Abe, are we Self-employed or Indentured Servants?

"Let me start by saying thank you for the opportunity to write. This will be a very technical posting. I have pulled information directly from the IRS.gov website. I will be responding intermittently throughout. My comments will be surrounded by asterisks *Hello*. This posting is specific to tax law in the U.S.A. but I welcome responses from others as well to get your opinions.

Obviously I am not a tax attorney, but I can read and I have a better than average IQ. I now ask you...As TSA officers in the United States were we truly self-employed?
From "http://www.irs.gov/faqs/faq12.html".

How do you determine if a person is an employee or an independent contractor?

The determination is complex, but is essentially made by examining the right to control how, when, and where the person performs services. It is not based on how the person is paid, how often the person is paid, or whether the person works part-time or full-time.There are three basic areas which determine employment status:

* behavioral control
* financial control and
* relationship of the parties

For more information on employer-employee relationships, refer to Chapter 2 of Publication 15, Circular E, Employer's Tax Guide and Chapter 2 of Publication 15-A (PDF), Employer's Supplemental Tax Guide. If you would like the IRS to determine whether services are performed as an employee or independent contractor, you may submit Form SS-8 (PDF), Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding. *This form is very straightforward. At the beginning it gives you the ability to put into your own words why you are even trying to figure out whether you were self-employed or not. Then it has specific questions under each of the three topics listed above.*

Unless you think you were an employee, you should report your nonemployee compensation on Form 1040, Schedule C (PDF), Profit or Loss from Business (Sole Proprietorship), or Form 1040, Schedule C-EZ (PDF), Net Profit From Business. You also need to complete Form 1040, Schedule SE (PDF), Self-Employment Tax, and pay self-employment tax on your net earnings from self-employment, if you had net earnings from self-employment of $400 or more. This is the method by which self-employed persons pay into the social security and Medicare trust funds. *Obviously as officers we were directed and instructed to report our earnings as self-employed on our annual tax returns and pay the quasi-quarterly estimated tax advance payments mentioned in the next paragraph.*

Generally, there are no tax withholding on this income. Thus, you may have been subject to the requirement to make quarterly estimated tax payments. If you did not make timely estimated tax payments, you may be assessed a penalty for an underpayment of estimated tax. Employees pay into the social security and Medicare trust funds, as well as income tax withholding, through payroll deductions.

*The Salvation Army provided the quarterly tax payments and we were expected to pay them immediately and were told that we would be terminated (even the use of that term intones employer/employee relationship) immediately if proof was found that we had not used the money for its intended purpose, a la embezzlement. My wife and I paid most of our tax payments, but actually got behind because our life was falling apart (details in the future) and used it to keep our family glued. It DID work and my wife and kids are doing well, but we now owe taxes to the government. We owe enough that we actually were scared...of the IRS and The SA. We brought it to our DC's attention thinking there would be some kind of help because of our special circumstances (we weren't binging on food or toys or anything). He said he would check and get back to us. We also specifically asked if my wife could work at a part time job just to pay off the debt. We were emphatically denied. We were trying to do the responsible thing by working off our own debt. Instead they kept us in debt... indentured servitude ...another indication that we were not in control of our employment as 'self-employed contractors'.*

If you are not sure whether you are an independent contractor or an employee, complete Form SS-8 (PDF), Determination of Employee Work Status for Purposes of Federal Employment Taxes and Income Tax Withholding. For more information on employer-employee relationships, refer to Chapter 2 of Publication 15, Circular E, Employer's Tax Guide, and Chapter 2 of Publication 15-A (PDF), Employer's Supplemental Tax Guide, and Publication 1779 (PDF), Employee Independent Contractor Brochure. For information on the tax responsibilities of self-employed persons, refer to Chapter 2 of Publication 505, Tax Withholding and Estimated Tax.

*I believe that if enough officers and former officers signed a petition with a description of their officership and filled out form SS-8 the law would immediately change, no matter how many tax lawyers The SA has on retainer.

Here are the facts as I see them: officers cannot negotiate where they work; they cannot negotiate how much they are paid; and they cannot negotiate how much they work. Those three items seem to take care of the three conditions listed above.

Now it's your turn. Tell us your stories about tax payments and whether you believe (according to the definition) that you were actually self-employed or an employee.*

References:

* Publication 505, Tax Withholding and Estimated Tax
* Tax Topic 762, Independent Contractor vs. Employee
* Tax Topic 407, Business Income
* Tax Topic 355, Estimated Tax
www.irs.gov
Source: www.irs.gov

Former Officer
USA