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From: mcb@styx.UUCP (Michael C. Berch)
Newsgroups: misc.legal,comp.edu
Subject: Re: Sorry - Independent contractors and the law
Message-ID: <21143@styx.UUCP>
Date: Mon, 5-Jan-87 21:51:39 EST
Article-I.D.: styx.21143
Posted: Mon Jan  5 21:51:39 1987
Date-Received: Tue, 6-Jan-87 00:46:26 EST
References: <2352@mtuxo.UUCP> <488@unc.unc.UUCP> <795@maynard.BSW.COM> <492@unc.unc.UUCP> <1085@Shasta.STANFORD.EDU>
Reply-To: mcb@styx.UUCP (Michael C. Berch)
Organization: Lawrence Livermore Laboratory, Livermore CA
Lines: 33
Xref: mnetor misc.legal:526 comp.edu:32

In article <1085@Shasta.STANFORD.EDU> kaufman@Shasta.UUCP (Marc Kaufman) writes:
> 
> I don't think we can get a *DEFINITIVE* ruling on this until the IRS makes
> up its operating rules.  The purpose, evidently, is to get withholding tax
> from "consultants", many of whom are on very long term contracts via
> "body shops", who broker such workers.  I think it is sufficient, in the
> body shop case, that the worker be an Employee of the body shop, and that
> the body shop (which collects the consulting fee from the ultimate employer)
> deduct Federal Income Tax on the way to paying the "consultant".

It may be *sufficient*, Marc, but it is precisely what we are trying
to avoid! We do not *want* to be employees of the body shop, which
entails (in addition to withhholding tax) deductions for mandatory 
unemployment taxes, workers' compensation policies, local employee 
taxes, and makes it impossible to take the normal deductions for 
business expenses that other self-employed people enjoy.

> While many consultant brokerages tend to read the ruling as being very broad,
> perhaps that is mostly to try to sweep in true independents and increase
> the complaint base. If you organize your business so that you are an
> Employee of a consulting firm, AND if you pay withholding taxes (as opposed
> to quarterly estimates) the IRS gains nothing by trying to reclassify you,
> so (possibly) won't.

If you're an employee of the broker, and are paying withholding tax,
you've *already been* "reclassified", my friend. If you try to set up
your own corporation and become an employee of it, you have still not
avoided the effect of the enactment, according to the Senate Floor
and Committee Reports.

Michael C. Berch
ARPA: mcb@lll-tis-b.arpa
UUCP: ...!lll-lcc!styx!mcb   ...!lll-crg!styx!mcb  ...!ihnp4!styx!mcb