summer help

Leah4

We just hired a summer "intern" , he is actually working for one of our employees who will be paying for his salary out of his commissions. Do I have to put him on our payroll and withhold taxes, or can I just pay him like an independent contractor and give him a 1099 at the end of the year?

Thanks,
Leah

ritaanz

Maybe I'm dense today, but why would the company issue a 1099 when the intern was paid by another individual? Is this intern really an independent contractor?

Leah4

You raise a good point, the problem is that to accommodate this employee, we are going to be giving him is pay using a company check.

ritaanz

Oh, the company, in fact, is paying him but from a different "pot". In stead of the payroll account it will be coming from another account such as commissions, right?

Then pay this individual just as you would any other employee, taxes and all.

stilldazed

I think you have an employer. Otherwise, you may have a conflict of interest with an employee running a private business within your organization that is benefiting your employer.

There are multiple definitions of independent contractor depending on the entity you contact (IRS, DOL, other various entities). While their individual laundry lists differ a little, they all essentially look toward similar criteria:
1. who controls the work (how, when, & where it is done)
2. who bears the risk if something goes wrong
3. who provides the supplies/materials/work space where the work is conducted
4. is there a definite start/end to the project
5. how does the employer/individual regard the relationship
6. does the individual work elsewhere performing the same services

Simply choosing to pay an individual by invoice and providing a 1099 does not make a contractor relationship.

Apply the above to your situation. If the majority of your responses are 'employer,' you have an employee/employer relationship. If it is a contractor relationship, I think your salesman I think your independent contractor actually works for your salesperson. So, the next question is does your salesperson have the authority to enter into independent contracts on behalf of your company, or is there a conflict of interest with your salesperson's business gaining access to your customers and/or other proprietary info.

best wishes

ACU Frank

This whole arrangement spooks me a bit. Why are you doing this?

Leah4

Thanks, I think this really clarifies the situation. We will consider him an employee, and just work out a reimbursement agreement with the other individual.

ritaanz

Leah, this is going to get confusing. How are you going to figure out the reimbursement amount? Are you going to include the other "costs" involved?

What costs, you ask. How about the employer's match for social security and medicare to start with. Then there's workers comp insurance, unemployment, payroll processing, etc.

I'm with Frank on this one.

stilldazed

I also agree with the others. Without knowing all the details, I think you have an employee situation. You have also agreed that your company will treat the individual as an employee. So, what are the cost issues to be decided? You either have an employee or you don't. If you agree you do, then you have a position that will be a paid position, with ALL of the necessary company pay obligations to the position/employee. Treat this person's payroll the same as everyone else's.

My gut is telling me that if I were faced with a situation like what you seem to be trying to describe, my employer would have an accountability issue to address with the manager--i.e., why did the manager agree to bring in an intern, decide to pay the intern, and make it work for the company when the company has no experience or very limited experience with this in the past(???). Is intern a child of someone significant to the manager? Either I don't understand your puzzlement, something about your situation is not yet clear, or somebody is working OT trying to save face (or something else) after a commitment has been made.

Just wondering.

Leah4

The issue is that we are a commodity brokerage firm. the guy who wants to bring in an intern is one of our biggest brokers, so our relationship with this guy is not exactly a traditional employee/employer relationship. We don't really care about the additional costs, the real problem is one of perception. We just had to lay off some employees, and it looks terrible that we then hired a summer intern. Based on everyone's advice, we have gone and put him on the payroll, and just told everyone that the broker hired him and he is working for the broker who is responsible for his salary. Complicated I know, but this is the way our industry works.
Thanks!

stilldazed

Thanks for the rest of the story. The whole thing makes a whole lot more sense now.