Has anyone talked to an attorney about this?
On 2016-12-08 17:10, David Schwartz wrote:
> This thread IS about my original grievance — Sec. 1706 of the Tax
> Code
>
> It says so right there in the Subject line.
>
> You’re a real estate professional lecturing computer consultants on
> stuff that works nicely in the real estate profession.
>
> It can be harmful in THIS profession. Because of 1706. Which has
> nothing to do with either LLCs or Real Estate.
>
> But there ARE companies who WILL NOT HIRE SINGLE-MEMBER LLC’S AS
> CONTRACTORS for gigs in computer-related high-tech gigs.
>
> I’m not aware that situation exists in real estate. Are you?
>
> What advice do you have for those of us who have LLCs and someone will
> only hire us as contractors if we’re either a C or S Corp?
>
> THAT is the topic at hand. It’s irrelevant how simple it is to set
> up LLCs if people won’t hire your LLC.
>
> If that was the case in real estate, you probably wouldn’t be using
> them, right?
>
> -David "The Tool Wiz" Schwartz
>
>> On Dec 8, 2016, at 6:48 PM, Vara La Fey <varalafey@gmail.com> wrote:
>>
>> I was clarifying generalized things for the poster who mentioned LLC
>> as a suggestion from his accountant.
>>
>> Was that poster you?? Then you're welcome. Was it someone else??
>> Then correct my errors or kindly stick to your original grievance.
>>
>> - Vara
>> - www.facebook.com/vara.lafey [1]
>> On Dec 8, 2016 4:39 PM, "David Schwartz"
>> <newsletters@thetoolwiz.com> wrote:
>>
>> I’m not sure what the point of these “Rah Rah for LLC!” posts
>> is all about. Nobody has said anything to the contrary.
>>
>> This list is primarily for people who work in the "high tech" (i.e.,
>> computing) industry, which is SPECIFICALLY what Sec. 1706 of the Tax
>> Code deals with.
>>
>> If you’re in Real Estate, Accounting, Architecture, or whatever,
>> 1706 does not apply to you. It’s very, VERY NARROW in its
>> applicability — BY DESIGN.
>>
>> Sec. 1706 eliminates the “safe harbor” provisions for people who
>> work as contractors, eliminating any “benefit of the doubt” that
>> is historically given in most other professions, and instead
>> subjects workers and the companies that employ them to a vague
>> 22-point (IIRC) series of questions that an IRS Auditor can use to
>> establish whether someone should be (or should have been) regarded
>> as a “contractor” or “employee” for tax purposes.
>>
>> The problem is, this is not something that is adjudicated when you
>> hire on, and it does not matter how many reams of paperwork you sign
>> that says it’s one thing or the other.
>>
>> It’s a ticking time-bomb that applies in the vast majority of
>> cases 3-5 years AFTER THE FACT when the person — usually hired as
>> a contract worker at the time — is audited by the IRS for whatever
>> reason, and the auditor reviews one of his employment situations and
>> subjects it to the 22-point “test”. If he rules the person was
>> acting as a “contractor”, all is fine.
>>
>> But if he rules the person should have been treated as an
>> “employee”, both the person and the erstwhile “employer”
>> just got nuked.
>>
>> The back-due taxes assessed to the “employer", plus accrued
>> penalties and interest, typically amount to far more than whatever
>> the person was paid. The company has no knowledge anything went awry
>> until they suddenly get a bill from the IRS.
>>
>> Meanwhile, the person in question now has to “unwind” any
>> business expenses and deductions, as well as anything that depended
>> on them such as retirement contributions, FICA/FUTA/UI set-asides,
>> etc. Everything is up-ended and needs to be re-filed.
>>
>> And to add insult to injury, the same auditor is likely to flag
>> previous and subsequent years for auditing as well, and what do you
>> think he’s going to rule on other contract gigs that were
>> fundamentally the same situations as the first one he nuked?
>>
>> Again, if you’re not in the high-tech industry, this does not
>> apply to you.
>>
>> Having a single-member LLC stand-in to protect you against such
>> situations can be helpful, IF the company you want to work with is
>> willing to hire you. Many are not because of problems discussed in
>> other threads.
>>
>> -David "The Tool Wiz" Schwartz
>>
>> On Dec 8, 2016, at 4:53 PM, Vara La Fey <varalafey@gmail.com> wrote:
>>
>> Yes, you can be the only user ("Manager" and "Member") of an LLC. I
>> did it for years in real estate, and still have my LLC.
>>
>> IIRC the form takes more like 5 min. You publish your intended LLC
>> in the Record Reporter for 6 weeks. I forget the cost, but it's
>> fairly cheap and easy. And IIRC, the Sec of State office (or
>> wherever I went) has a form for that too.
>>
>> LLCs are almost zero maintenance and are not sublect to hostile
>> takeover. And so easy that some real estate investors create one for
>> each property, just to keep properties legally isolated from each
>> other for basic liability reasons. An LLC name like "<street
>> address>, LLC" is one of those. (So named cause the investor
>> realized that pretty names would be silly and confusing.)
>>
>> Good luck!! :-)
>>
>> - Vara
>> - www.facebook.com/vara.lafey [2]
>>
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