Tuesday, August 16, 2016

EMPLOYEE OR INDEPENDENT CONTRACTOR (Or will you pay twice or more)

EMPLOYEE OR INDEPENDENT CONTRACTOR
(Or will you pay twice or more)

            Many businesses are trying to avoid having employees due to the many regulations, penalties, governmental mandates and what they perceive as costly taxes and insurance.  Is this a trap you are setting for yourself?  Say you run a small law firm and you have a part time secretary, paralegal or assistant. (If not a law firm insert your business i.e. roofer, electrician, butcher, baker, or candle-stick maker)  What if that person also works elsewhere?  Is that person an employee or independent contractor?  You should first look to the IRS for guidance.   When doing so you will find it is not a simple search.  The IRS has 4 categories 1) independent contractor, 2) employee (they call a common law employee), 3) statutory employee, and 4) a statutory nonemployee.

1.       Independent contractor. (click on links to access reference material) People such as doctors, dentists, veterinarians, lawyers, accountants, contractors, subcontractors, public stenographers, or auctioneers who are in an independent trade, business, or profession in which they offer their services to the general public are generally independent contractors. However, whether these people are independent contractors or employees depends on the facts in each case. The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done. The earnings of a person who is working as an independent contractor are subject to Self-Employment Tax. 
2.     Employee (common law employee).  Under common-law rules, anyone who performs services for you is your employee if you can control what will be done and how it will be done. The following 3 factors are also considered Behavioral Control, Financial Control and Relationship of the PartiesThis is so even when you give the employee freedom of action. What matters is that you have the right to control the details of how the services are performed.  Say you have a secretary, roofer, part-time baker etc. who you control their hours of work, where they work, and how they perform the job.  This person is an employee.
3.     Statutory employee.  If workers are independent contractors under the common law rules, such workers may nevertheless be treated as employees by statute (statutory employees) for certain employment tax purposes if they fall within any one of the following four categories and meet the three conditions described under Social Security and Medicare taxes:
i.           A driver who distributes beverages (other than milk) or meat, vegetable, fruit, or bakery products; or who picks up and delivers laundry or dry cleaning, if the driver is your agent or is paid on commission.
ii.          A full-time life insurance sales agent whose principal business activity is selling life insurance or annuity contracts, or both, primarily for one life insurance company.
iii.         An individual who works at home on materials or goods that you supply and that must be returned to you or to a person you name, if you also furnish specifications for the work to be done.
iv.         A full-time traveling or city salesperson who works on your behalf and turns in orders to you from wholesalers, retailers, contractors, or operators of hotels, restaurants, or other similar establishments. The goods sold must be merchandise for resale or supplies for use in the buyer’s business operation. The work performed for you must be the salesperson's principal business activity.

You should consider whether 3 (i) above includes a person who does your typing or research at home or elsewhere?  Does it include a candle-stick maker who works from their garage for you or a baker who works from their kitchen for you

Withhold Social Security and Medicare taxes from the wages of statutory employees if all three of the following conditions apply:
·         The service contract states or implies that substantially all the services are to be performed personally by them.
·         They do not have a substantial investment in the equipment and property used to perform the services (other than an investment in transportation facilities).
·         The services are performed on a continuing basis for the same payer.

            ?
4.      Statutory nonemployee.  There are three categories of statutory nonemployees: direct sellers, licensed real estate agents and certain companion sitters. Direct sellers and licensed real estate agents are treated as self-employed for all Federal tax purposes, including income and employment taxes, if:
·         Substantially all payments for their services as direct sellers or real estate agents are directly related to sales or other output, rather than to the number of hours worked; and
·         Their services are performed under a written contract providing that they will not be treated as employees for Federal tax purposes.

Now you may ask:  Why should I care?  You might think "my employee/independent contractor will not turn me in as they are not paying taxes anyway and we are in a friendly relationship."  Have you heard of whistle blower statutes?  One of the biggest causes of IRS audits is from disgruntled associates, employees, and ex-spouses.  The IRS Whistleblower –Informant Award program offers rewards of 15-30% of the amount collected.  The first award in 2011 was four and one half million dollars ($4,500,000.00) to an anonymous accountant.  What if you have been paying the person “under the table”?  Unless you are not reporting income you receive, then you are claiming income but not deducting the valid tax deductions for earning that income.  If you are not reporting the income then you are incurring additional liabilities including possible criminal penalties.  What happens if the person gets injured and files for worker’s compensation and/or social security disability and you have not reported them as an employee?  For social security disability, the person must have paid in for a certain period of time.  If they were not paying the taxes and it was determined you should have been paying the taxes, then you are subject to tax penalties.  Can you then be sued for the benefits they would have received?  You can be liable for all the unpaid taxes, even if you are not the owner of the company.  See Who Can Be Responsible for the TFRP.  These taxes may not even be dischargeable in bankruptcy and may be withheld from your income, wages, and tax refunds in the future.

            Next, if the person files a worker’s compensation claim and is determined to be an employee for who you have not carried worker’s compensation insurance, what can happen?  Pursuant to I.C. 22-3-4-13(f), “In an action before the board against an employer who at the time of the injury to or occupational disease of an employee had failed to comply with IC 22-3-5-1, IC 22-3-7-34(b), or IC 22-3-7-34(c), the board may award to the employee or the dependents of a deceased employee:
(1) compensation not to exceed double the compensation provided by this article;
(2) medical expenses; and
(3) reasonable attorney fees in addition to the compensation and medical expenses.”

So this means if your secretary gets in a car accident when delivering mail to the local post office and you do not have worker’s compensation insurance her health insurance (if she has it) may not cover her as she is working (see our previous blog on worker’s compensation), and you can be held liable for the entire medical expenses, attorney fees and up to double what the worker’s compensation awards would be. 

            Now you have a disgruntled employee who may have to file bankruptcy to discharge medical bills, has no income and does not qualify for social security disability.  Do you think this person may sue you under Title 22 above?  Do you think this person will turn you in to the IRS?

            In my practice I regularly encounter people who think they are saving money by claiming everyone who works for them are independent contractors and as such do not pay withholding taxes, worker’s compensation insurance, and sometimes do not issue 1099’s.  I have not even addressed the state tax penalties, overtime laws, or the additional IRS penalties for failure to file returns or pay taxes, interest on the taxes/penalties, implications of hiring a contractor who does not cover their employees for worker’s compensation and the interest on all of these.  Suffice it to say, not treating an employee as an employee is a dangerous practice.  It is even more dangerous if you pay them under the table and do not report income.  You should consult a Certified Public Accountant or your business attorney to see what advice they will give you.  You may not like the advice but in the long run you may be able to sleep at night without the worries of the possible repercussions.

This is third of a series we will be doing on the issues of sole proprietorships, partnerships and other small business and issues with not complying or handling insurance, tax and other issues that can be found on our blog.

Prepared by Richard A. Mann of Richard A. Mann, P.C. Attorneys at Law, www.rmannlawoffice.com
Follow us on Twitter:  https://twitter.com/RAMattorneys
This blog does not constitute legal advice nor does it establish an attorney client relationship.  This is for general information purposes as in most legal situations the facts and terms of an agreement between the parties can affect the result.


Saturday, August 6, 2016

Are You Incurring Liability For People You Hire for Your Business?

Are You Placing You or Your Company in Jeopardy?

Are you placing you or your company in jeopardy?
Are you having work done in your office?  Is you IT contractor installing a new computer system, telephone system etc.? Are you paying more than $1,000.00?
The Indiana Court of Appeals has held that a person or business may be liable for injuries sustained by the employee of a tree trimming service when that employee was injured. A little known statute which is Indiana Code 22-3-2-14(b), requires that when you hire someone to perform any activity on your company’s behalf exceeding one thousand dollars ($1,000.00), such as tree trimming, lawn service, plumbing, electrical service and the like, that you require them to provide you with proof from such contractor a certificate from the worker's compensation board showing that such contractor has complied with section 5 of this chapter, IC 22-3-5-1, and IC 22-3-5-2. If you fail to do so you shall be liable to the same extent as the contractor for compensation, physician's fees, hospital fees, nurse's charges, and burial expenses on account of the injury or death of any employee of such contractor, due to an accident arising out of and in the course of the performance of the work covered by such contract. There are some exceptions that apply to your owner occupied residence but you should obtain the certificate in any case.
The interesting question raised in this case was the tree trimming service was only being paid six hundred dollars ($600.00). Part of the agreement between the tree trimming service and the business was that the tree trimming service was allowed to keep the wood that resulted from cutting up the downed tree. The employee of the tree trimming service argued that the wood was valued at more than four hundred dollars ($400.00) and therefore the true value of the contract was in excess of one thousand dollars ($1000.00).
Therefore, under this case, if a computer installer, painter, roofer, chimney sweep, or the like is injured while performing work for you in the amount in excess of one thousand dollars ($1000.00), you could be personally liable for compensation, physician's fees, hospital fees, nurse's charges, and burial expenses on account of the injury or death of any employee of such contractor, due to an accident arising out of and in the course of the performance of the work covered by such contract.
Also, another insurance that you should require them to provide is proof of liability insurance, which also covers you.  You can purchase at your own cost as part of your business insurance to protect you from the above issues.  You should consult you insurance professional to see if your current policy covers you.
This is one of a series we will be doing on the issues of sole proprietorships, partnerships and other small business and issues with not complying or handling insurance, tax and other issues.

Prepared by Richard A. Mann of Richard A. Mann, P.C. Attorneys at Law, www.rmannlawoffice.com
Follow us on Twitter:  https://twitter.com/RAMattorneys

This blog does not constitute legal advice nor does it establish an attorney client relationship.  This is for general information purposes as in most legal situations the facts and terms of an agreement between the parties can affect the result.

Tuesday, July 5, 2016

Indiana has 2 Child Support Calculators. Make sure you understand them (Updated from Previous post)

WHICH SUPPORT CALCULATOR ARE YOU USING?
WHAT DO THE NUMBERS MEAN?

Recently there was a question posed as to why The Indiana Support Master Software and the Indiana Supreme Court Calculator resulted in different support amounts with the seemingly same numbers.  The example given, involved a Father who was designated as the non-custodial parent exercising 190 overnights per year, leaving Mother with 175 overnights.  As the designated custodial parent, Mother was to pay the amount commonly known as the 6% rule amount for uninsured health expenses and the controlled expenses.  Based on Father making a gross income of $2,500 a week and Mother making a gross income of $750 a week and no other variables, what is the support amount?  When calculating child support you must pay close attention to all the factors.  It appears that using the Support Master when you designate who the Payor is, you are basically deciding who will be attributed the parenting time credit and who pays the controlled expenses.  If the person is the Payor then that person receives the parenting time credit and the other pays the controlled expenses.  If you want the person with more than 183 overnights to receive the credit for the additional overnights then in the Support Master you must list the other person as the Payor.  You would then need to address the controlled expenses if the person with the most overnights is not paying them.  A person who is not the “custodial parent” may have more overnights in a situation where that person does not work in the summer and has more overnights as a result of time in excess of the guidelines in the summer.  In the Supreme Court calculator, you can put both at 183 and then you are asked to select who pays the controlled expenses.  By switching who is designated to pay the controlled expenses, you can see the difference it causes in the support amount and then adjust your support order accordingly.

INDIANA SUPPORT MASTER
           
The Indiana Support Master lists on page 1 the third line of item 7 “credit for parenting time for 190 overnights” and the result is credit of $90.60 for Father.  This results in Father paying $149.40 or $149 per week as it is rounded down to the nearest even dollar amount.  It then lists Mother as paying the first $973.44 of uninsured medical i.e. the 6% rule.  Now go to the parenting time credit worksheet on line 1PT it says 183.  This is because the child support guidelines parenting time credit table does not go beyond 50-50 or 183 overnights.  It appears that the guidelines assume if you have more than 183 overnights you are the custodial parent.  So if you make Father the custodial parent with Mother having the 175 overnights the resulting support is $98.35 and Father pays the 6% amount.  If you use 183 overnights each such as in an equal time arrangement and Mother is the custodial parent under Indiana Support Master, Father still pays the $149, and Mother pays the 6% amount and all controlled expenses.  If Father is designated the custodial parent he pays $103 per week, the 6% amount, and all controlled expenses.  It should be noted that controlled expenses account for approximately 15% of the cost of raising a child.

INDIANA SUPREME COURT CALCULATOR

If you use the same scenario as above and use those numbers into this calculator, in the first example you have Father paying $94 and the calculator automatically defaults and assumes the Father is custodial parent.  The issue with the default in the program is that in the comments on the worksheet it says Custodial Parent Annual Obligation is $973.44 on the 6% rule.  It does not identify which parent is presumed to be Custodial in the calculation.  One might say well it is obvious is it not?  We all know that at times designation as to who is custodial is very important to people unrelated to the support obligation.  In the second scenario above this calculator asks you who will pay the controlled expenses and changes the support by approximately $45 a week.  To obtain a number closer to credit with 190 overnights, you select one person at 184+and the other at 181-183 and designate the person who you want to pay controlled expenses.

The point of this article is that if you are using shared custody arrangements in an agreement, you must also designate who pays the controlled expenses that include, but are not limited to, the uninsured medical expenses.  It appears that neither calculator will give you a number, which gives the person not paying controlled expenses, more than 183-184 overnights. 


Prepared by Richard A. Mann of Richard A. Mann, P.C. Attorneys at Law, www.rmannlawoffice.com
Follow us on Twitter:  https://twitter.com/RAMattorneys

This blog does not constitute legal advice nor does it establish an attorney client relationship.  This is for general information purposes as in most legal situations the facts and terms of an agreement between the parties can affect the result.

Sunday, July 3, 2016

Landmark Decision in Indiana grants Equal Rights to Parenthood of Married Same-Sex Couples for Children Born to Them During Marriage

Thursday, June 30, 2016,  the United States District Court for the Southern District of Indiana held that married same-sex spouses must be afforded equal rights as opposite-sex spouses as parents to the children born of their marriage.  While Indiana has long recognized husbands to be the father and legal parent of children born into their marriage, previously wives to the birth mother were not afforded this same recognition and would be forced to go through the lengthy and expensive adoption process.  With today's ruling, the children born to same-sex spouses will now have two parents.  This grants the children and these families the protection and stability previously only granted to opposite-sex couples.  Our firm is proud to continue to fight for equality for all families.  This case was brought by  5 Indianapolis Lawyers including Megan Gehring and Richard Mann of  Richard A. Mann, P.C.Karen Celestino-Horseman, William Groth and Raymond Faust.  To see the ruling following these links:

https://www.dropbox.com/s/djsv3ouwkavgk57/entry%20on%20cross%20motions%20for%20sj.pdf?dl=0

https://www.dropbox.com/s/ea5h070kkrha8oi/Final%20Judgment.pdf?dl=0

https://www.dropbox.com/s/pkmzejhzqssd7pc/Permanent%20Injunction%20Order.pdf?dl=0

 We are also proud to announce that two of our same-sex married clients had their child on Thursday afternoon as the decision was being released.  They were able to use the links above to convince the hospital personnel to place both of their names on their child's birth certificate.


Prepared by Richard A. Mann of Richard A. Mann, P.C. Attorneys at Law, 
Follow us on Twitter:  https://twitter.com/RAMattorneys
Follow our blog: http://ramlawoffice.blogspot.com/

This blog does not constitute legal advice nor does it establish an attorney client relationship.  This is for general information purposes as in most legal situations the facts and terms of an agreement between the parties can affect the result.

Monday, June 27, 2016

WHY YOU SHOULD CARRY WORKER'S COMPENSATION INSURANCE

(Or do you want to lose everything from an accident)


            If you are the Owner of a Sole Proprietorship, a Partner in a Partnership, or a Member or Manager of a Limited Liability Company, you are not automatically included as an employee under your current worker's compensation insurance.  Under Indiana Code § 22-3-6-1, an Owner of a Sole Proprietorship, a Partner in a Partnership, or a Member or Manager of a Limited Liability Company is not an "employee under IC 22-3-2 through IC 22-3-6 until the notice has been received."  The notice must be in writing and is not effective until both your insurance carrier and the Indiana Worker’s Compensation Board has received your election.  Mailing is not receipt.  Best practices would be to serve by certified mail return receipt or some other method allowing for written proof of receipt.  While hand delivery may be a viable option with the Board, it is highly unlikely that it would be with the insurance carrier.  The written notice must be "served upon the...insurance carrier and upon the board."  Id.  The Board is the Indiana Worker's Compensation Board.  In addition to serving notice, the owner, partner, member or manager must also be "actually engaged in the" business of the proprietorship, partnership or limited liability company.  Id.  If the Owner of a Sole Proprietorship or a Partner in a Partnership is an independent contractor in the construction trades and does not make the election to be included as an employee, the Owner or Partner "must obtain a certificate of exemption under IC 22-3-2-14.5."  Id.  You must file for an exemption.  A contractor or employer who assists someone in filing for a false Application for exemption could be charged with a Class 6 felony.  It is important to make sure that you are covered as an employee under your worker's compensation insurance as any injury suffered while at work may not be covered by your health insurance and you may not be able to recover your lost earnings.  See Dreiling v. Custom Builders, 756 N.E.2d 1087, (Ind. Ct of App. 2001).  In that case the owner of the company was injured and because he had not taken the proper steps his injuries and medical expenses were not covered.
            Some may think they are not in a dangerous profession so they do not need worker’s compensation coverage.  If you are an attorney who slips on the floor while going to see a client, is in an automobile accident driving to a hearing, or struck by a car crossing the street to the court, your health insurance may not cover your medical bills as most major health insurance carriers exclude from coverage injuries sustained while working.  In Wright Tree Service v. Hernandez, 907 N.E.2d 183 (Ind. Ct. of App. 2009) (reh'g denied), the court upheld the decision of the board that the heart attack was related to the job.  So if you have a heart attack at the job, your health insurance carrier could claim it was in the course of your employment and, therefore, it is not covered under your health plan. 
            Another issue if you do not elect to be covered is your lost income may not be covered.  Every self-employed person should have disability insurance.  But if you do not, at least you can receive compensation, however little, from worker’s compensation.  If you have employees and you currently just cover them, you will probably find adding yourself may not increase your costs or if it does it will be minimal.

This is one of a series we will be doing on the issues of sole proprietorships, partnerships and other small business and issues with not complying or handling insurance, tax and other issues.

Prepared by Richard A. Mann of Richard A. Mann, P.C. Attorneys at Law, www.rmannlawoffice.com
Follow us on Twitter:  https://twitter.com/RAMattorneys
This blog does not constitute legal advice nor does it establish an attorney client relationship.  This is for general information purposes as in most legal situations the facts and terms of an agreement between the parties can affect the result.
If you click on the link it will transfer you to the information referenced.


Tuesday, June 7, 2016

NEW INDIANA E-FILE RULES PUT MORE RESPONSIBILITY ON FILERS

NEW INDIANA E-FILE RULES PUT MORE RESPONSIBILITY ON FILERS

Effective July 1, 2016, the Indiana Supreme and Appellate Courts along with Hamilton County, Indiana Circuit and Superior Courts, go to mandatory e-filing for attorneys.  Trial court filers should familiarize themselves with the new Rule 86 of the Indiana Rules of Trial Procedure effective for filings after June 30, 2016.
At the trial court level, attorneys now will need a few more forms in their bank of forms.  The new rule now calls for 4 additional forms.  The first form identified is the Acknowledgement of Service under Rule 86(G)(2)(ii) which is similar to the form used in the US District Courts.  This occurs if the filer personally serves the complaint and summons or mails the summons and complaint by first class mail.  The filer prepares the summons and transmits the summons to the clerk.  The clerk will then stamp, add the cause number, seal, and sign the summons and return it to the filer.  The rule requires the filer to file the Acknowledgement of Service with the clerk.  If the respondent or defendant refuses to sign the form, the filer shall then immediately file an Affidavit of Service with the clerk.  If the filer files by copy service, the filer shall leave a copy at the proper address, mail a copy of the summons and file with the clerk the Affidavit of Service, similar to the method used by a sheriff in copy service. 
Also, under Rule 86, now if the filer is serving the respondent or defendant by certified or registered mail, the filer prepares the summons and transmits the summons to the clerk.  The clerk will then stamp, add the cause number, seal, and sign the summons and return it to the filer.  The filer will then send the summons by certified or registered mail, and then promptly file with the clerk the Certificate of Issuance of Summons which must contain the method of service with respect to each party, the date of mailing, address of each party, and tracking or identifying number for each summons under Rule 86(G)(2)(c).  Once service has occurred then the filer must file with the clerk an Affidavit of Service setting forth the date of service, the person served, and the address served.  Since the name may not be legible on the receipt from the post office, we believe the best practice until directed otherwise would be to attach a copy of the receipt.
For service by publication under Rule 86(G)(2)(e), the filer prepares the summons and transmits the summons to the clerk along with an Affidavit for Service by Publication to the Clerk as provided in Trial Rule 4.13.  The clerk will then stamp, add the cause number, seal, and sign the summons and Affidavit for Service by Publication and then return them to the filer.  The filer shall deliver the summons to the publication authorized by Trial Rule 4.13(C), with instructions that after the completion of the period of publication the return shall be sent to the Clerk.
Another form you should add is the new E-Filing Appearance By Attorney In Civil Case. This has many changes.

Prepared by Richard A. Mann of Richard A. Mann, P.C. Attorneys at Law, www.rmannlawoffice.com
Follow us on Twitter:  https://twitter.com/RAMattorneys
This blog does not constitute legal advice nor does it establish an attorney client relationship.  This is for general information purposes as in most legal situations the facts and terms of an agreement between the parties can affect the result.


Wednesday, May 11, 2016

IS IT TOO LATE TO CHANGE NAME IN PATERNITY ACTION 4 YEARS AFTER THE ORIGINAL ORDER? NO SAYS INDIANA COURT

Court of Appeals Upholds Changing Child's Last Name to Father's 4 Years after Initial Order Establishing Him as Father of Child

            The Indiana Court of Appeals on May 11, 2016, upheld the Warrick Superior Court's decision changing the child's last name from the maternal name to the paternal name.  In the case of Leslie and Farmer, 87A01-1508-JP-1164, the trial court ruled that based upon current case law the court felt it had to grant the request.  The interesting and unusual fact of this case was that the Father admitted that he had previously been informed by his counsel that he could have asked for the name change sooner but did not do so for tactical reasons.  The parties had originally been to court and the order establishing paternity was issued July 20, 2011.  The child was born August 30, 2010.  The parties were then in court over contempt and modification issues without either party raising the issue of name change.  Typically the family name or last name in an paternity action is addressed in the initial paternity order.  The Court of Appeals even commented that the parties had agreed in February 2011, that only one issue was open for the court to address and that was who would supervise Father's parenting time.
            As a result of this case, more Fathers may be filing name change petitions after the original paternity order is entered.
Prepared by Richard A. Mann of Richard A. Mann, P.C. Attorneys at Law, www.rmannlawoffice.com
Follow us on Twitter:  https://twitter.com/RAMattorneys
This blog does not constitute legal advice nor does it establish an attorney client relationship.  This is for general information purposes as in most legal situations the facts and terms of an agreement between the parties can affect the result.