I regularly teach classes for a Large Training Company, as do a dozen other people, as a contractor. Large Training Company has just informed me that they have engaged a Third-Party Payor service to handle payments to contractors. They have asked me to provide my date of birth, SSN, and personal mailing address to the Third-Party Payor. It’s actually more of a demand and condition of continuing to teach. I’m also permitted to provide an EIN if I choose to, but they definitely want my DOB and SSN.
But I don’t contract with them directly. I work for My Company (I don’t own it and I’m not an officer of the corporation, but it’s easier to call it “My Company”) and My Company bills Large Training Company for my services and expenses. I don’t personally bill Large Training Company and I’ve never received any payments directly from them. All tax matters are between My Company and me. Large Training Company shouldn’t care if I’m an employee of My Company or a contractor to them or if I do the work for free.
So I just provided Third-Part Payor with a valid, recent W9 form (with legitimate EIN) for My Company. “Not acceptable,” they say. “You are the representative of My Company and we need your DOB, SSN, and personal mailing address.”
I’ve told them to get stuffed. They have no more right to this information than they have to get the same info for the employees of the company they contract to clean their offices.
Am I off-base here? Am I in some way obligated to provide my personal information to them?
If they demand that data or you won’t get paid, then your options are work for free, or provide the data. Or in the extreme long-shot, contact a live person at the payor and explain there’s another intermediary “My Company” in here and their systems need to accommodate that reality. And if they can’t / won’t understand that, then you’re back to work for free or provide the data. Or drop Large Training Company as a customer of your services.
Legally? IANA expert so I’ll withhold comment as post #2 in FQ.
Unless they’re making payments to you directly there’s no reason to require this information. They may be required to collect instructor qualifications data though.
To be clear, Third-Party Payor is under contract to Large Training Company to pay for services, NOT to My Company.
My Company has, for several years, invoiced Large Training Company directly for my training work and received payment directly from them. I am reimbursed for expenses (airfare, lodging, transportation, etc.) by My Company. I receive a W-2 or 1099 from My Company, not from Large Training Company.
I am quite concerned that I could, for example, receive a 1099 from Third-Party Payor with my SSN, which would be an error on their part. But it would be a royal PITA to correct the situation. For further confusion, Large Training Company does not itemize or pay for my expenses when I teach. They pay a lump sum and I (or My Company) is responsible for paying all expenses from that sum. A 1099 would state an amount that is likely to be 40% legitimate travel and lodging expense, not personal compensation.
I guess the question is whether 3rd Party believes in paying contract(or) services, or will only allow for work-for-wages. It sounds like they have fixated on the latter.
It may be this sort of “subcontractor” thing is kind of nuanced and they (LTC) want to divorce themselves from any issues that the IRS may have with these sorts of arrangements. (Plus the fun facts of issuing the appropriate tax documents).
Considering they probably pay their office cleaners by contract, I have trouble understanding what the issue might be with paying for teaching services that way.
This is the first thing that confuses me. A W-2 is for actual employees, and reports wages, tips and salaries. A 1099 is for non-employee contractors/freelancers, You should be getting one or the other, but not both. Are you an actual employee of My Company or are you an independent contractor?
I’ve been both. My association with My Company has been over more than ten years. But that’s basically an employment or independent contracting arrangement between My Company and me, not between Large Training Company or Third-Party Payor and me.
Third-Party Payor is apparently a large, national HR Management firm that will assume responsibility for working with independent contractors. It seems more proper for My Company to be working with Large Training Company’s accounts payable group, since we invoice them (along with our corporate W9) every time I teach a class.
Again, My Company is not a sole proprietorship and I don’t own it.
Seems to me that My Company should be handling any interaction with Large Training Company. You are instructed by My Company to teach a class for Large Training Company; My Company is obligated to pay you regardless of their ability to collect from Large Training Company.
Have you told your supervisor at My Company about the request from Large Training Company? This has a potential to turn into a real clusterfuck if it is not worked out directly between My Company and Large Trainings Company.
Yes, My Company is well aware of the situation. They are equally confused and concerned. And I agree that things can go south quickly if someone makes an error.
The response to my inquiries to Third-Party Payor goes something like this:
Me: “You don’t pay me. You pay My Company for my work. My Company then pays me. I’m not personally your independent contractor and you shouldn’t need my DOB, SSN, and address. My Company needs it to pay me, but you don’t.”
Third-Party Payor: “All contractors must be entered with their First and Last name as well as DOB and SSN. This is because they are the individual representative of their company. They will be able to include their company name in the W-9 portion of the Tax Info tab. Our banking team will look for these fields to be completed before we can activate your payroll.” (This is their actual, unedited response.)
Me: “But I’m not personally on your payroll. You don’t issue me a check at all.”
It probably doesn’t help that most of the other instructors ARE paid personally as independent contractors per class. Teach a class…check gets mailed to you individually at your home.
This should be your response to the third party whenever they ask for personal information.
How does your company bill for work done on contracts?
For my company, the customer pays my company a lump sum in advance of any labor. As me and my coworkers do labor, our pay comes from that lump sum. The lump sum is typically incremented monthly. If the money runs out, we stop work. When the contract ends, any remaining money is returned to the customer.
Your company should be confirming the details of the contract, because something does not feel right with your situation. It might be an innocent misunderstanding, but money irregularities are a warning sign that shouldn’t be ignored.
My Company accepts a request from Large Training Company to provide an instructor (me) for a certain class for (say) $2000. We are responsible for all expenses, which can be 30% to 40% of the total contract amount. Therefore, all my expenses are submitted as part of my monthly expense report to My Company. I am paid based on the net profit after expenses. The number of hours it takes is irrelevant. Flying to SF to teach? The net is bad. Driving to the nearest city to teach? The net is good. Strangely, the offered payment for teaching would be absolutely the same in each case. Large Training Company doesn’t care where the class is relative to where I live or how I manage to get there. A class 10 miles away pays $2000. A class 2800 miles away pays $2000. (This is bat-shit crazy, but it’s the way things are.)
This whole Third-Party Payor thing is apparently a brand new initiative by Large Training Company to off load payroll, taxes, commission, and other headaches on someone else.
Prior to now (6 years) My Company would just issue an invoice for teaching the class and it would get paid directly by Large Training Company in 30 days or less. The invoices don’t even mention my name, though everybody knows I’m the one actually teaching.
This is nuts. Imagine asking your plumber for their SSN before you can send a check to Roto Rooter…
Is your company a contractor or a vendor? Maybe you need to start insisting your company is a vendor, for which there is only an EIN. Perhaps since they were brought on to pay “contractors” they have a strict definition of “contractor” for which your company does not qualify.
Not saying YOU are doing anything wrong with terminology, just saying maybe the robots on the other end need to be shaken up a bit.
Maybe TPP has had run-ins with IRS and does not want a situation where what is essentially pay can disappear down a “I’m a contractor company” rabbit-hole. If the IRS comes knocking and says “who specifically was this money for, who did the work?” they can point to you? (In case IRS thinks MyCo is a tax avidance scheme.)
But as I said, they probably pay their janitorial services with a contract. Does this mean they don’t use TPP for that?
I think this is the problem right here, and I think My Company has to fix it with Third Party Payor.
But let me see if I have this right - you are a contractor working through the equivalent of an temp agency. Large Training Company calls temp agency and they send an instructor. Might be you, might be someone else. And you might be sent to teach a course at Medium Training Company although it seems you fairly regularly work at LTC. LTC pays the agency which in turn pays you and now LTC is going to a third party payroll service. Why does the third party payroll service even know your name or that you exist ? I worked for a very large employer and we sometimes used agencies to provide security , to fill in for nurses who were out sick or on vacation and so on. The payroll people at my employer had no reason to know the names of the security guards or nurses who actually came and did the work - they wouldn’t be paid through payroll , the bill would go to the people all the other bills like the phone or electric bills. They don’t get the name and SSN of the person the phone company sends to work on the lines. Or is it not just payroll - has LTC outsourced their entire finance/accounting department so that third party payor is also paying contractors and the phone bill etc?
What seems to have happened is that someone at LTC is first, unaware that unlike the others, you are not a contractor of LTC. The fact that you might be a contractor of your employer doesn’t matter and this sort of double contracting might be what’s leading to the confusion - and that’s why My Company is going to have to fix it, not you.
I know a bit about the Canadian side of this issue - and I know Revenue Canada had some guidelines about “contractors” who were essentially working full time for another company. There’s a employer contribution to UIC (Unemployment Insurance) and CPP (Canada Pension Plan - sort of like Social Security) and they had concerns that companies were calling contractors what were actually employees to avoid paying the employer portion of these wages. Plus other issues like how many “employees” work there when paying the premiums to the Worker Compensation Board, etc.
I gather there’s an employer portion of Social Security in the USA too?. Plus IIRC the USA has rules that apply differently if you have less than, say, 24 or 50 or 100 workers? They don’t want a company claiming that the workers actually work for 10 different companies with only 20 employees each…
Unless the contracting company was arms-length from the worker (which yours appears to be) the rules had to do with to what extent the worker set their own schedule, how much direct supervision, etc. (There was also some criteria like whether 80% or more of a “personal corporation” revenue came from one source…IIRC) When I looked into this about 2 decades ago, Revenue Canada also had rules about not retaining earnings in the corporation so it didn’t accumulate money and turn into a way to pay out income over multiple years to minimize taxes.
That’s why I’m wondering if something similar is applying with your workplace and their issues with the IRS.
If TPP won’t play ball, I suppose you will have to either play their game or stop working there.
I guess the real question is what the resulting tax treatment looks like - do they ignore the MyCo and send you a year-end form as if you were an employee of Large Training Company? Will each cheque from TPP include employee-type tax deductions? And how does that mess up the books at MyCo…?
Thanks, doreen! I hate to go into too many details, but I can probably make it a bit clearer.
I co-founded My Company several years before I started teaching for LTC. I then “semi-retired” (I’m in my 70s) and sold my piece of the company to the co-owner. My current status is best described as a “principal emeritus.” I continue to do work for them and frequently represent them as a consultant, provide technical resources, attend conferences in their name, represent them as a volunteer on national committees, and generally do whatever my experience permits. I’m compensated very little, but I net enough from activities like teaching to cover the expense of having me donate time on the licensing/certification boards and national committees. In fact, I also donate time to teach various classes for free, when appropriate. My Company benefits greatly from this.
My Company is glad to have me work with them, and they market me as an associate. They handle all accounting, including my expenses, and issue me a 1099 each year. I do as much work for them as I choose to and make all decisions regarding my workload, schedule, and calendar. I am free to take on other independent work, which I occasionally do.