I think I FINALLY know the difference!

[Jenna]

I've never had too much of a problem differentiating between ICs and employees, but after going through quite a few threads and some online articles, I started to see the term "booth renter" come up as well. This has been confusing the crap out of me (especially amidst negotiating an agreement with an upcoming massage clinic meaning to bring people on as ICs) so after hours of Google searches, I finally found a really great article that really gets to the nitty-gritty of making the separation. Yes, it's from a nail tech magazine, but I think it still relates very well to the whole spa-type industry.

http://www.nailsmag.com/feature.aspx?fid=14&ft=1

After reading this through, I'm glad I haven't signed this contract yet because there was already a question of blurring the lines between IC and employee, but now there's a bit of booth renter in there now. Yikes!

 

[Colette~]

I think I FINALLY know the difference!

Thanks for posting this. I wonder if the definitions vary by state?

 

[xcake_eater123]

I think I FINALLY know the difference!

What a great read !!! Lots of places have Mt's as IC and that always annoyed me :irked: I have always thought if an MT is working at you business all the time they need to either be a renter or employee. Like the article said the goverment is very short on cash and it won't be long before they start looking deeper into the massage world

 

[PeaceLoveHope <3]

I think I FINALLY know the difference!

Like the article said the goverment is very short on cash and it won't be long before they start looking deeper into the massage world

CA did this starting 2 years ago and bankrupt several hair salons and spas with the back taxes and fines.

If businesses fully complied with the law, it would not necessarily be welcomed by the ICs. If you are treated like an employee, then you get paid like an employee, which means a lower amount per service/hour and taxes taken out, which means less take=home pay, though not necessarily less income. Many people we work with want to be an IC so they get their gross pay, at a higher rate, and many don't file the required quarterly SE taxes and reporting.

We structure our IC pay to be 10% higher than our employee pay, so if the person complied with the law -- as we are required to do -- their net pay at the end of the quarter is almost the same as being an IC. True, employees have benefits and protections that cost businesses money, but in exchange for that the employer has control over the employees time/schedule and actions.

 

[tatooedpriestess]

I think I FINALLY know the difference!

Thanks for posting this. I wonder if the definitions vary by state?

The definitions don't vary by state. That's decided by the IRS (federal government). What type of business license you get and how you file your state taxes might though.

 

[Baby #2 Coming!!!]

I think I FINALLY know the difference!

This is one of the reasons I am so glad MA requires compliance plans for establishments each year. I just make 2 copies for each IC, send one to state and keep one on file. Start date is date signed, end date is one year. All other things such as commission, tax responsibility etc, is all in it.

We structure our IC pay to be 10% higher than our employee pay, so if the person complied with the law -- as we are required to do -- their net pay at the end of the quarter is almost the same as being an IC. True, employees have benefits and protections that cost businesses money, but in exchange for that the employer has control over the employees time/schedule and actions.

I am actually incorporating 1st of the year and giving all the IC's this option, except it will be 15% less than IC's. It all comes out in the wash. As an IC they usually owe taxes. As an employee, they will take home less, but probably get a refund. So far, I have 7 out of 10 opting to be put on payroll (myself included). I can't wait to have a paycheck and pay taxes bi-weekly instead of getting murdered in January.

 

[ChipA]

Does anyone want to take the time to read & weigh in on this

I've managed to negotiate a FEW changes on this lease agreement, but it's unlike anything else I've encountered before so it would help me out a lot to get a fellow MT's opinion. My accountant/brother-in-law thinks it's a bunch of bunk : so I'm a little worried about it. Anyone who is willing to do that for me, let me know and I will PM the contract to you. Some parts of it aren't really clear (something else I'm trying to get changed) so I can clarify anything you need.

Thanks!

 

[Burning like Antartic ice]

I think I FINALLY know the difference!

As an employee, they will take home less, but probably get a refund.

This is one of the great scams the gov't has come up with -- make you think getting your own money back is a refund.

With a little planning and the investment of 15 minutes when you fill out your W-4, you can adjust your withholding allowances so that you take home the maximum each pay check and don't owe a penny in January and get nothing back. Why wait until the end of the year to have full use of your own money.

We each claim 11 withholding allowances on our paychecks -- no kids involved and we are not claiming each leg of our cats as a dependent -- all perfectly legal, and it optimizes our pay.

Most people don't read the instructions on their W-4 -- page 2, and just fill out page one, and put "1"exemption for themselvs, and maybe another 1 or 2 for kids, but the line for "other allowances" is there for a reason. 90% of people don't bother to find out what it is.

 

[Happy Happy]

I think I FINALLY know the difference!

With a little planning and the investment of 15 minutes when you fill out your W-4, you can adjust your withholding allowances so that you take home the maximum each pay check and don't owe a penny in January and get nothing back. Why wait until the end of the year to have full use of your own money.

I totally agree. But the VAST MAJORITY of people are not very good at saving it, or investing, or spending wisely. I know it's just getting money back at the end of the year that belongs to us anyway. But most people are pretty excited when they get that check. I never get one...I write one.

But, I do understand your point. Many people think they are getting a gift. Although, the interest earned is pretty close to a savings account nowadays :

 

[coolPINKISH]

I think I FINALLY know the difference!

It's all psychological. Getting a check at the end of the year creates the illusion of getting paid, and that's much more fun than budgeting and investing! But hey, some people might need that "out of sight, out of mind" help so they don't spend what they could have put into savings on their own.

 

[Pompal 09.]

I think I FINALLY know the difference!

It's all psychological. Getting a check at the end of the year creates the illusion of getting paid, and that's much more fun than budgeting and investing! But hey, some people might need that "out of sight, out of mind" help so they don't spend what they could have put into savings on their own.

Exactly, not to mention, it's much more fun spending a big check, than a bunch of little amounts :grin:

 

[Pompal 09.]

I think I FINALLY know the difference!

But hey, some people might need that "out of sight, out of mind" help so they don't spend what they could have put into savings on their own.

But then they spend the refund check they get, so there is no net difference.

 

[ILOVEYAHOOANSWERS]

I think I FINALLY know the difference!

But hey, some people might need that "out of sight, out of mind" help so they don't spend what they could have put into savings on their own.

But then they spend the refund check they get, so there is no net difference.

I didn't clarify this, but I meant in an instance where people are setting money aside for the same thing they would spend their refund on, such as a vacation or car down-payment or whatever that might be, not long-term. But you ARE right about people spending their tax returns immediately instead of investing. I am guilty of that myself (although I usually spend mine on bills & debts)!