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Independent Contractor- California

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  • Independent Contractor- California

    My question is

    1) If I or my subs are doing work at a customer house and the work including material and eq, is less then $500.00 PER HOUSE. Do they need a contractors liscense?
    My subs go to 3-4 houses a day.

    2) Also do you need a bear liscense to be considered a independent contractor in the state of california? I do DirecTv work...I install satellite systems

    3) Does anyone have a phone number of a Good Labor Law Attorney in Southern California that can go up against the EDD?

  • #2
    I'll answer your questions in the order posed:

    1. Anyone who contracts for or bids on a job that totals $500 or more (labor and materials) must hold a contractor's license from the CSLB. There are exceptions, including working as an employee of a licensed contractor or taking jobs that are valued at less than $500.

    2. If you subcontract work to an individual and the work requires a license (e.g., electrical, plumbing, flooring, etc) and the person to whom you subcontracted the work does not hold a valid license to do that work, then that person is your employee for state law purposes. This is true even if your subcontractor can satisfy all of the traditional tests that would otherwise render him an Independent Contractor (e.g., he holds himself out as being self-employed, he is paid by the job and not the hour, he uses his own tools & equipment, etc.).

    3. From your post, it sound like the EDD is trying to reclassify your independent contractors as employees. If successful, you could be looking at astronomical charges - basically, all the state taxes you should have withheld from their wages (as if they were employees), state unemployment compensation, state employment training tax, penalties, and interest. It is the policy of the board not to recommend attorneys or other professionals. That having said, you should start calling attorneys and/or CPA's in your area. You are looking for someone who handles tax controversy work.
    Barry S. Phillips, CPA
    www.BarryPhillips.com

    IRS Circular 230 Disclosure: This response is intended to provide general information and written for educational purposes only. It does not establish a client relationship. This communication is not intended to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to any party any matters addressed herein.

    Comment


    • #3
      ?

      Thanks, But to be sure, YOU don't a liscense if it's under $500.00 per job? or in a full day of work?

      Thats one of the things that they are saying, is that the subs that work for me, That they are not exceeding the $500.00 per job, but in a day.

      Which we pay them by piece work, So they get paid by each job they get completed. Which it only ranges from $25-$85 per house that they go to...

      Comment


      • #4
        It's $500 per job, as measured by the entire job. The important point being the $500 exemption may not apply if the subcontractor's work (albeit it under $500) is part of a larger project that exceeds $500 in labor and materials.

        Example: A homeowner is having a kitchen remodeled at a total cost of $6,000 and decides to sublet the flooring work which is only $300. The person doing the flooring would not be exempt from licensure because the overall cost of the project was over $500.

        This is spelled out in CA B&P Code Section 7048 http://www.aroundthecapitol.com/code...00/7040-7054.5 and aslo on the CSLB website (Scroll down to Item 27) http://www.cslb.ca.gov/forms/gBldgOff.asp
        Barry S. Phillips, CPA
        www.BarryPhillips.com

        IRS Circular 230 Disclosure: This response is intended to provide general information and written for educational purposes only. It does not establish a client relationship. This communication is not intended to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to any party any matters addressed herein.

        Comment


        • #5
          Barry, I assume you are sitting, but, to be safe, sit down and put away any beverage that you may be holding, because you are not going to believe what you are about to read --

          At first glance, California's law requiring licensing of contractors is a good thing.

          No need to recheck, it is me who wrote that, good ole ScottB who finds little to like in California's quirky laws.

          The abuse of the independent contractor status by those involved in construction here has been a major problem. One of the things Maine is considering is licensing. They have also been surveying businesses, including those who file Schedules C with their income tax returns for their input on the mess and possible solutions.
          Senior Professional in Human Resources and Certified Staffing Professional with over 30 years experience. Any advice provided is based upon experience and education, but does not constitute legal advice.

          Comment


          • #6
            ?

            What about statue laws on if you make over a certin amount of money in a day or year?

            Do you need a liscense for that?

            Comment


            • #7
              The licensing requirements are not based on you much money a worker earns in a day, month, year, or any other period. For example, if a handyman earns $1,000 a day (working on multiple jobs) all year long, he can generally escape the state's contractor's licensing requirements - provided he does not run afoul of the $500 rule I discussed and illustrated in great detail above.
              Barry S. Phillips, CPA
              www.BarryPhillips.com

              IRS Circular 230 Disclosure: This response is intended to provide general information and written for educational purposes only. It does not establish a client relationship. This communication is not intended to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to any party any matters addressed herein.

              Comment


              • #8
                well....

                Oaky then, EDD is just trying to bust me up, They are feeding us with a bunch of BS!

                Thanks do you deal with any EDD hearings? I have my CPA working on it for me, But they are not use to dealing with these types of issues...

                Comment


                • #9
                  Aaron J: Oaky then, EDD is just trying to bust me up.

                  If the EDD is telling you that a worker needs to possess a contractor's license if he earns more than $500 a day, I agree. However, if the EDD is arguing that one of your subcontractors is required to possess a contractor's license or some type of specialty license because the total cost of the job (labor and materials) is more than $500, the EDD may be raising a valid point.

                  From my perspective, the important question in your case being: What is the cost/value of the job to the homeowner (cost of the Direct TV dish, receivers, wiring, labor to install, etc.)? If the total cost/value is more than $500, eventhough your subcontractor is only being paid $25-$85, he may very well need a license under California law. If this is the case and he does not possess one, he will be deemed your employee v. independent contractor.

                  Aaron J: I have my CPA's working on it for me, but they are not use to dealing with these types of issues...

                  Question: If you were in need of a heart bypass operation, would you entrust your health to a doctor that "was not use to delaing with this type of issue?" Of course not. My advice: Retain an attorney or CPA that is well-versed in employment tax law and resolving tax controversy matters with the EDD. The CA state bar and/or CA Society of CPA's have websites that can facilitate you finding such a professional in your area.
                  Barry S. Phillips, CPA
                  www.BarryPhillips.com

                  IRS Circular 230 Disclosure: This response is intended to provide general information and written for educational purposes only. It does not establish a client relationship. This communication is not intended to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to any party any matters addressed herein.

                  Comment


                  • #10
                    Reponse

                    Thanks for all the advice, They are not exceeding the $500.00 per job, with all materials,cost of eq etc....It adds to around $300.00 to $350.00

                    I will contact a lawyer to see what we can do, Thanks

                    Comment

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