********************
more on employee embezzlement - webinar follow up
********************
It’s something that we would all like to pretend doesn’t happen---and certainly not in our business: employee embezzlement and fraud. Several weeks ago, I hosted an audio webinar for my clients on recognizing the telltale signs, self-auditing and plans of action.
Just last week, the Associated Press reported that the chief executive of a Midwest hospital chain stole over $1.5 million. How did he do it? Simple—he wrote checks to an accomplice, charged them on the books to recruiting activities, and gave the accomplice a kickback in return for turning over most of the money. And the kicker was that it took the hospitals EIGHT YEARS to figure out the scheme! Until they conducted an external audit, they were clueless.
Rather than explain all the sordid details and classic patterns in embezzlement, I am making my webinar available to my entire readership---completely free! One of the things that we pride ourselves on at K&K is our commitment to education. That’s why Jennifer writes on healthcare issues weekly and the indomitable Ken publishes his newsletter every single day!
So, if you have an hour to spare, listen to the recorded webinar - get the link by contacting Erica Yougerman, Esq. in my office 516 747 6700 x 308 or EYoungerman@KirschenbaumEsq.com. Then think critically about your organization and ask whether any of the case studies I describe could happen to you—if you haven’t already experienced some level of fraud already. We are available to consult on your exposure and recommend mitigation. For details, contact Judge Ruth Kraft at (516) 747-6700 ext. 326 or email RKraft@Kirschenbaumesq.com.
********************
Follow up comments on classifying your employees: 1099 or W2 from Oct 11, 2013 article
********************
Ken
Just a reminder for FLORIDA readers - despite the federal possibilities in the IRS codes - In Florida if you sell alarms you are engaged in Contracting so you must be either a Florida licensed Alarm or Certified Electrical Contractor or an authorized "Alarm Agent" who is employed by that licensed contractor. An "Alarm Agent" must be a payroll employee and that is defined in the statute as being paid payroll where taxes etc are deducted by the employer so there are NO 1099s allowed under Florida Alarm Contracting law. The primary impetus to this was the workman's comp reforms of several years ago which requires workers comp coverage of everyone involved in contracting unless a formal exemption is applied for and received from the State of Florida and the limitations on that exemption do not allow a commission sales person to get one unless he owns a chunk of the company and proves it.
Hope this helps
Mike Fletcher
Florida Alarm School LLC
Alarm Agent Training
*************************
Ken,
Regarding TT's question (October 11) about employees, that he also treats as independent contractors, Judge Kraft is correct, but TT may have additional issues with the IRS. I have published several articiles in alarm industry trade journals and state association publications about employee classification in the Security Industry. This is one of the hottest topics for IRS audits, and, as Ruth points out, enforcement of the provisions of the Affordable Healthcare Act is going to make this an even hotter topic. The IRS is now conducting employee classification audits in which they are looking for employees "misclassified" as contractors. One of the methods that they use to identify targets is to look for employers who send 1099's to individuals. If you are sending both a W-2 and a 1099 to the same number, you are drastically increasing your chances of scrutiny from the IRS. I have guided enough Taxpayers through these audits that I can give TT a preview as to how it would probably go down. The IRS will first review the returns of all of the individuals for whom TT's company issues 1099's. If they find one that did not report the income on his/her tax return, or one that did not file a Schedule C (self employed earnings) they will audit that individual. They will then assess the entire FICA and Medicare tax (13.3%) against the individual. The individual will most probably reinterpret his/her relationship with the Company and claim to be an employee. The IRS will have the individual sign a statement containing their version of their job duties and that he/she is actually an employee. The IRS, armed with this statement, will then visit the Company and perform a classification audit. During the classification audit the IRS will look at the true nature of the relationship between the Company and the "Contractor." They will look to see if the Company controls the method or the output of the workers. Even in an "independent sales" arrangement, the Company most probably sets pricing ranges, supplies the eventual product, sets some rules that the sales agents must follow, prevents the sales agents from selling for other companies, and controls many other aspects of the salesperson’s job function. TT does not say where he is located, but many states require anyone dealing with a customer to have a State issued identification card that says that they are an "employee” of a licensed company. It is very hard to make a case that a person carrying a card in his/her pocket that states "Alarm Company Employee" is truly a contractor.
If you are confident that your contractor truly is one, you can file IRS Form SS 8 ( Determination of Work Status for Purposes of Federal Employment Taxes and Income Tax Witholding), state your case, and let the IRS settle this issue for you. The downside of filing this Formis that if the IRS rules that the "contractor" is an employee, the Company is bound by this determination. Companies should also be aware that a "contractor" can also file this form and be classified as an employee and potentially relieved from its responsibility for half of the FICA and Medicare tax.
In summary, this is a slippery slope and a red hot topic for IRS audit and enforcement, mainly because the stakes are high and the audits are not very complicated for the IRS Agent. “Independent Sales Agents” are notorious for not filing tax returns and paying taxes, and can get the “contracting” company into a lot of hot water. In TT's case, based upon the limited information given, it appears that the only component that may not be an "employment" relationship is the straight commission compensation. This in itself will most probably not adequately support the contractor classification, and TT should also consider the exposure to wage claims for workers not making minimum wage. The IRS would also look at the “contractor’s” duties when they are classified as an “employee” to determine the control that TT has over him/her. The IRS is also charged with enforcing the Affordable Care Act, and this may appear to be an attempt by an employer to evade the provisions regarding full-time equivalent workers. Judge Kraft is an expert on this topic and could advise TT's company. Employee classification is complicated and it is not enough for your tax practitioner to know the law, they need to understand your industry. We are glad to help you to navigate the Tax Code and how it applies to the Security Industry.
Mitch Reitman
S.I.C. Consulting, Inc.
Fort Worth, TX 76133
817-698-9999
**************************
Speaking Engagements
**************************
October 22 - 25, 2013 Texas Burglar & Fire Alarm Association. San Luis Resort Spa & Conference Center Galveston, TX. registration: http://tbfaa.org/annual-convention/ For more information contact Brad Shipp – 877-908-2522 exdirector@tbfaa.org; Debi Ulmer - 281 859-4569 debi@dispatchcenter.net Classes; trade show; golf;
**************************
***************************
Webinars
****************************
**********************************
December 4, 2013 12 noon EST Register here: https://attendee.gotowebinar.com/register/4919260455763006721
Title: 10 Things Residential Security Alarm Companies should consider BEFORE entering the world of Commercial Engineered System Fire Alarms
Presented by: Bob Williams, President of Briscoe Protective Systems and his Management Team.
Briscoe Protective Systems has been in the industry for 35 Years and has made the transition from a Residential Alarm Company in the late 70’s to a Engineered System Fire and Security Company that is an SDM Top 100 Company. Find us on the web at www.BriscoeProtective.com or on LinkedIn under Companies, Facebook and Twitter@BriscoeProSys
Description: There is a big difference between installing Residential Fire Systems and Commercial Engineered Fire Systems and there are “Key Factors” that Security Company’s should consider before attempting to go into this lucrative but challenging market.
Who should attend: Alarm company owners and fire techs.
****************************************************************************