Tax question

[Trans Lift]

Quick question. Does anyone know the if flight schools are actually allowed to send out a 1099 MISC for full time flight instructors?

[adam32]

No...not really anyway...

[apiaguy]

why not?... plausible to be a sub contractor as a flight instructor.. just need to set it up properly.

[adam32]

why not?... plausible to be a sub contractor as a flight instructor.. just need to set it up properly.

 

How my accountant explained it, in order to be a sub contractor he would need to supply his own tools (helicopter) in order to legally do it...I know people do it, I just don't because I know I'm the one guy that will get caught...and with the 70,000+ new hires at the IRS, I don't want to take that chance...

[clay]

Hey, I'm a bit curious about this as well. I JUST had a 1099-misc show up from a previous employer. kinda caught me off guard considering last year, he told me "I dont issue 1099's to instructors" and I never got one last year either. Wondering why I get one now that I left the company

[yzchopper]

I was gonna fly as an instructor at the flight school that I trained at and they told me to just go get a LLC business license and then they would hire me under my business name. I would therefore be a sub-contract CFI. Most of the CFI's at the flight school work this way. The school contracted you thru your busniess is how that works so you would get a 1099. You are responsible for taking out your own taxes. It just means the school has to pay out less taxes for its' employees. Hope this helps. It can be confusing doing it this way but it is legal.

 

Clay,

You received one because the employer did not take out taxes on your paychecks and now the employer is trying to cover their arse for not doing the taxes. It sounds like your former employer may be getting audited.

 

Steve

[Trans Lift]

I just got one from my former employer. I found out that it means I have to set up a company name and pay a shitload more taxes. This is ridiculous seeing that I was a full time employee. I think it's time to have a chat with the IRS.

[Inferno]

You'd be better off seeing a CPA than going anywhere near the IRS... Nothing good comes from seeing the IRS.....

I just got one from my former employer. I found out that it means I have to set up a company name and pay a shitload more taxes. This is ridiculous seeing that I was a full time employee. I think it's time to have a chat with the IRS.

[fry]

You probably do not want to be paid as an independent contractor because...in addition to any personal liability and benefits issues...as such you would be responsible to pay both the employer and the employee payroll taxes when you file your 1040. That's about 13% in taxes you'll have to come up with on April 15th...or make estimated payments for during the year...in addition to any income tax you might owe. (The employer and employee payroll taxes are 7.65% each and as an independent contractor you pay both but, the employee half is deductible so your actual total payroll tax is about 13% rather than the simple sum of the two...15.3%)

 

The only way it would make sense to do this is if you've got a lot of business deductions to offset that additional tax. For example, if the payroll tax amounted to $2,300...about the amount of additional payroll tax on $40k of income...you would need about $15,000 in business deductions to offset that tax.

 

Of course an employer would love to pay you as an independent contractor because then he does not pay the employer tax. But generally flight instructors who do not control their own schedules or provide their own tools...a helicopter...so they do not qualify as contractors under the tax code.

 

If the employer does give you a 1099MISC rather than a W-2 just contact the IRS an tell them you were not an independent contractor...they will agree with you...and they will go back and beat hell out of the employer for the back taxes...employer and emplyee...plus penalties and interest. That will be the last time that school pulls that crap.

 

A warning: If you file your 1040 as an independent contractor and deduct a bunch of business expenses (e.g., training costs) to offset the payroll tax you could be in for a nasty surprise later. If two years down the road the IRS decides to audiit your Schedule C deductions (which are the second highest percentage of IRS audits) and finds that you did not qualify as an independent contractor they will disallow those deductions and you will be liable for the additional taxes, penalties and interest....plus you will have paid the payroll taxes. This is not a matter of a grey area in the tax code...the NON-independent contractor status of flight instructors has well established precedents. By taking that position you are just playing the audit lottery...i.e., betting the IRS will not pick you out for audit.

 

Oh, and ignore all that nonsense about setting up an LLC or a corporation. It will cost you more to have them set up than you will ever save in taxes BUT, more importantly, it does NOT qualify you for independent contractor status if you would not have been qualified otherwise.

[apiaguy]

total scare tactic...

you can set up properly to be an independent contractor flight instructor....

of course, you have to follow the law... if it means you pay a little more taxes in order to have a job... I imagine a number of you would choose to be independent.

 

setting up as an llc or corp is not to "save in taxes", it is to establish a legitimate business entity.

 

I agree that being an independent contractor has its own set of slippery slope issues and you should probabally get some advice NOT from the internet....

This issue was the basis for the TX guy flying his plane into the building.

[Trans Lift]

Thanks for the info. I have no interest in being an independent contractor so therefore, I don't like being screwed by someone who is too lazy to do the proper work for their employees. I'm going to sort this problem out with the help of a professional. I just wanted to get some extra info and to ee if anyone else had gone through this issue.

[horsefly]

As I understand, it is very difficult for a flight instructor to actually be an independent contractor. My wife and I discussed this subject quite a bit when she was getting her accounting degree. There is no absolute items that make the determination according to the IRS. However there are 3 main things they look at.

 

1. You set your own schedule.

2. You set your pay (such as in a contract).

3. You determine how you accomplish the job.

 

Basically if the flight school is setting your work schedule, paying you by the hour, and giving you some kind of syllabus to follow, then you are definitely not an independent contractor.

 

If the school only supplies you with students, maybe a helicopter, and only sets the objective of getting the students their rating, and you are allowed to train them the way you want, when you want, then you may be an independent contractor.

 

Finally this is from the IRS website:

The general rule is that an individual is an independent contractor if you, the person for whom the services are performed, have the right to control or direct only the result of the work and not the means and methods of accomplishing the result.

[gmsemel]

I seen this stuff over the years. Every time the national economy takes a nose dive. Businesses do the 1099 sub contractor thing. I once was working full time for a company and they were doing the normal W-2's for taxes. Then they had a meeting on my day off and when I showed up next for work they blind sided me on this stuff. They just said we are going Sub Contract, you have to get a tax number and set up a business name and we will pay you an additional 5 dollars per hour. Have a nice day. I did that, jobs were hard to come by then like now. In the end it was better for me, Just pay me and I will take care of it myself. It can work for you if you want to work it. You will need to keep some records and make quarterly tax payments. This is good in that you start looking at how the government spends money and how you have to write a check to pay for the BS they do. Just make sure that they pay you for your time. That means as a Flight instructor, you get to bill for your time, not them and then they split it with you. In other words, you get the whole fee per hour or dam near it. don't go 50/50 you loose on it, 60/40 you will just break even and hold out for 75/25 or 100% and then say to them I will pay you ex dollars a week for office rental. You would need to talk to a good accountant. And maybe a lawyer too. You set your Fee, and then pay some rent for a desk and lights and such. And you run it like you would any business. Read up on Business and how to run one.

[Cowboydave157]

Many things to keep in mind when dealing with W2 or Contractor status.

 

The flight school can likely get away with 1099 status if the following apply

1) You do not have a set schedule

2) You are paid only to perfom a task. Such as providing instruction. If you are also paid

to perform other tasks, it gets harder for them to go the 1099 route.

3) You do not have business cards with the name of the flight school on them.

 

One of the real tricky issues is liability insurance and workmans comp. Unless the schools policy states that contactors are covered, you are on your own. This means if a lawsuit occurs, the flight school's insurance is going to put the laser dot dead center on your chest.

 

FYI, if you are a LLP or LLC, the flight school is required to provide you with a 1099.

If you are a Sub-S or Corp, they are not required to provide a 1099.

Not sure about LLP and LLC but with my Sub-S, I am require to pay myself a W2 wage.

Either way, you are required to file the correct tax forms and make the payments.

 

As a sub, there are some extra deductions that you can claim. Mileage to and from the work site. A portion of your cell phone bill (if that is how the school contacts you). A portion of your internet bill (if you use your PC to check weather for eaxample).

Hope this helps