the introductory material in the first chapter, Chapter 2 presents
a comprehensive examination designed to allow the reader to determine
his/her likelihood of success as an independent contractor. While no one
can guarantee that one person will be successful while another will fail,
the test and evaluation process in Chapter 2 gives an objective reader a
way of determining their own chances. As long-time contractors ourselves,
we feel it is very important that anyone thinking about this career know
and evaluate all factors that bear on this career field.
Contact Eagle Press at the following address:
Independent Contracting
c/o Eagle Press, Ltd.
P.O. Box 303
Noti, Oregon 97461
Chip Rosenthal ch...@chinacat.unicom.com contributes:
I found that |Consulting Handbook for the High-Tech Professional|, by
Stevn K. Shapiro published by Wordware Publishing, provided a reasonable
orientation when I was starting out.
The TOC is:
Introduction
Consulting - Who Can Do It, Who Needs It, and Why?
Beginning Your Practice
Using Professionals
Finding Clients and Obtaining Contracts
Fees and Fee Structures
Marketing and Promotion
Revenue: What To Charge For
Contracts
Performance
Software Development Methodologies
Proprietary Software Development
Using the Computer in Your Business
Your Future in the Industry
Additional Reading
I found its discussion of several of the mechanicals to be illuminating.
It includes a sample contract that I drew upon when developing my
contract. It directly addresses issues of interest to software
developers (copyright, licensing, etc.), albeit not in rigorous detail.
Discussion of business issues such as accounting and taxes is extremely
weak: essentially one paragraph that says `hire somebody to do it.' This
book is NOT for somebody who will NOT be marketing services directly to
an end client, e.g. a job-shop contractor.
I can recommend it as a first book for the aspiring _solo_practicioner_.
And it's cheap ($15.95). [Well, it _was_. I'm told it's now out of
print -- mcl.]
[Does anyone else have good recommendations for the bookshelf? -- mcl.]
------------------------------
Subject: Is there an archive site for misc.jobs.contract?
Not that I'm aware of.
------------------------------
Subject: Where can I find the current version of these FAQs?
They are posted to misc.jobs.contract, misc.answers, and news.answers every
4 weeks. They are also archived on rtfm.mit.edu for anonymous FTP under
pub/usenet/misc.jobs.contract/ as:
Misc.jobs.contract:_Welcome_to_misc.jobs.contract
Misc.jobs.contract:_Frequently_Asked_Questions_(FAQs)
Misc.jobs.contract:_Text_of_IRS_Section_1706;_the_Twenty_Questions
Additionally, for those without direct FTP access, they are available via
email from mail-...@rtfm.mit.edu. For instructions, send email with a
blank subject line, and use the following as the whole body of your message:
send help
------------------------------
Subject: Contributions to this posting.
I would like to thank the following people, who have contributed to, or
helped revise, this posting:
Akkana <akk...@netcom.com>
Robert Blythe <bly...@cactus.org>
Jay C. Bowden <j.bo...@ieee.org>
Stan Brown <abvax!iccgcc.DNET!bro...@uunet.uu.net>
George Hartzell <hart...@postgres.berkeley.edu>
Pete Holzmann <pe...@Octopus.com>
Dale Ollila <da...@SSD.intel.com>
Chip Rosenthal <ch...@chinacat.unicom.com>
Arthur Rubin <art...@pnet01.cts.com>
Mark Schoonover <scho...@manta.nosc.mil>
David B. Wollner <d...@network.ucsd.edu>
[Obligatory disclaimers: I have no connection, other than subscriptions,
with the above magazines; however, I am a former ICCA member. I've made
my best effort to ensure all information is correct, but errors have been
known to occur. I have received a review copy of the Renes and Ollila book.]
Mark Linimon
Version: 2.07 (December 1993)
Last-Modified: Fri Dec 17 19:46:15 EST 1993
This periodic posting contains information relevant to a recurring
topic in misc.jobs.contract, mainly of interest to readers in the USA.
Its two companion postings, "Welcome to misc.jobs.contract"
<contract_welc...@nominil.lonesome.com> and "Misc.jobs.contract:
Frequently Asked Questions (FAQs)" <contract_fa...@nominil.lonesome.com>
serve as an introduction to the group for new readers.
This posting includes the complete text of the USA Internal Revenue Service
Section 1706, defining the treatment of workers, such as contract engineers,
for tax purposes; a conference committee report regarding the intended
interpretation of Section 1706; the relevant sections of Section 530 of the
Revenue Act of 1978, as amended; and a listing of the "Twenty Questions"
used by the IRS to determine one's employment status.
------------------------------
Subject: table of contents.
Subject: Complete text of USA IRS Section 1706.
Subject: Notes accompanying USA IRS Section 1706.
Subject: Conferrees' report about the amendment.
Subject: The entire section 530 as referenced above.
Subject: Definition of a few terms in Section 530.
Subject: The Twenty Questions.
Subject: Contributions to this posting.
------------------------------
Subject: Complete text of USA IRS Section 1706.
SEC. 1706. TREATMENT OF CERTAIN TECHNICAL PERSONNEL.
(a) IN GENERAL - Section 530 of the Revenue Act of 1978 is
amended by adding at the end thereof the following new subsection:
"(d) EXCEPTION. - This section shall not apply in the case of an
individual who pursuant to an arrangement between the taxpayer
and another person, provides services for such other person as an en-
gineer, designer, drafter, computer programmer, systems analyst, or
other similarly skilled worker engaged in a similar line of work."
(b) EFFECTIVE DATE. - The amendment made by this section shall
apply to remuneration paid and services rendered after December
31, 1986.
------------------------------
Subject: Notes accompanying USA IRS Section 1706.
Note: "another person" is the client in the traditional shop relationship.
"taxpayer" is the shop.
"individual","employee", or "worker" is you.
------------------------------
Subject: Conferrees' report about the amendment.
Conference Report Language
on Section 1706
5. Treatment of certain technical personnel
Present Law
Section 530 of the Revenue Act of 1978, as amended, provides
generally that taxpayers who in the past had a resonable basis
(such as past industry practice) for not treating workers as employ-
ees may continue such treatment under certain circumstances,
without incurring employment tax liabilities.
House Bill
No provision.
Senate Amendment
The Senate amendment provides that section 530 of the Revenue
Act of 1978 does not apply in the case of an individual who, pursu-
ant to an arrangement between the taxpayer and another person,
provides services for such other person as an engineer, designer,
drafter, computer programmer, systems analyst, or other similarly
skilled worker engaged in a similar line of work. This provision is
effective for services performed after the date of enactment. By
virtue of the exception to section 530 of the 1978 Act provided
under the Senate amendment, the prohibition against issuance of
regulations or rulings concerning employment tax status in section
530 of the 1978 Act does not prohibit issuance of regulations or rul-
ings with respect to the employment tax status of individuals with
respect to whom the Senate amendment applies.
Under the Senate amendment, it is intended that certain individ-
uals retained by firms providing technical services are classified,
for income and employment tax purposes, as employees or as inde-
pendent contractors under the generally applicable common law
(nonstatutory) standards without regard to section 530 of the Reve-
nue Act of 1978. Technical services firms have retained engineers,
designers, drafters, computer programmers, systems analysts, and
other similarly skilled personnel who are engaged in lines of work
similar to those listed for assignments for clients of the technical
services firms. Some of these individuals have taken the position
that they should be treated as independent contractors, which
would relieve the technical services firms of the obligation to with-
hold income and employment taxes from their earnings.
The Senate amendment applies whether the services of such in-
dividuals are provided by the firm to only one client during the
year or to more than one client, and whether or not such individ-
uals have been designated or treated by the technical services firm
as independent contractors, sole proprietors, partners, or employees
of a personal service corporation controlled by such individual. The
effect of the provision cannot be avoided by claims that such tech-
nical service personnel are employees of personal service corpora-
tions controlled by such personnel. For example, an engineer re-
tained by a technical services firm to provide services to a manu-
facturer cannot avoid the effect of this provision by organizing a
corporation that he or she controls and then claiming to provide
services as an employee of that corporation.
This provision does not affect the application of Code section
414(n), relating to employee leasing, to technical services personnel
in circumstances where that provision applies under present law.
Also the provision does not apply with respect to individuals who
are classified, under the generally applicable common law stand-
ards, as employees of a business that is a client of the technical
services firm.
Conference Agreement
The conference agreement follows the Senate amendment with a
technical modification clarifying the language of the Senate
amendment to comform to the language of section 530 of the Reve-
nue Act of 1978 and with an amendment to the effective date. The
conferees further clarify that the provision does not affect the ap-
plication of the Treasury's authority under Code section 414(o) to
prevent avoidance of certain employee benefit requirements. The
conferees believe that the provision will provide more consistent
tax treatment of individuals performing services in the technical
service industry.
The conference agreement is effective for remuneration paid and
services performed after December 31, 1986.
------------------------------
Subject: The entire section 530 as referenced above.
[Sorry about the lines that are a little long, I didn't want to reformat
the "ACT" in case its format influences its meaning :-) -- ch...@eng.umd.edu
(Chuck Harris) ]
ACT SEC. 530. [Revenue Act of 1978 (P. L. 95-600) as amended by P. L.
96-167, P. L. 96-541 and P. L. 97-248] CONTROVERSIES
INVOLVING WHETHER INDIVIDUALS ARE EM-
PLOYEES FOR PURPOSES OF THE EMPLOYMENT
TAXES.
Act Sec. 530 (a) TERMINATION OF CERTAIN EMPLOYMENT TAX LIABILITY.-
(1) IN GENERAL. -If-
(A) for purposes of employment taxes, the taxpayer did not treat an indi-
vidual as an employee for any period, and
(B) in the case of periods after December 31, 1978, all Federal tax returns
(including information returns) required to be filed by the taxpayer with respect
to such individual for such period are filed on a basis consistent with the tax-
payer's treatment of such individual as not being an employee,
then, for purposes of applying such taxes for such period with respect to the
taxpayer, the individual shall be deemed not to be an employee unless the tax-
payer had no reasonable basis for not treating such individual as an employee.
(2) STATUTORY STANDARDS PROVIDING ONE METHOD OF SATISFYING THE REQUIRE-
MENTS OF PARAGRAPH (1).-FOR PURPOSES OF PARAGRAPH (1), A TAXPAYER SHALL IN
ANY CASE BE TREATED AS HAVING A REASONABLE BASIS FOR NOT TREATING AN INDIVIDUAL AS
AN EMPLOYEE FOR A PERIOD IF THE TAXPAYER'S TREATMENT OF SUCH INDIVIDUAL FOR SUCH
PERIOD WAS IN REASONABLE RELIANCE ON ANY OF THE FOLLOWING:
(A) JUDICIAL PRECEDENT, PUBLISHED RULINGS, TECHNICAL ADVICE WITH RESPECT TO
THE TAXPAYER, OR A LETTER RULING TO THE TAXPAYER;
(B) A PAST INTERNAL REVENUE SERVICE AUDIT OF THE TAXPAYER IN WHICH THERE
WAS NO ASSESSMENT ATTRIBUTABLE TO THE TREATMENT (FOR EMPLOYMENT TAX PURPOSES)
OF THE INDIVIDUALS HOLDING POSITIONS SUBSTANTIALLY SIMILAR TO THE POSITION HELD BY
THIS INDIVIDUAL; OR
(C) LONG-STANDING RECOGNIZED PRACTICE OF A SIGNIFICANT SEGMENT OF THE IN-
DUSTRY IN WHICH SUCH INDIVIDUAL WAS ENGAGED.
(3) CONSISTENCY REQUIRED IN THE CASE OF PRIOR TAX TREATMENT.-Paragraph
(1) shall not apply with respect to the treatment of any individual for employ-
ment tax purposes for any period ending after December 31, 1978, if the
taxpayer (or a predecessor) has treated any individual holding a substantially
similar position as an employee for purposes of the employment taxes for any
period beginning after December 31, 1977.
(4) REFUND OR CREDIT OF OVERPAYMENT.-If refund or credit of any overpay-
ment of an employment tax resulting from the application of paragraph (1) is
not barred on the date of the enactment of this Act by any law or rule of law,
the period for filing a claim for refund or credit of such overpayment (to the
extent attributable to the application of paragraph (1)) shall not expire before
the date 1 year after the date of the enactment of this Act.
Act Sec. 530 (b) PROHIBITION AGAINST REGULATIONS AND RULINGS ON EM-
PLOYMENT STATUS.-No regulation or Revenue Ruling shall be published on or
after the date of the enactment of this Act and before the effective date of any
law hereafter enacted clarifying the employment status of individuals for pur-
poses of the employment taxes by the Department of the Treasury (including
the Internal Revenue Service) with respect to the employment status of any
individual for purposes of the employment taxes.
Act Sec 530 (c) DEFINITIONS.-For purposes of this section-
(1) EMPLOYMENT TAX.-The term "employment tax" means any tax imposed
by subtitle C of the Internal Revenue Code of 1954.
(2) EMPLOYMENT STATUS.-The term "employment status" means the status
of an individual, under the usual common law rules applicable in determining
the employer-employee relationship, as an employee or as an independent con-
tractor (or other individual who is not an employee).
------------------------------
Subject: Definition of a few terms in Section 530.
1) The "taxpayer" is your client, or the company you work for.
2) The "individual" or "worker" is you.
3) Any reference to "employee" is you after you fail the tests!
------------------------------
Subject: The Twenty Questions.
[These rules were presented before the Committee on Ways and Means,
Independant Contractors, June 20, July 16 and 17, 1979, Serial 96-32.
I've left out the explanatory paragraphs that follow each of these rules.
The document I have runs about 5 pages ... There's no information about
how they score this during an audit.]
Under the common law, a worker is an employee if the person for whom he works
has the right to direct and control the way he works, both as to the final
result and as to the details of when, where, and how the work is to be done.
It is the IRS view that the employer need not actually exercise control. It
is sufficient that he has the right to do so. IRS has adopted 20 rules to
determine whether workers are employees. In brief, these rules are directed
at the following questions:
1. Is the person providing services required to comply with instructions
about when, where, and how the work is to be done?
2. Is the person provided training to enable him to perform a job in a
particular method or manner?
3. Are the services provided integrated into the business' operation?
4. Must the services be rendered personally?
5. Does the business hire, supervise or pay assistants to help the person
performing the services under contract?
6. Is the relationship between the individual and the person he performs
services for a continuing relationship?
7. Who sets the hours of work?
8. Is the worker required to devote his full time to the person he performs
services for?
9. Is the work performed at the place of the business of the potential
employer?
10. Who directs the order or sequence in which the work must be done?
11. Are regular written or oral reports required?
12. What is the method of payment - hourly, commission or by the job?
13. Are business and/or traveling expenses reimbursed?
14. Who furnishes tools and materials used in providing services?
15. Does the person providing services have a significant investment
in facilities used to perform services?
16. Can the person performing the services realize both a profit or a loss?
17. Can the person providing services work for a number of firms at the
same time?
18. Does the person make his services available to the general public?
19. Is the person providing services subject to dismissal for reasons other
than nonperformance of contract specifications?
20. Can the person providing services terminate his relationship without
incurring a liability for failure to complete a job?
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Subject: Contributions to this posting.
Thanks to Chuck Harris <ch...@eng.umd.edu> for the initial transcription of
section 1706 and section 530. Thanks to Stuart Kreitman <s...@gsg.pa.dec.com>,
<jba...@btr.btr.com>, and/or Edward Reid <e...@titipu.meta.com> for the
Twenty Questions list. Disclaimers: errors in editing are, however, my
own. Be sure to consult either a lawyer and/or qualified CPA before
making your own decisions.