Spa wants to change my status from 'Employee to IC'

[thelibertines]

So I have been working for the same spa for two years...they now want to restructure my status from Employee to IC without any change in my split. They want to still consider me an 'employee' although they will be taking no taxes out of my check and I will be responsible for that myself.

While I do not know specifically how much this will affect me I have a feeling that it will be a cut in pay.

I was under the impression from reading my 'Business Mastery' book that an employer cannot play both sides of this fence. You are either an IC and are given an appropriate perceneforum.xxxe (higher than I am getting) and I supply everything OR the employer pays the taxes, liability insurance (though I already carry my own), unemployment taxes, medicare etc... but typically in this scenario the split is less.

Help me out here if you have any insight into the tax implications for an IC. I just have a feeling that it is going to cost me more because the tax bracket I will be in will be different because technically the IRS will see me as an IC....I don't see how the spa can consider me an 'Employee' but then not take out my taxes if they are booking the clients I see there, providing all linens and oils, telling me HOW to work and WHEN....

Help please...

 

[LIFE]

If you go to the IRS definition of employee, you are an employee. They are trying to take advaneforum.xxxe of you. Once you go to subcontractor status, you will pay double social security taxes, since employers pay half for their employees. Plus, as an independent business, you have to keep track of your taxes, and make sure that you keep up with quarterly payments, or you will start running into costly tax problems. Also, you will not be covered by the employer's workers' comp insurance, so if you injure yourself in the course of your work, let's say a back injury, no coverage.

I would get the official definition of an employee from the IRS, and use that in speaking with your employer. That should be a big help. If they insist on subcontractor status, some things have to change, including your perceneforum.xxxe.

 

[livelovebhappy]

Thanks Omed! I called the IRS this morning and looked in my business mastery book...I am going to request that we re-negotiate our terms...hopefully this will work. I like my place of work and people I work with...Thank you for taking the time to post...

 

[Barkley Hound]

You can't be an employee without taxes being withheld. There are no two ways about that.

The first step towards "Business Mastery" should be to rid your brain of the concept of "the split" unless you can answer, with total certainty, the following questions

* Is a 70% split to me more "fair" or "appropriate" than a 40% split?

* Do I care what someone else (the owner/employer or other massage therapists in my market) earn from an appoinment?

* Do I change my answer to #1 in the event of a complimenary ($0 revenue) service?



These are trick questions. If you answer YES to any of them you will never be satsified working in a "split" environment.

 

[nomorebuffalo]

They can't legally change your status from employee to IC and then still consider you an employee.

Everything needs to be done in writing, and it needs to be written in such a way that the IRS would approve, just in case you check with the IRS.

 

[Marilee C]

If you change from employee to IC status, you need to have a complete written (and signed!) contract covering all aspects of the working relationship. Have it reviewed by a lawyer (preferably) and/or someone else reasonably qualified to evaluate the terms of the agreement. Doing otherwise leaves you wide open to exploitation.

Being an IC legally gives you much more latitude in determining how you do your work, something spa management may not have considered. They will not be able to exercise the same level of control over you unless you permit it in the agreement. This could be positive or negative, and it's unlikely they've really thought that aspect through. The freedom that comes with being an IC makes for a good bargaining tool...

 

[Joe Schmo]

Thank you all for your replies...Yes, I quickly decided after research with the IRS and other sources all that you posted below that there will need to be a change of terms of employment if they go through with this restructure.

R&R - I have been happy with my "split" for two years...it has worked...I appreciate your rhetorical questions and I will meditate on them...

I am not going to take an approximate 7% cut in pay right now so that I can then be responsible all of my taxes and stay at the current pay rate.

What is really not ok is that they stopped deducting taxes from a coworkers paycheck two weeks ago without ever discussing with her that they wanted to change the business structure...this is not alright...

What I really don't appreciate is after being a dependable and skilled therapist for two years, they don't respect me enough to come to me and give me the straight story and let me decide from there...instead they try to quietly put all the taxes on me hoping I don't understand that this will equate to approx. 7% cut in pay, and on top of it try to still hold me to a noncompete clause, all of their procedures and policies, etc....especially when I have had the best two months I have ever had since working there...have booked a few packages of multiple sessions....and have had many repeat clients...something isn't adding up here.

There is a lack of communication here and other issues. I understand it is tough times...there is a lot more to all of this then I will post on a public forum...

I am done being the sentimental, loyal one I have been...I am seeing that 'business is business' This is actually an excellent learning opportunity...

 

[LMT]

cc -- don't forget we have the Private Forum, if you decide you need to talk further and in a less public place.

I wish you well.