Employer converting employees to self-employed and huge tax hit

Senator - it appears you are assuming the OP's wife will be categorized as "self employed" - where all those nice tax benefits you mention come into play. But it seems she's being categorized as 'non-equity partner'..... NOT self employed. The benefits you talk about (SEP etc) don't apply. She'll still have 401k and not be SEP qualified.

Given the high income of this situation - I think I'd be talking to a tax accountant or tax attorney... or perhaps even an employment attorney. It sounds like OP's wife might be an attorney herself - but probably not specializing in tax or employment.
 
rodi said:
Senator - it appears you are assuming the OP's wife will be categorized as "self employed" - where all those nice tax benefits you mention come into play. But it seems she's being categorized as 'non-equity partner'..... NOT self employed. The benefits you talk about (SEP etc) don't apply. She'll still have 401k and not be SEP qualified.

Given the high income of this situation - I think I'd be talking to a tax accountant or tax attorney... or perhaps even an employment attorney. It sounds like OP's wife might be an attorney herself - but probably not specializing in tax or employment.
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agree. If for no other reason than to deeply understand exactly how much this new arrangement is likely to cost the OP's DW, as well as what avenues may exist to mitigate that cost.
 
Senator said:
How about you take the money in as "Gross Revenue", not salary.
How about you deduct MANY business deductions, BEFORE you pay anyone.
How about you set up a SEP or similar to reduce taxable income.
How about you pay a wage of 60% of what is left, and take the rest as a 40% dividend, without any SE taxes.
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Yes, I can see how that would work out to her advantage, but I doubt she'll have much say in how her income is structured for tax purposes. Good question to ask the employer, though.
 
soupcxan said:
You're right, I should be thrilled to pay another $15k/year in tax for no reason.:confused:
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Soup: You don't seem to get it, so I will explain.

YOU AND YOUR SIGNIFICANT OTHER ARE EXTREMELY FORTUNATE TO EARN WHAT YOU EARN.

The fact that you have to pay some taxes should not matter so much.

If your income is what you said it is, 15K is not so much that y'all are getting screwed.

Be thankful for what you have, and quit whining about taxes.

15 years ago our income peeked at 200K on which we paid 47K in federal taxes. I was self employed and paid all the SS and Medicare taxes on top of that, and I did not complain. Actually it was a gift to earn enough to have to pay those taxes.

You need to grow up.

I apologize to the rest of the forum for ranting.
 
Rustward said:
Soup: You don't seem to get it, so I will explain.

YOU AND YOUR SIGNIFICANT OTHER ARE EXTREMELY FORTUNATE TO EARN WHAT YOU EARN.

The fact that you have to pay some taxes should not matter so much.

If your income is what you said it is, 15K is not so much that y'all are getting screwed.

Be thankful for what you have, and quit whining about taxes.

15 years ago our income peeked at 200K on which we paid 47K in federal taxes. I was self employed and paid all the SS and Medicare taxes on top of that, and I did not complain. Actually it was a gift to earn enough to have to pay those taxes.

You need to grow up.

I apologize to the rest of the forum for ranting.
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the OPs income level has nothing to do with this
 
Big_Hitter said:
the OPs income level has nothing to do with this
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In post #42, the OP asked "is it even worth working here anymore". Income level is important to be able to answer that question. With a $200K income, paying an extra $15K in taxes is not that much and is likely still worth working. With the SS tax cap I think the extra tax would be no more than $10K but that's not much of a difference with that kind of income.
 
aaronc879 said:
In post #42, the OP asked "is it even worth working here anymore". Income level is important to be able to answer that question. With a $200K income, paying an extra $15K in taxes is not that much and is likely still worth working. With the SS tax cap I think the extra tax would be no more than $10K but that's not much of a difference with that kind of income.
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that just implies a lateral move is an option.

arguing that "you make so much that you shouldn't bitch about another $XX in taxes is not the topic here"
 
Big_Hitter said:
the OPs income level has nothing to do with this
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I disagree.

If you are doing all you are able to do, living modestly, and your taxes go up 15% that is a really big deal.

But the OP is in a "high income" household, and can easily afford to absorb an extra 15K in taxes. He and his wife should 1) figure it out, or 2) suck it up and pay the taxes, or 3) find another job.

Another thing he should do is stop playing "victim".
 
harley said:
A better alternative would be for you to put this thread on ignore so you don't have to react so obnoxiously. Similar to when I put individuals on ignore.
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You have my permission to ignore me.
 
rodi said:
Senator - it appears you are assuming the OP's wife will be categorized as "self employed" - where all those nice tax benefits you mention come into play. But it seems she's being categorized as 'non-equity partner'..... NOT self employed. The benefits you talk about (SEP etc) don't apply. She'll still have 401k and not be SEP qualified.

Given the high income of this situation - I think I'd be talking to a tax accountant or tax attorney... or perhaps even an employment attorney. It sounds like OP's wife might be an attorney herself - but probably not specializing in tax or employment.
Click to expand...

Definitely talk to an accountant. Maybe she can incorporate, or form an LLC and that LLC becomes the non-equity partner.
 
Lets all take a deep breathe on this... No need for rants.

And while poles can be useful for structural support, or strippers, or ethnic identity, or location of Santa... I'm not sure a poll or pole is useful in this case.
 
rodi said:
And while poles can be useful for structural support, or strippers, or ethnic identity, or location of Santa... I'm not sure a poll or pole is useful in this case.
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i was being sardonic but I do have a thing for poles
 
soupcxan said:
You're right, I should be thrilled to pay another $15k/year in tax for no reason.:confused:
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It's not exactly "no reason". It's a market decision by the business owner. It only has to benefit the business (The Owner). If someone gets harmed anywhere on the spectrum from "Annoyed" to "annihilated" that's the marketplace as defined by current policy. Anybody here Pro-business?
 
One of my volunteer gigs is preparing taxes at the local library, primarily for the elderly and lower income folks. I saw this trend really start kicking into gear about 3 years ago. Many people were not even aware this had happened to them as the tax documents they received were no longer W2s. Employers got the bug back then to push this for the obvious medicare and social security savings as well as for retirement and health insurance savings gained from the "former" employees. The IRS has guidelines as to what defines an employee versus an independent contractor. For several people, no conditions of employment were changed; only their status. Many could have easily fought and won the classification battle, but would have probably lost the war with a quick termination. The best move is to probably look for work elsewhere as the employer has already made a decision to increase profit at the employee's expense.
 
Big_Hitter said:
that just implies a lateral move is an option.

arguing that "you make so much that you shouldn't bitch about another $XX in taxes is not the topic here"
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The OP's wife's employment situation is changing.


Would you like to tell me what is so new and different about that?

Would it be any better if the employer ceased to exist? That has happened to quite a few people.
 
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REWahoo said:
OK, that's one. What percent of the remaining 100+ million have one? :)
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Believe it or not, there is a big number of W-2 earners that have accountants....

When I did taxes, and I would do a few hundred returns, probably 90% were W-2 earners... there are some who make pretty big dollars... now, this was in the early 80s and we had a doc who had a W-2 making (IIRC) like $2 mill a year...


I also remember all the time when talking to people who would say "I will just give it to my tax accountant".... I always wondered why they would need one... but it was very common to hear....
 
retiredunder50 said:
One of my volunteer gigs is preparing taxes at the local library, primarily for the elderly and lower income folks. I saw this trend really start kicking into gear about 3 years ago. Many people were not even aware this had happened to them as the tax documents they received were no longer W2s. Employers got the bug back then to push this for the obvious medicare and social security savings as well as for retirement and health insurance savings gained from the "former" employees. The IRS has guidelines as to what defines an employee versus an independent contractor. For several people, no conditions of employment were changed; only their status. Many could have easily fought and won the classification battle, but would have probably lost the war with a quick termination. The best move is to probably look for work elsewhere as the employer has already made a decision to increase profit at the employee's expense.
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A good recourse is to look for a new job that pays better, might take a while but that is ok. Once you get the new job, after about 6 months or when you feel comfortable in it. Then you file with proper authorities about the illegal tax cheating owners, and demand payment of vacation time/pension/sick time/overtime/FICA taxes/etc.
The Old employer gets an investigation, large fine, has to reimburse employees and the IRS, and has a pretty hard time getting back at you since you don't work there and only reported criminal activity.
Possibly you could also benefit from the whistle blower law and get a % of the govt imposed fine.

It never happened to me, so I never got the chance.
 
Rustward said:
The OP's wife's employment situation is changing.


Would you like to tell me what is so new and different about that?

Would it be any better if the employer ceased to exist? That has happened to quite a few people.
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it's a conversion to a non-equity partnership. those are rare (i.e new and different)

maybe, things happen for a reason
 
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