Job status: Independent contractor vs. employee

All I want to say is thanks for this. I detest the whole accounting side, and its dependence it creates on high priced accountants. Plus the IRS.gov site isn't always a great source of enlightenment.

 

Sounds like they have a lazy (or stupid) accountant. Even a brief read of the IRS definitions of "employee" and "independent" contractor shows that you are NOT an employee, but a contractor. An important part of that is that you provide services to others as a contractor.

 

I believe there are criteria for what makes a part-time employee or a contractor is here:

http://www.irs.gov/Businesses/Small...ependent-Contractor-Self-Employed-or-Employee

It sounds like a judgmental call after considering a number of financial, behavioral and relationship/contractual types of issues. If you are not sure if you are a contractor, or employee, then there is a form you can fill out to have a determination made. Can take six months to get a determination. And my guess is that the answer is likely to be the one that generates the most return for the government.

[One of my accounting professors told me that one way he passed a tax law exam when he was unsure, was to create a hypothetical situation that highlighted all possible options, and then picked the answer most favorable to the government. Probably not fool proof, but it made sense.]


Form SS-8
If, after reviewing the three categories of evidence, it is still unclear whether a worker is an employee or an independent contractor, Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding (PDF) can be filed with the IRS. The form may be filed by either the business or the worker. The IRS will review the facts and circumstances and officially determine the worker’s status.

Be aware that it can take at least six months to get a determination, but a business that continually hires the same types of workers to perform particular services may want to consider filing the Form SS-8 (PDF).

 

If you have expenses that are not reimbursed but that you have to incur in order to stay employed, you still can deduct them. I'm officially a full time employee, but there are certain qualifications I have to maintain that I don't get reimbursed for. I always deduct those. Maybe I'll get audited, but I doubt I'll owe any additional tax because of it, since they are things I have to pay for to keep doing what I'm doing. You don't get paid for rehearsals, and you aren't commuting to the church gig, so I don't see why you wouldn't be able to keep deducting mileage and everything else you are spending to make a bit of money playing there.

I'm not trained as a tax guy. Heck, I don't even play one on TV, so take anything I say with that in mind.

 

Does the church pay their part of SS? and take the employee portion out of your check?

Does the church pay unemployment insurance on your behalf?

 

I don't know who is telling you this, but I don't believe it for a minute. I was a contractor with the IRS for 10 years and I can tell you that the vast majority of the time when people are whining about the IRS, they are leaving out a lot of self serving facts. I'm not saying they are perfect, but most of the time when people have troubles with the IRS, it's because they didn't obey the tax laws passed by Congress. The IRS only enforces the law, they don't make it.

 

You appear to be, in every meaningful way, an independent contractor. If it were me, I'd see about getting myself re-classified as a sub who...subs a LOT. You're going to get beaten to death on your deductions otherwise (as you've already deduced).

 

I IC or freelance. More freedom for me and my customers, negotiated one contract and getting them to pay up when they terminated was not pleasant

 

Are they withholding you taxes? I believe you will also pay LESS S.S. tax as an employee. Isn't Schedule C somewhere near 13-15% - about twice the employee rate.

Or quit.

 

I was a trustee at my church and the move to put independent contractors on the payroll was driven by our insurance company not the IRS. Either the IC had to maintain their own liability insurance (which can get extremely expensive) or go on the payroll as an employee to be covered under the church's policy.

 

Church has to make whatever decision is best for the church. So do you. May no longer be a good fit for you. Plenty of churches out. Find one that fits.

 

Why, of course not. It's the government. This place is goin' to hell in a hand basket.

 

Ask your musician friends who does their taxes. If you find a CPA who regularly handles freelancers contact them. They might work a deal with you in which they'll give you some advice about this in exchange for doing your tax returns when the time comes.

Even if they want you to set up an appointment and charge you for a plan of action, it may be well worth it.

 

you should have a business license and a Federal Tax ID. More than that, I would highly highly recommend you form an LLC. You can do that online in most states for the whopping sum of about 25 bucks. You can also easily get business general liability insurance for very cheap. Carrying you own GL is very wise and keeps you and your gear protected. That will clear up any question about your status with the church. An LLC is the best way to go, you get the tax benefits of both a corp and sole prob but without the liability and passthrough of a sole prop.

 

I'll play devil's advocate (with all due respect to the religiosity here). 1) The church (employer) has you on a set schedule; you perform your duties during a pre-determined, scheduled time. 2) You are performing your duties on your employer's premises. I am VERY familiar with the various criteria used to determine employee vs independent contractor here in my state. As frustrating as this is, if I were making the determination in your case (as you have described it), I would classify you as an employee of the business (church); however, I would also press your employer as to why you are not being paid for any rehearsals that are required of you.