Job status: Independent contractor vs. employee

Discussion in 'Band Management [BG]' started by Brad Johnson, Dec 26, 2014.

  1. Brad Johnson

    Brad Johnson Inactive

    Mar 8, 2000
    Gaithersburg, Md
    DR Strings
    I'm a full time musician. All of my work is reported through 1099. I get several for the various work I do. Here's my new dilemma...

    A church I work with that originally hired me as an IC decided on Jan 1, 2014 to change musicians' status to part time employees. No new contract, no pay rate, no actual change to what I do other than screwing up my expense situation, which is sizable and figured heavily into my decision to work with them. For example I wrote off thousands of miles in business travel driving to and from the church which is on the opposite end of the metro area. This change was brought on by an IRS amnesty program dealing with "misclassifications".

    As it is I am paid for each time I play. No other time is accounted for, including rehearsals and time spend learning music. I provide my own gear, pay for all associated expenses out of pocket. The only compensation I get on this gig is the exact same as when I was classified as an IC.

    I play with several groups, this situation is the only one where someone's pretending I'm an employee to cover their butt. Again, I get $xxx per service or function, don't have any time related pay, they're not tracking any employee time and I pay for all of my tools. What they did amounts to a major pay cut and the kicker is that if they hire subs they're paid as ICs. So they clearly can work with ICs, they decided to paint the regulars with a wide brush. Anyone else dealing with a situation like this?

    This amnesty program appears to be a blatantly heavy handed tactic to make churches force people they work with to pay more taxes vs. deduct legitimate business expenses.
    Last edited: Dec 26, 2014
  2. PauFerro


    Jun 8, 2008
    United States
    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 site isn't always a great source of enlightenment.
  3. Brad Johnson

    Brad Johnson Inactive

    Mar 8, 2000
    Gaithersburg, Md
    DR Strings
    While the IRS site explains how to force this situation on vendors, I've found no information on what to do if you're being wrongly reclassified.
  4. RustyAxe


    Jul 8, 2008
    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.
  5. Brad Johnson

    Brad Johnson Inactive

    Mar 8, 2000
    Gaithersburg, Md
    DR Strings
    Agreed. They have a person in place who is willing to roll over on command. Early on that same person tried to pay a sub as employees and had to pay them as an independent contractor instead when the same things I pointed out to them about me were presented by the sub.

    I asked them how they answered the IRS questionnaire and as I suspected they answered that I don't offer my services to the general public and they even answered that I don't use my own equipment. Both undeniably not true.

    The last thing I want to do is draw attention to myself or this church with the IRS but I can't afford to take this big of a hit because the IRS wants to force weak willed organizations to do this sort of nonsense and screw legitimate small businesses in the process.
  6. PauFerro


    Jun 8, 2008
    United States
    I believe there are criteria for what makes a part-time employee or a contractor is here:

    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).
  7. Brad Johnson

    Brad Johnson Inactive

    Mar 8, 2000
    Gaithersburg, Md
    DR Strings
    I am sure that I'm an independent contractor. It's what I've done for a living since 2008. The IRS is holding the threat of prosecution for misclassification over church's heads to coerce them into actually misclassifying relationships in order to drive tax revenue. And because it's the easy way out for the church, the collateral damage apparently isn't causing anyone on their side to lose any sleep.

    I file correctly, deduct legitimate business expenses and pay the taxes I should pay as a self-employed individual. It would be nice if the IRS could just be happy with that.
  8. Gaolee

    Gaolee Official leathers tester and crash dummy

    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.
  9. Brad Johnson

    Brad Johnson Inactive

    Mar 8, 2000
    Gaithersburg, Md
    DR Strings
    My understanding is that an employee can't deduct mileage to and from work, that's commuting. I average well over 10,000 miles in mileage to and from this job. Normally I would deduct all business related mileage.

    The agreed upon pay is $250 per service, two services each Sunday plus whatever functions I'm available for. So this is over $25k/year.
  10. john m

    john m Supporting Member

    Jan 15, 2006
    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?
  11. lfmn16

    lfmn16 Inactive

    Sep 21, 2011
    charles town, wv
    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.
    Last edited: Dec 26, 2014
    marmadaddy and ZorgRift like this.
  12. Tom-Phil


    Nov 29, 2010
    Hamilton OH
    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).
  13. friendlybass


    Jul 19, 2012
    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
  14. Stick_Player

    Stick_Player Inactive

    Nov 13, 2009
    Somewhere on the Alaska Panhandle (Juneau)
    Endorser: Plants vs. Zombies Pea Shooters
    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.
  15. Kingratt


    Dec 26, 2014
    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.
    marmadaddy likes this.
  16. allenhumble

    allenhumble Supporting Member

    Oct 22, 2004
    Acworth GA.
    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.

  17. Why, of course not. It's the government. This place is goin' to hell in a hand basket.
    TheBear likes this.
  18. Carl Hillman

    Carl Hillman

    Jan 1, 2010
    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.
  19. davy4575


    Nov 4, 2009
    Denver, CO
    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.
  20. 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.