Re: Question: 1099 status and agencies

[Sharon Burton <sharonburton -at- EMAIL -dot- MSN -dot- COM>]

I agree with all the points made below. I am certain that there are a lot of
agencies that work this way. However, in all but one case, my experiences
with agencies were much more positive than that and they met my needs at the
time. Perhaps I have just been really fortunate.

I know 3 people who own agencies and the plan I outlined below describes how
they work. I can easily imagine that other agencies work the way you
describe. It does vary from agency to agency. I have a friend that is
working for a not good one right now. I would never take a job through that
agency. You just have to listen to the rumors before you decide to work with
one.

Many corporations simply are too afraid of directly hiring contractors
because of the IRS regs. And so they use an agency to provide the buffer -
if you are working for an agency, you are the employee of the agency, not an
employee of the client. So the agency pays all the payroll taxes. But I have
been a consultant 1099 for several years and all my contracts specify up
front that I am a contractor and responsible for my own taxes. And that I
will have other clients and all the stuff that the IRS uses to examine this
stuff. And I am doing fine with this. I prefer it. I also know people who
don't want the quarterly tax hassle and so always use an agency.

My point remains. Use the agencies for what they are good at - getting you
in the world as a contractor. Get yourself known and very soon, jobs fall in
your lap. I haven't looked for a job in 2 or 3 years and have been busy as
can be.

sharon

Sharon Burton
Anthrobytes Consulting
Home of RoboNEWS, the award-winning unofficial RoboHELP Newsletter
www.anthrobytes.com
anthrobytes -at- anthrobytes -dot- com


-----Original Message-----
From: Elna Tymes <etymes -at- LTS -dot- COM>
To: TECHWR-L -at- LISTSERV -dot- OKSTATE -dot- EDU <TECHWR-L -at- LISTSERV -dot- OKSTATE -dot- EDU>
Date: Wednesday, 03 June, 1998 6:12 PM
Subject: Re: Question: 1099 status and agencies


>Sharon -
>
>The problem the original poster had was that a lot of agencies, like a
>lot of companies, have felt so burned by the threat of the IRS chasing
>them for consultants' not paying their own taxes that many have taken
>the easy road and simply declared "no 1099's."  Even if you point out
>that you're a valid [insert state name] corporation, which pays its own
>taxes and pays you a salary and therefore pays taxes on you, many
>agencies and companies don't understand the difference between a
>corporation and a 1099 and summarily dismiss your pleas.
>
>You said:
>> Agencies spend money finding these jobs. They make money by having people
as
>> W-2 employees by taking a part of the hourly rate the agency gets from
the
>> employer. They are unwilling, for obvious reasons, to lose money by
finding
>> you a job and not make money off you.
>
>ULP! A little far-fetched, m'dear.  You're assuming that agencies don't
>make any money when they work with another corporation. Agencies make
>money off the people they find, by charging a percentage of the billed
>hourly fee (usually).  Regardless of whether the person doing the work
>is an employee of the agency, or an employee of the company that is
>contracted with the agency to do the work.  The agency gets the markup
>either way.  If the agency is keeping you as a W2 (direct employee),
>then the agency is also paying the employER FICA, and other things that
>vary from state to state, like disability insurance, etc.  If the agency
>has contracted with your corporation, the agency is still collecting its
>markup, just not paying payroll taxes - your corporation is doing that.
>
>Think of it this way: when you pay a newspaper company to have the paper
>delivered,  you are essentially contracting for the delivery services of
>the person who handles your route.   The delivery person is an employee
>of the newspaper company, so even though he/she is providing a service
>to you, you aren't paying him/her directly for it.  Therefore, you
>aren't paying payroll taxes - the newspaper company is doing that.
>Presumably, the company has factored into its subscription rate the cost
>of payroll taxes on its delivery people.  So like the agency, it's
>charging a markup above its combined production and delivery costs, both
>of which also involve payroll costs.
>>
>> For many deals, if they find another company (the EIN and corporate
status
>> shows you are a company) that takes the job, they get a finders fee,
>> sometimes thousands of dollars. Thus, their unwillingness to deal the way
>> you want to.
>
>Having the hiring company create a company-to-company relationship with
>your little corporation bypasses the agency, and if they found the job,
>that's not fair.  But don't assume that they can't work with you if
>'you' are a company with all the proper credentials.
>
>My company has been working with agencies all over Silicon Valley for
>years, and we make it very clear that we don't do end-runs around the
>agencies who are honest and ethical.  Many agencies hide behind their
>"no 1099" rules and refuse to look at the facts; there's enough demand
>out there now that we can afford to just bypass them and get our own
>contracts and work with the agencies who will honor our company status.
>Btw - there's a URL somewhere for the IRS' '20 questions list' that
>helps delineate whether you're a contractor or an employee.  I managed
>to clean it out of my bookmark stash.
>
>Elna Tymes
>Los Trancos Systems
>
>
>