Contract pilots are really employees

[coloneldan]

Here is something everybody doing contract work should be aware of. You might want to tell the people who hire you about it, although they won't be happy to hear it.

According to the IRS, a contract pilot is not an independant contractor. He is an employee. If the company that hires one doesn't withold taxes from his pay, they are guilty of tax evasion. Issuing a 1099 won't cut it.

This link is from the March Aviation International News.

www.ainonline.com/Issues/03_06/0306_irs_10.htm

 

[NuGuy]

Heyas,

The same goes for Flight Instructors that have to pull ANY desk duty.

The first and every time the boss says that you have to answer phones, sweep up the place, schedule you or insist that you are present at a certain time, keep a record of it. CYA

Nu

 

[Wang Chung]

Wow - interesting article. I just forwarded that link to a bunch of folks I know that are affected. Colonel- you're right about certain employers not being happy about this one...assuming they "didn't know" in the first place.

 

[timeoff]

Read on.

http://www.irs.gov/publications/p15a/ar02.html#d0e389

There isn't a single instance where a pilot would "technically" fall into the subcontractor/independant contractor category.

For you guys at your first year doing contract work, prepare to get stung on taxes. SE tax is around 15% right off the top (your portion of FICA and your employers is now paid by you), plus your respective income tax. Since you aren't actually a business, you won't have very many expenses to offset your income, therefore keeping you in a higher tax bracket. 75k a year will earn you about a 12k-15k tax bill come April 15th.

In the end you lose, even though your paycheck looks bigger ever week. Been there, done that (not as a pilot obviously). I owe more to the IRS than I do on my house.

 

[coloneldan]

Hey Wang Chung, I think I'm in love with your avatar. Do you think she would marry me? I'm a pilot ya know. :nuts:

 

[SKYLAWYER]

Just a reminder also, there is no statue of limitations on IRS tax evasion issues. They can revisit it 35 years later and demand the interest on the money they find due. The firm I work at (non-lawyer work mostly paralegal stuff, still 1.5 years away from graduation, tossing the gear in the mean while) was recently involved in a case where a flight school was hit was a huge tax bill and was forced to shut down due to years of hiring free-lance instructors. The IRS held the position that because the owner required specific schedules for the instructors they were actually employees. The bill forced to school to shut-down and liquidate its assets to settle the huge tax burden.

 

[User546]

You saying we're suppose to report this stuff in the first place??

You guys must not have as good of an accountant as I do...

 

[jimpilot]

Opinions

Here is something everybody doing contract work should be aware of. You might want to tell the people who hire you about it, although they won't be happy to hear it.

According to the IRS, a contract pilot is not an independent contractor. He is an employee. If the company that hires one doesn't withold taxes from his pay, they are guilty of tax evasion. Issuing a 1099 won't cut it.

This link is from the March Aviation International News.

www.ainonline.com/Issues/03_06/0306_irs_10.htm

Of course one must consider the source. Margaret Vernet, president of Corporate Aviators of Newtown, Conn. is in the business of selling a service that would grow greatly if flight departments started using her service to protect them selfs. I notice no IRS rulings etc. are mentioned only her opinions.

 

[coloneldan]

Of course one must consider the source. Margaret Vernet, president of Corporate Aviators of Newtown, Conn. is in the business of selling a service that would grow greatly if flight departments started using her service to protect them selfs. I notice no IRS rulings etc. are mentioned only her opinions.

Keep reading. Check out Starbucks and Microsoft. You could be right of course. I haven't investigated this yet, but I will.

 

[Corona]

Of course one must consider the source. Margaret Vernet, president of Corporate Aviators of Newtown, Conn. is in the business of selling a service that would grow greatly if flight departments started using her service to protect them selfs. I notice no IRS rulings etc. are mentioned only her opinions.

Bingo. AIN has not always been a provider of exhaustive journalism. They found a solution in search of a problem in order to sell copy. No news there, anyway.

I worked for a certain well-known flight school chain that insisted on paying everyone as a contractor. But, they also required a specific show-time in the A.M., as well as dictating a very specific training regimen for their students. They have switched to the standard employee model and my guess is they either got caught or managed to get good legal advice. That was a pretty obvious violation of the law.

Contract pilots are in a much grayer area. They are professionals, and are offering services to the general public, so to speak. Although the time, manner and place of work are not negotiable, the ability to decline the work is.
It is an interesting question, though I wouldn't be given to panic as Ms. Vernet might wish.

C