How to tell the difference?

An IC is the one that performs/contracts the actual work for another, usually supplying laborers, or materials.
The IRS has 3 high level requirements for determination.
1. Reasonable Basis- Must be a reasonable basis for not treating worker as employees.
2. Substantive Basis- Must have treated all workers as IC’S.
3. Reporting Consistency- Must regularly file form 1099-MISC if wages exceed $600/year.

Actions must be consistent.

Degree of control is the main determining factor!
Behavorial control- when and where to do work, what tools/equipment to use, what sequence to follow.
Financial Control- Are their unreimbursed expenses does ic invest in business, how business pays workers. extent worker can realize a profit or loss.
Tyoe of relationship

(Text courtesy of Ed Jones CPA)

Realities of being an Independent Contractor

1. You are taxed on your net income
A. You would be taxed at two levels, self-employment and your normal marginal tax rate. The net income of self-employment is taken on form 1040 se and then the employment taxes are assessed. The first 89k is taxed at 15.3% and then 2.9% thereafter. Half this tax is then subtracted from your federal income, the remainder is taxed at your normal federal and state rates.

2. Due to above its possible for a self-employed IC to pay as much as 50.3% in taxes. And the state gets an addtl 0-10% depending on the state.

An IC is essentially a business.

A. You are running a sole proprietorship. You must keep records and all normal rules of business apply. Deducting expenses is dependent on how good you keep records.

b. Insurance and registration is required.

c. Highly suggested to setup a seperate business bank account for the business, and run all income and expenses through it.

Mileage- This is the major expense of an IC. You must keep a log of biz vs personal mileage. The first and last trip of the day are considered personal unless you have a home office.

Meals/Entertainment- Only deductible if you are entertaining a client, keep details of purpose of the meal and participants, proof of payment.

Home Office- IRS does allow you to deduct expenses of home office. This advantage is small unless you rent. Your home office must be set aside solely for business.

Retirement- As a self-employed individual there is an advantage to setting up retirement plans. Your contributions are tax-deductible.

Health Insurance- This is deductible for self-employed individuals. Done on your 1040.

Keep records, this is critical!

You must pay taxes quarterly!

.

So after our last post of the negative clients we wanted to highlight the great kinds of clients. The ones that we all love to work with and care for.

1. Tippers- These types of clients greatly appreciate your service and consistenly let you know how happy they are and how indispensable you are to them. They tip your staff or you and are very appreciative of the services provided.

2. Early Bookers- These folks like to schedule their vacations in advance and will contact you with sufficient time to let you know their dates of service or when they are moving to your city and looking for dogwalking service. They are flexible and easygoing.

3. Referrers- These types of clients not only appreciate your service but they tell everyone they know about you/your company.
They pass your cards, mention your name or even post a review of their service on a website such as yelp or citysearch for all the world to see.

4. Flexibles- These clients you never hear from, but in a good way. They always pay on time, have few schedule changes. Are ok with a sitter filling in when their regular pet sitter/dog walker is out and respond promptly when you communicate with them.

5. Simples- Has a few if any requirements for their pets care outside food,water and exercise and attention

Types of potentially negative pet sitting clients, how to spot them and deal with them as professional as possible.

1. Book and Cancelers-
These types of clients will take up a lot of your time and energy constantly making requests for pet sitting visits and then canceling at the last minute. You will get some business from them but they will take a lot of time and energy from your schedule.
It is not suggested that you keep these clients on board as you could be very frustrated and lose out to potential new clients due to the time required to service them. Best to politely let them know you are not the right pet sitter for them

2. Paranoids/ Rigids-
BE VERY CAREFUL OF THESE TYPES! They are avidly on the lookout for anything to go wrong to confirm to them their sense of the world which is that things are going to go wrong for them. This most likely was caused by a previous trauma in their life. These types
are lawsuits waiting to happen and even if your do your best and everything goes well there is a high chance their expectations will not be met. In addition you will constantly be having to defend yourself, your policies, and your staff if you are not independent.
They will most likely have unrealistic expectations and ask for guarantees to things you cannot guarantee.
Avoid these types at all costs!
If you have clients such as this you are taking a very big risk every time you service them!

3. Low-tech- These types of clients can be good as they never complain or have any issues and can be pretty flexible and easygoing, you will just have to accept the fact that it will be a very hard time reaching them or getting them to return and email or phone call. Best to keep reiterating your policies, over time your low tech clients can become more communicative but you will have to
make sure to keep reiterating what policy you will like them to comply with and how.

4. Hi-Tech-
These clients use blackberry, fax, phone are very tech savvy and trusting of these modes of communication.
They are probably in powerful positions in their career and expected to be reachable at most times.
These kinds of clients can be bad as they may not hear the word no very often and expect any request to be done, even with as little as 15 minutes notice and will not be respectful any of your policies (non-cooperative).
They most likely are willing to pay top dollar for services and cost is not an issue so its up to you if you want to balance the high demand for last minute and very last minute requests vs good paying client.

5. Complainers/ Chop-Busters- These types of clients will constantly be unhappy and have concerns no matter how good your service. They will complain even if satisfied, almost as a right to bust your chops.
They can be very high maintenance. It is not suggested you service these types of clients as they will most likely not refer you.

6. Tantrum Throwers- You will know these clients on your first initial phone call. You will hear their aggression on the other end of the line and how the last 6 (literally) pet sitting companies were unable to make them happy. They are not afraid to throw around four letter words and berate. They are very angry people, best to kindly let them know you are booked or don’t service their area.

7. Boundary Pushers/ Entitled- Watch out for these folks! They will constantly test you and your policies. They will rewrite your contract, tell you when they will pay and how much they think its worth, call you at off hours expecting to reach you and feel their behavior is acceptable. Best thing to do is stay strong and try to dissuade or not attract these types of clients via your website and marketing material.

8. Last Minute client- They are unorganized and constantly book last minute- You will know them as they are the ones who call 1 day before a major holiday wanting service as a new client. They obviously knew their travel plans ahead of time, why was their pet’s care so low on their list of things to do? We find these types will always call last minute so if you take them on expect them to always call/email you on short notice.

9. Non-communicators- These types of clients will be disinterested at best. You will never hear from them, not for canceling or requesting future service. They will leave you a message or text you but rarely call or email you. They are uninterested in your service and treat as something they can’t be bothered with but know they need. Unlikely you will get any referrals from these folks.

10. Discount Seekers- These types of clients care about one thing, are you the lowest in town. To them quality of service is secondary. It is almost a game as “Find the deal” is their ultimate motive. They will call or email just to ask “what are your rates” i.e are you the lowest I can find? There will be no loyalty with these folks as there is always someone cheaper available.