Wednesday, October 20, 2010

Forced to incorporate is a quirk of the company.


Hi June,

I'm a New York City Indie Sound mixer for TV, 10 years. Thanks so much for your very informative web site.

I'm so confused this is the second company that has sent me an email with this content. "Hi Sheila, Helen forwarded your invoice and w-9 form to me – however, we cannot pay you via a w-9 form. Because you are not incorporated, we need to pay you via a w-4 and withhold payroll taxes. You will be issued a w2 for 2010 tax reporting purposes. We are obligated to follow the instructions of New York State Department of Labor. Please complete the attached, including a signature and a withholding exemption amount on line 5. You may email it back to me, mail, or fax." I have not sent a reply to this request.

I am wondering if i should incorporate (which you don't suggest). Some years ago I used a DBA. I could I use the name I used then to get a tax id number and set up a bank account and ask this company to issue me a 1099 to the DBA?

If all my vendors start doing this will I lose my ability to deduct.

I welcome your comment.
Sheila



Hi Sheila,

If you are legitimately self-employed then there is no New York state department of labor law that says you must incorporate or you must be an employee. That demand is a quirk of the company.

Here's my post with good overview of the requirements for self-employment: Employee vs. Self-employed. And here's a post of someone in a similar situation: Forced to be an employee!

If the company will accept a federal ID # or a DBA [
doing-business-as meaning a name other than your own] or even an LLC then by all means do one of those rather than work as an employee or even more cumbersome and expensive, forming a corporation.

Would be great if you could get me a copy of the instructions of New York State Department of Labor that Helen says they are obligated to follow.

Pleased that my site is helpful. Thanks for letting me know.

-- June

2 comments:

Riles said...

I think some companies do this as extra protection from someone being reclassified as an employee.

June Walker said...

Yes, I agree with you, Riles. However, it still places the big boys in the position of pushing around the little boys for their own protection. It forces an unnecessary burden on indies.

-- June