Sec. 1706 of the Tax Code

Fri Dec 9 09:42:29 MST 2016

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 at 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 at 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 at 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]
>> 
>> ---------------------------------------------------
>> PLUG-discuss mailing list - PLUG-discuss at lists.phxlinux.org
>> To subscribe, unsubscribe, or to change your mail settings:
>> http://lists.phxlinux.org/mailman/listinfo/plug-discuss [3]
>  ---------------------------------------------------
> PLUG-discuss mailing list - PLUG-discuss at lists.phxlinux.org
> To subscribe, unsubscribe, or to change your mail settings:
> http://lists.phxlinux.org/mailman/listinfo/plug-discuss [4]
> 
> 
> Links:
> ------
> [1]
> https://u2206659.ct.sendgrid.net/wf/click?upn=tzJbcg2o-2FNh3kfIF32sRUUEfAUrPlRdODloCrKUTDLEe1Xr5sB7TGzxKSs-2BD8fg9_6lpMB7VLnN-2Fj9-2FEErg8-2F-2BMBpb5QxlByTgv2M3fbWD9ebvC-2BWrN3h7jImK8EVWYBeKRW4yrs59mwQltWw1TlFtLCMC-2B5cnU0264VQjgJOC5GFzr-2Bj4wik2Mv85C3Cc4xoI-2FBtmaMZLU1X7JvFsTPKDww1VCf4TriziZJkbteHegMvMb8m0Rqxic0CFQ8MZHpGYphK-2BxTba4RvxbDlPQhdQ4syk2Mv2OGBpGOXujSqWiw-3D
> [2]
> https://u2206659.ct.sendgrid.net/wf/click?upn=3cK2FVJjyu2N-2Bxco034fZnnbK2LIZIfnojzH-2BPzZg719bV7hL2TJnC2UduzrwTqYFT6KRTGnVKmzvcAKMPt79XrrgQnt-2BSNUlminq-2F76bJx9ZjtqcTQrqktkVt4owoc319cITVAwLk-2BOQMb9wm1aTEIeL5bE5CnOiigdLaja-2FV7Nhw7GT4DrHEkMbdEKMmavkjE7veYmbT4e6KFkih-2FOxCTHdQNYHVIEz-2B4ypziKQc5XHN4kB1j-2FuhIDb2ikWU6RqN2N9p1qXuvZXynCL54yGwQvOjgNy0XcR3VhYdauJ-2FQNDIqPlox23BTST1xXhVNe4uNxMdKKQ8OhwWoSEfRY4Pye7JrdEYC64eX4TPd-2FykuUI9gWuluO7q8z-2BoeZI6oQG7v-2FFWz1E-2Feua1JgTZg87TAeBjCONsmnCgke31l0jifmIC-2Fx407Vq64ZCPjWwvQFos-2BRVvdfSvT8ttejqNvbDC07xaHE9-2BnB1e17N6sF8aMKmoNsRtw4jr1BVKxR1HbRT28CKz-2FQL9-2BSS4yOGPjOSQ-3D-3D_6lpMB7VLnN-2Fj9-2FEErg8-2F-2BMBpb5QxlByTgv2M3fbWD9ebvC-2BWrN3h7jImK8EVWYBeKRW4yrs59mwQltWw1TlFtIalWYkC6-2BF4-2BmkGxzJjiEf-2FEMGTdnQSCEQb-2FkA5BsemQxQ82GjNODfGfeDaXALKA2BZrmTTIiKn1kE24MgZmYTbNFM39OPqhcL1fmFSc6wNFRy6l7kS2qaGu9LkMgNSAXGzr9nuctJU3D8efy84jvY-3D
> [3]
> https://u2206659.ct.sendgrid.net/wf/click?upn=5DvWGaZUY8Sh5aRLWfQTKYiRLVzunonVk948p8WIzMe-2FXlJ9Cta8w8U9xoku9LrUSHNMJbSd3ZEwH-2BqnW2UHlA-3D-3D_6lpMB7VLnN-2Fj9-2FEErg8-2F-2BMBpb5QxlByTgv2M3fbWD9ebvC-2BWrN3h7jImK8EVWYBeKRW4yrs59mwQltWw1TlFtONEtphN-2FB8pS4lOjhWzGVsjUAlQ72Lzqp9gvLSjUPbeuryDYe7DStS-2FVNkLpf-2BUD9w8r2P4DD9USbxSZPKVOgBNYpVGYe4m-2FSmqVTL50bbxr7D1wR-2FlUtoY6F82bLN6agga25-2FrXh-2B3jaEpRAkOj5g-3D
> [4]
> https://u2206659.ct.sendgrid.net/wf/click?upn=5DvWGaZUY8Sh5aRLWfQTKYiRLVzunonVk948p8WIzMe-2FXlJ9Cta8w8U9xoku9LrUSHNMJbSd3ZEwH-2BqnW2UHlA-3D-3D_6lpMB7VLnN-2Fj9-2FEErg8-2F-2BMBpb5QxlByTgv2M3fbWD9ebvC-2BWrN3h7jImK8EVWYBeKRW4yrs59mwQltWw1TlFtLyjTrZKkGNgmpSVNwlmbDVoYd0L6GwblRgyALpXgS360kcPhySuWZTYiifHbIwzbdibpZN5d8FaGnjdL9cwzYwtcNnm4soP-2FrJTqB6kQQEZpr8QQfcnuFWD8e8u1HjC4-2FmeL0lKZ554XIHOM7YSRRw-3D
> 
> ---------------------------------------------------
> PLUG-discuss mailing list - PLUG-discuss at lists.phxlinux.org
> To subscribe, unsubscribe, or to change your mail settings:
> http://lists.phxlinux.org/mailman/listinfo/plug-discuss

-- 
Keith Smith