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    5 Replies Latest reply on May 5, 2009 8:42 AM by diversetax

    Strategy for Eliminating Payroll Taxes, Workers' Comp., Etc.

    salkeith Newbie
      Here's an interesting strategy I found for eliminating payroll taxes,
      workers' compensation insurance,
      minimum wage requirements, overtime
      and owner's payroll administrative costs. This is the basic idea:

      Employers today must save as much as possible
      when hiring workers for their businesses. The current business climate
      requires that we take a fresh look at requiring a potential new hire ("NH")
      to establish their own legal entity, a Corporation or a LLC, and then having
      your business enter into an Independent Contractors Agreement with the NH
      Corporation or LLC. The idea is that within the Independent Contractors
      Agreement it will spell out the duties and responsibilities NH Corporation
      or LLC is to provide NH obligations to your business. There are
      numerous advantages to this arrangement.

      If this piqued your interest, you can read the full article at

        • Re: Strategy for Eliminating Payroll Taxes, Workers' Comp., Etc.
          LUCKIEST Guide
          Eliminating Payroll Taxes, Welcome Sal

          Will check out the web site.

          Go to Members page and share some info.
          • Re: Strategy for Eliminating Payroll Taxes, Workers' Comp., Etc.
            DomainDiva Ranger
            You are years too late. Microsoft tried that and got tagged by the government big time. I see things like your post and get that uneasy feeling. You would probably not be someone I would want to work for OR Contract for.

            There are certain work rules that differ between 'employees' and 'contractors'. I have been contracting for 15 years and the rules are VERY VERY different.
            • Re: Strategy for Eliminating Payroll Taxes, Workers' Comp., Etc.
              puzzleman Tracker
              I understand the desire to reduce paperwork and costs, but at what expense? Why do you want to put the people who will be doing the work for you on a regular basis to handle all of their own self-employment payments and paperwork?

              Most people don't know what is all involved. I prefer to treat my people with respect and honor instead of trying to chisel their pay and their time (to fill out the appropriate paperwork).

              If you try to cheat on your taxes with your people, why shouldn't they try to cheat you??


              • Re: Strategy for Eliminating Payroll Taxes, Workers' Comp., Etc.
                cutcomp Wayfarer
                In many states, this strategy just doesn't work for eliminating Workers Compensation liability (although it can work in some states.) In many states (such as my own home state of Illinois) using an uninsured independent contractor doesn't eliminate your Workers Comp exposure. An independent contractor or subcontractor that doesn't have his own Workers Comp insurance is covered under the policy of whatever entity retains his services. The story I like to share in this regard happened many years ago to my own grandmother. She owned a restaurant, and hired a roofer to do some work on the restaurant's roof. The unfortunate man fell off the roof while doing the work and was killed. Turned out that he didn't have his own Workers Comp--as an sole proprietor of his own business, he wasn't required to purchase insurance for himself. But when he was killed while performing work for my grandmother's business, the Workers Comp liability was still there for her. The family of the deceased roofer was able to pursue a claim against my grandmother's policy.

                Some states have enacted specific statutes to address this kind of issue, so that sole proprietors and partnerships that elect to go without coverage are not entitled to Workers Comp benefits from companies that retain their services in a true independent contractor relationship--but many states have not addressed this.

                Even in many of the states that have enacted such statutory changes, the "independent contractor" cannot be performing the same kind of work as the company that retains them, if they want to get the exemption. That is, a roofing company could not hire a bunch of "independent contractors" who do roofing work. But a restaurant could retain a roofer as an independent contractor and not get the Workers Comp liability (if located in one of the states that have changed their rules.)

                Many states have been cracking down in recent years on abuses of independent contractor relationships, because some employers have been trying to dodge their tax and Workers Comp liabilities by turning employees into "independent contractors" that are independent only on paper. So this is probably not a wise strategy IMHO. And in states like Illinois, it definitely won't eliminate Workers Compensation liability. When your insurance company does the audit, the odds are good they'll just tack on a substantial charge for all those "independent contractors" that didn't have their own insurance.
                • Re: Strategy for Eliminating Payroll Taxes, Workers' Comp., Etc.
                  diversetax Wayfarer
                  I totally agree with everyone. It is very unethical to practice this. You really need to visit the IRS website and learn the difference between the treatment of an employee and contractor. A contractor is not mandated for specific hours, etc as an employee and if you treat a contrator as an employee, they have the right to challenge to 1099-misc income and request that due to your demands, they should have been paid as a W2 employee, therefore, with no SE (self employment ) taxes due.

                  This law is really great because it helps give taxpayers a chance to report people that take advantage of others in this way. Be carefull when you are trying to get by on cutting expenses, especially when it hurts others. In the end it will backfire on you.


                  God Bless