Employer converting employees to self-employed and huge tax hit

[Texas Proud]

^^^^^


But if they are making everybody a 'partner' then it is not along the lines of your article...

Yes, in an law or accounting practice it is usually 'up or out' mentality.... I get that... but if they change everybody, including the new people, it seems like a money grab....


So.... to the OP... is everybody in the firm being 'converted'? Or are there going to be employees still What about the 'help'.... you know, the assistants, HR, accounting, library etc. etc...... if the whole firm is not becoming partner then it is not quite the same as I read in your first post.... they are just doing it to your DW and maybe a few others....

 

[soupcxan]

I'd rather not go into all the details because it is a small world after all. But I think it is incredibly discouraging to be given a pay cut for no fault of your own.

 

[MRG]

soupxcan,
I think that stinks. Has she asked what's in this for me?

These changes benefit someone so maybe a few well placed questions may nicely make the point of I'm getting unhappy about this.

Seriously stuff like this, not for near the income, made me leave. In the end one of the best decisions I ever made.

 

[rodi]

For me, this might be the straw that broke the worker bee's back. Effective pay cut, benefit cut, basically a 'heck with you' message from the equity partners. I think if look elsewhere even if it meant a small pay cut.

 

[Big_Hitter]

yep, I'd be giving them 8 "nas" 3 "heys" good bye

 

[Sunset]

I'd rather not go into all the details because it is a small world after all. But I think it is incredibly discouraging to be given a pay cut for no fault of your own.

Sure, but not nearly as discouraging as being laid off for the same reason.
So she takes a pay cut, she can still look for a replacement job and it could look impressive as a "partner" of the old employer.

 

[pjm-7]

Did you work for a government agency?

I would love to hear your take on this issue.

I worked for a government agency (not federal). An independent contractor is free of control and direction by contract and by fact. Just because the employer makes someone sign a contract that in and of itself does not make the person independent. There must be a "material" fact. Also, the person must hold him or herself out to the public to be independent. Does this independent contractor have their own business cards, website and maintain their own professional licensing? Does the contractor set the rate of pay?

There are plenty more tests that need to be met, this is just a summation.

 

[Lakewood90712]

So how many years did she plan to stay before this " Partnership " change was imposed ?

 

[Walt34]

That's why I'm asking...is it even worth working here anymore?

Well, it depends on what she thinks of course, but if it was me I'd sure be considering other employment opportunities. This is clearly an employer that doesn't give a rat's rear end for employees so that's how I'd treat the employer. That itself is depressing enough over a long period of time to make me want to go elsewhere even if it meant a pay cut.

I learned a long time ago that the people one works with can make a job almost fun and entertaining or make you depressed and morose.

 

[Rustward]

About two years ago in this thread http://www.early-retirement.org/forums/f28/high-w-2-earnings-are-killing-our-taxes-75914.html

You posted this:

Boo hoo for us, right?

Wages 347k + interest/dividends/CG 25k = AGI 372k
- itemized deductions: 24k - exemptions: 4k = 344k taxable income
Tax: 86k + AMT 1k + additional medicare tax 1k + net investment tax 1k
Total federal tax: 89k

We already max our 401ks, and our deductions are being phased out so more donations doesn't help. Having a kid this year also isn't likely to help much as that exemption is phased out for us too.

If these numbers are still close, perhaps you could afford a few hundred dollars to talk with a tax specialist, CPA, or other professional who could tell you all of your options.

Yes, boo hoo 4 u.
I am crying for you.
You have been dealt such a tragic hardship.
No human should ever have to endure something as torturous as this.

Who can afford to live on so little? And now you might have to pay a little more in taxes? It's just not right!

 

[soupcxan]

About two years ago in this thread http://www.early-retirement.org/forums/f28/high-w-2-earnings-are-killing-our-taxes-75914.html

You posted this:


If these numbers are still close, perhaps you could afford a few hundred dollars to talk with a tax specialist, CPA, or other professional who could tell you all of your options.

Yes, boo hoo 4 u.
I am crying for you.
You have been dealt such a tragic hardship.
No human should ever have to endure something as torturous as this.

Who can afford to live on so little? And now you might have to pay a little more in taxes? It's just not right!

You're right, I should be thrilled to pay another $15k/year in tax for no reason.

 

[Senator]

You're right, I should be thrilled to pay another $15k/year in tax for no reason.

I just cannot fathom this opportunity resulting in less after tax spending money.

Anyone that makes LESS money being self employed and working for the same company, than being employed as a W2 worker, has a fool for a tax accountant.

 

[REWahoo]

Anyone that makes LESS money being self employed and working for the same company, than being employed as a W2 worker, has a fool for a tax accountant.

How many W2 workers do you think have a tax accountant?

 

[ivinsfan]

If you pay 86K in taxes you should have a tax accountant....

 

[athena53]

Anyone that makes LESS money being self employed and working for the same company, than being employed as a W2 worker, has a fool for a tax accountant.

How about:

1. Salary doesn't change but you now owe the Self-Employed portion of Social Security contributions.
2. Company no longer pays any portion of your health insurance. Yes, the premiums are deductible but that likely will not make up for loss of that subsidy.
3. The OP has said his wife will get a 401(k) match, but typical contract workers don't have that. SEP IRAs have generous maximum contributions but there's no Roth version.

The OP's wife's employer is doing this because it lowers their personnel expenses. One way or another those expenses land on the backs of the "partners".

 

[HadEnuff]

I worked for a government agency (not federal). An independent contractor is free of control and direction by contract and by fact. Just because the employer makes someone sign a contract that in and of itself does not make the person independent. There must be a "material" fact. Also, the person must hold him or herself out to the public to be independent. Does this independent contractor have their own business cards, website and maintain their own professional licensing? Does the contractor set the rate of pay?

There are plenty more tests that need to be met, this is just a summation.

Pretty much what my understanding was. And yet, in dentistry, and it's likely not unique, the trend is towards making what really are employees, ICs. They work in one place, they do not meet any of these tests.

I have yet to hear of any of these arrangements being challenged.

 

[aaronc879]

You don't get a share of the profits unless you put up six-figures of cash to buy in. And that is it's own can of worms.

That's why I'm asking...is it even worth working here anymore?

If she is an attorney she can probably find another job paying $200K/yr. In the mean time, $200K is a lot of money even with a little more tax so it's certainly worth staying until she can find a different job that suits her better.

 

[Big_Hitter]

How many W2 workers do you think have a tax accountant?

I do

 

[Big_Hitter]

Yes, boo hoo 4 u.
I am crying for you.
You have been dealt such a tragic hardship.
No human should ever have to endure something as torturous as this.

Who can afford to live on so little? And now you might have to pay a little more in taxes? It's just not right!

 

[REWahoo]

I do

OK, that's one. What percent of the remaining 100+ million have one?

 

[HadEnuff]

How many W2 workers do you think have a tax accountant?

If you pay 86K in taxes you should have a tax accountant....

I do

OK, that's one. What percent of the remaining 100+ million have one?

Well, most of that 100+ million may not benefit from having a tax accountant, but for someone paying 86K, and facing the decisions that OP and his DW are facing, it's a very good suggestion.

 

[Senator]

How about:

1. Salary doesn't change but you now owe the Self-Employed portion of Social Security contributions.
2. Company no longer pays any portion of your health insurance. Yes, the premiums are deductible but that likely will not make up for loss of that subsidy.
3. The OP has said his wife will get a 401(k) match, but typical contract workers don't have that. SEP IRAs have generous maximum contributions but there's no Roth version.

The OP's wife's employer is doing this because it lowers their personnel expenses. One way or another those expenses land on the backs of the "partners".

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.

You cannot make anyone smart enough to run a business, so it maybe be time to take a different job.

 

[Big_Hitter]

OK, that's one. What percent of the remaining 100+ million have one?

my boss uses my accountant too (clifton larsen allen), so that's two

 

[Senator]

OK, that's one. What percent of the remaining 100+ million have one?

No one needs an accountant,. They can read and understand the laws themselves. Of course, it maybe more expensive that way.

There is a huge issue with the tax laws when a common man cannot understand them.

 

[marko]

OK, that's one. What percent of the remaining 100+ million have one?

Just about everyone I know has one. So, add another 25 or so to the headcount.

No one needs an accountant,. Of course, it maybe more expensive that way.

Yeah, like really, really expensive!!!