Re: Question: 1099 status and agencies

[Elna Tymes <etymes -at- LTS -dot- COM>]

Sharon -

The problem the original poster had was that a lot of agencies, like a
lot of companies, have felt so burned by the threat of the IRS chasing
them for consultants' not paying their own taxes that many have taken
the easy road and simply declared "no 1099's."  Even if you point out
that you're a valid [insert state name] corporation, which pays its own
taxes and pays you a salary and therefore pays taxes on you, many
agencies and companies don't understand the difference between a
corporation and a 1099 and summarily dismiss your pleas.

You said:
> Agencies spend money finding these jobs. They make money by having people as
> W-2 employees by taking a part of the hourly rate the agency gets from the
> employer. They are unwilling, for obvious reasons, to lose money by finding
> you a job and not make money off you.

ULP! A little far-fetched, m'dear.  You're assuming that agencies don't
make any money when they work with another corporation. Agencies make
money off the people they find, by charging a percentage of the billed
hourly fee (usually).  Regardless of whether the person doing the work
is an employee of the agency, or an employee of the company that is
contracted with the agency to do the work.  The agency gets the markup
either way.  If the agency is keeping you as a W2 (direct employee),
then the agency is also paying the employER FICA, and other things that
vary from state to state, like disability insurance, etc.  If the agency
has contracted with your corporation, the agency is still collecting its
markup, just not paying payroll taxes - your corporation is doing that.

Think of it this way: when you pay a newspaper company to have the paper
delivered,  you are essentially contracting for the delivery services of
the person who handles your route.   The delivery person is an employee
of the newspaper company, so even though he/she is providing a service
to you, you aren't paying him/her directly for it.  Therefore, you
aren't paying payroll taxes - the newspaper company is doing that.
Presumably, the company has factored into its subscription rate the cost
of payroll taxes on its delivery people.  So like the agency, it's
charging a markup above its combined production and delivery costs, both
of which also involve payroll costs.
>
> For many deals, if they find another company (the EIN and corporate status
> shows you are a company) that takes the job, they get a finders fee,
> sometimes thousands of dollars. Thus, their unwillingness to deal the way
> you want to.

Having the hiring company create a company-to-company relationship with
your little corporation bypasses the agency, and if they found the job,
that's not fair.  But don't assume that they can't work with you if
'you' are a company with all the proper credentials.

My company has been working with agencies all over Silicon Valley for
years, and we make it very clear that we don't do end-runs around the
agencies who are honest and ethical.  Many agencies hide behind their
"no 1099" rules and refuse to look at the facts; there's enough demand
out there now that we can afford to just bypass them and get our own
contracts and work with the agencies who will honor our company status.
Btw - there's a URL somewhere for the IRS' '20 questions list' that
helps delineate whether you're a contractor or an employee.  I managed
to clean it out of my bookmark stash.

Elna Tymes
Los Trancos Systems