Congrats to SmartTek
    SmartTek is an mPers product.  You can meet with its creator, Barry Schweiger at ISC at a private meeting by scheduling here: http://smarttek.formstack.com/forms/letsmeetatisc or look for him at the Tri-ED booth (# 16039).   Barry has some great ideas how you can significantly increase your RMR.
    Security Sales & Integration Magazine today recognized SmartTek Systems, Inc., www.SmartTekSystems.com, and its mPERS Mobile Personal Security App as a 2015 MVP, Most Valuable Product, at its annual SSI SAMMY Awards reception held in Las Vegas. In its judging criteria for the SSI MVP Awards, the publication recognized SmartTek Systems’s mPERS for its, “Innovation, functionality, competitive advantages and benefits to the end user.” http://smartteksystems.com/
Note:  Last day to get free suspense novel - my gift to you:  http://www.amazon.com/Thursday-Noon-Mideast-Political-Thriller/dp/B00ITXV6OE
    I have another comment on your friend Anon's latest predicament, in your April 8th blog.  While I sympathize with poor Anon, he is a great educational experience for the rest of us.  I just hope that Anon's company doesn't become a cadaver.  
    While it is unfortunate that Anon may be out his install money, the real loser in this situation may be the dealer that Anon did the work for.  Your advice that Anon should notify the Department of Labor was right on the mark, but, the DOL is only going to be the tip of the iceburg.  This is a long response, but I believe that it is a huge issue and an issue that is ignored by the majority of otherwise compliant Security and Systems Integration companes.  As I have mentioned before in this blog, the IRS considers employee misclassification a serious issue (read that as there is money out there and they are going to get it) and has sent several notices to practitioners (beanhead guys like me) to tell our clients that they are coming down hard on it.  They don't like to see people who are really employees being misclassified as "contractors."  Nothing against Anon, but these "contractors" don't always remember to report the income and pay taxes on it and the IRS has had enough.  Here is what the IRS has announced that they are doing:

  •          selecting companies that send more than a few 1099's to individuals for classification audits
  •          comparing employer payroll reports to state unemployment reports (many companies are more fearful of a "contractor" filining an unemployment claim than they are of the IRS, so they pay unemployment insurance on the "contractor" but send him/her a 1099).   This type of discrepancy will eventually generate a classification audit, and the Revenue Officer will be armed with a sworn document submitted to the State that lists the "contractor" as an employee.
  •          auditing recipients of 1099's to ensure that they have properly reported the income on their tax returns and paid self employment taxes.  If the recipient has not paid self employment taxes, they may give him/her an opportunity to sign an affadavit that they were in fact an employee, and go after the "employer" for the taxes… and penalties
  •          investigating direct reports and complaints from the general public.

    The IRS even had an "amnesty" program a few years ago, by which a company could "become compliant" by voluntarily classifying its "contractors" as employees and paying a small percentage (as little as 5%) of the back taxes.  The IRS waived all penalties and all was good.  That ship has sailed, but the IRS will still work with employers who voluntarily come into compliance.  If the IRS finds you first, here is how it will most probably go down. 

  •          You will receive a form letter from the IRS inquiring about a seemingly minor employment tax issue, most times asking you to verify the amounts on your quarterly payroll tax report (Form 941).  Don't answer it without consulting your tax professional, and don't ignore it.  The IRS has you in their sights and the storm is just over the horizon.  Respond, respond correctly, and come clean, you aren't going to like what happens next if you don't.
  •          You will get a call from a Revenue Agent, or a surprise visit from a Revenue Officer.  He/she will ask to look at your payroll records, including contracts with your alledged contractors (what, you don't have contracts, how can they be contractors if you don't have contracts with them?  Who would work for your company without a contract, oh, I know, an employee). 
  •          The Revenue Agent will spend several hours (or days) hanging around your office looking at records, making your employees nervous, and giving you hearburn.
  •          The IRS will most probably determine that these "contractors" are, in fact, employees, and assess taxes and penalties, many times in the hundreds of thousands of dollars. 
  •          Since the Taxpayer (you) has the burden of proof with the IRS, this is different than a claim by a vendor or creditor.  You are guilty until you prove that you are innocent.  The IRS will begin the collection process.
  •          The IRS will place a lien on your business
  •          The IRS will levy your bank account
  •          The IRS will padlock your business and seize your assets

    Alarm company owners call me all of the time and try to make their case that these contractors are not employees.  If they can't convince me, they have no chance of convincing the IRs. Additionally, most states require licensure for Alarm companies.  A pocket card is not a license, and most say "Alarm Company Employee."  It is extremely hard, if not impossible, to prove that a person with a card in their pocket that says employee is a contractor.   
    Properly classifying employees is not that difficult, and it isn't as expensive as you may think.  A "contractor" has to pay self employement tax of 15.3% on his/her self employment income, while an employer witholds half of this amount, and pays the other half.  Either way, the tax is the same.  My advice, explain to the "contractor" that they are really an employee, you are going to administer the tax payments for them, and that you are going to withold their 7.65% tax, and pay the other 7.65% yourself.     Since the employee doesn't have to pay the 15.3% tax, you are going to pay them 7.65% less.   Not an easy conversation, but easier to convince an employee that he/she is an employee, than to convince the IRS that the employee is a contractor. 
    If you read this and still believe that these people are contrctors, call Ken and get the proper contracts to document the contractor relationship.  If you don't call Ken and do this, call Ken after the Revenue Officer has visited, as he and his attorneys also do a great job handling bankruptcies.
Mitch Reitman
Reitman Consulting Group
Also last day to get Another gift - an ISC Special by alarm guy turned author - get Jay Stuck's new novel for FREE using this link - good for today only:  http://www.amazon.com/BAD-DREME-George-Dreme-Thriller-ebook/dp/B00TVPBRWK