Robin's Ruminations

This posting completes my direct analysis of the six part test used by Washington to determine whether or not a worker is an employee or an IC.  The sixth test is very similar to the fifth in that it is fairly simple to determine whether or not the worker can be classed as an IC.

6.  Maintain Books - If you want to use IC's you must make certain they are maintaining their own set of books.  They need to keep some kind of accounts receivable and payable.  They need to file their own tax returns (see tests 4 and 5).  They should maintain a checking account separate from their personal account just for business related income and expenses.  

I understand some IC's don't want to bother with this boring side of being in business.  They're process servers not bookkeepers!?!  The only problem is, if you get audited and the auditor looks closely at your IC's, and discovers they aren't keeping their own books - well you fail the six part test.  When he's done the auditor will hand you a bill for three years taxes plus penalties plus interest!  Now how much trouble is it to make sure your IC's are keeping their own books?  Given the alternative I don't think it is much trouble at all.

SUMMARY
I'll take a moment here to muse about what I've covered on this topic over the past couple of weeks.  And, because it was the department which is triggering so much angst in our industry right now, I'll say a few things about L&I.  But keep in mind that pretty much the same applies to Employment Security and the IRS.

We've been told by L&I that they are focusing on the process serving and legal messenger industry.  Some companies have been audited already, some are under audit, and others are sure to follow.  It doesn't matter how small you are you need to prepare for the knock at the door.

The interesting thing is, L&I is a creature of business.  It was created to solve some serious problems businesses were having with their employees.  Namely they were getting sued on a regular basis by injured workers.  Judgments were being handed down which crippled many companies and pushed others out of existence.  The solution was a system of insurance in which both sides, workers on one and business on the other, agreed to certain trade offs.  Workers gave up their right to sue and employers agreed to fund L&I.  

But time has taken its toll and the original problems have been forgotten.  Many in business now chafe under what are seen as burdensome taxes.  Some employees game the system and milk it for every paid day off they can get.  And society itself has changed thus making some of the established ways of doing things outmoded and outdated.

Process serving, though an ancient profession, seems to have slid under the government radar until only recently.  When L&I finally began to take some notice of us they attempted to apply their existing rules to a group for which they didn't even have a classification.  After considerable effort and negotiation L&I finally established a classification for us under the private investigator / security guard heading, 6601-07.  

We are an unusual industry.  We don't really fit the norm when it comes to government's preconceptions about business.  Even the application of the six part test doesn't make sense.  The test was created to keep prevent abuses in industries much larger than ours.  The most prominent of which is the construction industry.  We have little in common with most other businesses.  I don't think it would be a stretch to say we're somewhat unique.

I've received some information from my friend Tony Klein in California.  The process servers there have already gone through the problems we are now encountering.  As time permits I'll examine it and attempt to determine its usefulness to our situation.

I urge all of you, whether you use employees or IC's, to learn the law as it applies to your business.  Apply what you learn and play within the rules.  If you don't think the rules are fair then work to change them.