Skip to comments.IRS orders FedEx to pay $319 mln
Posted on 12/22/2007 2:49:32 PM PST by lowbridge
FedEx Corp. said late Friday that the Internal Revenue Service has ordered the company to pay back taxes and fines totaling $319 million for ground employees the firm misclassified as independent contractors.
The ruling covers 13,000 employees FedEx had in 2002, and the company said that the IRS is investigating the status of contractors hired between 2004 and 2006. That probe could lead to further penalties, the company said.
(Excerpt) Read more at marketwatch.com ...
Fed-Ex should tell them “MOLON LABE!”
Reason #45873459 that the IRS should be abolished. What difference does it make who did what, as long as it was done? Taxing the same job differently for different workers is social-micro-engineering. Only the most arrogant or the most clueless think they know how to create utopia by such engineering. Neither class should be in charge of America.
Don't get me started on how crummy DHL's service is. Took them 5 days to deliver a guaranteed 2 day delivery. Cost me a bundle of money.
From the postings that I’ve read at a couple of consumer websites, I don’t understand how DHL is still in business (along with Best Buy, Amazon, Ebay, Circuit City, etc, etc).
A similar level of vigilance is required on the part of people who feature themselves as independent contractors, but only work for one customer. The IRS is going to come after you and your customer.
Just tell the IRS those 13,000 employees were chinese dishwashers.
I've purchased Russian kettlebells form a supplier down in Texas. He uses UPS exclusively because they will reimburse his losses if they screw up the delivery or lose the package. Not so with FedEx. He stopped using FedEx because they kept losing the packages and not covering the losses. The "independent contractors" didn't have any liability or accountability.
Then why in the hell should this make any difference - other than the fact it is a damn arbitrary law?
It's a law written at the behest of labor unions, who live in terror that their employers are going to reclassify them all as independent contractors to avoid paying health benefits and to allow them to stop doing business with the deadwood among their numbers...most of whom are union officers. ;)
It doesn't matter to them that independent contractor status might be a huge advantage to their members, as the most talented among them could command much higher rates.
It goes beyond that... There are 20 common law factors that are supposed to be used to weigh whether or not a worker is a contractor or employee - case law shows that if the worker meets just 4-5 of the factors, they are found to not be an employee. Of course, the IRS takes the stance that if you meet ANY of the 20, it’s an employee. Of course, States consider otherwise (and rightly so).
Try to justify to a State why a contractor is NOT given a 1099, but a W-2. And try to explain to the IRS why an “employee” is given a 1099 and not a W-2. And try not to get both sides upset at you.
If you’re tagged/audited by the IRS and you have ANY contractors on staff, you best not meet ANY of the 20 criteria or they will consider it willful misrepresentation of classification and immediately hit you for at least twice the taxes that should have been due (income and FICA and SS). And you have to fight to not only show it was NOT willful, but that the worker was in fact a contractor.
I know, it happened to me 3 times in 7 years. Even pointing out to the “revenue officer” (yes, that’s their title) the LAW and the IRS’ own guidelines that it is to be a WEIGHTED evaluation of the 20 factors, I was still found to be committing willful misrepresentation and hit with literally hundreds of thousands of dollars of fines and levies. Which are applied immediately - you know what an IRS levy does to your credit lines?
In each case, after 6 months and tens of thousands of dollars in legal fees to fight them I got the IRS to “forgive” the infraction and accept my classification. Yes, “forgive” me for doing nothing wrong to start. In each time, they even tried to attach my personal assets even though that is clearly illegal (corporate veil).
Just another example of the IRS taking a guilty-until-proven-innocent attitude. And even when PROVEN innocent in a judicial pre-trial review or court they still consider you’re doing something wrong, they just haven’t found it yet... I’m convinced that beating them in the first audit was the reason I got two more in the space of 3 years.
The IRS is one of the largest drags on the economy; I know that much of the offshoring of companies and assets is strictly to avoid their own contradictory and unilateral means of dealing with the tax payer. If the asset is outside their reach, there’s a lot less to worry about...
That’s what they get for trying to work within the law.
If they had just hired illegals they would be getting a subsidy from congress instead of having to pay fines to the IRS.
Can add only one word: FairTax.
Send treats to the troops...
Great because you did it!
Seriously, the IRS has some of the craziest rules when it comes to determining who's an employee VS who's a contractor... There are actually companies who do nothing but "certify" contractors. I know this because a company I worked for had a very hard time with the IRS a while back...
I worked as a full time employee of a company... A large software company wanted me to come on to their site, using their equipment, to teach a 5 day class. So they attempted to hire my company to send me to teach the class. But because I was going to the software company's offices, and using their equipment, I was being classified as an employee of that software company by the certification company. We tried to explain to them that I wasn't being hired, but my company was being contracted to send me. It was a real nightmare, and it involved all sorts of letters, a tax lawyer, and a waiver over a period of about 3 weeks. Eventually things were straightened out and I jetted off to teach the class, but it was a real nightmare.
See my #18 post...
And legally, they should not. Per the IRS’s own publication P15A, there are 20 common law factors, of which sole-customer is just one. The IRS is to consider ALL factors in determining independent contractor or employee status.
Unfortunately, the IRS doesn’t follow its own guidelines and assumes if you meet ANY of the factors you’re an employee. Which is clearly incorrect and illegal.
But you’re right, they’ll come after you anyway and force you to prove otherwise - that you’re not breaking the law. Guilty until proven innocent, in the case of the IRS.
Weren’t these the delivery guys from the RPS ground service that Fedex bought from Roadway Freight to jumpstart their Fedex Ground service? The RPS delivery guys were independent contractors.
Well now at least their shorts are “Brown”.
The difference is who pays for the other half of the social security taxes. An employee on a W4/W2 basis has income taxes , social security taxes and medicare taxes extracted and forwarded by the employer on each paycheck period. The employer has to pay a matching amount to the IRS. When an independent contractor is involved, the company sends a 1099 for the gross amount of wages paid to the contractor. That contractor is then responsible for paying income taxes, social security taxes, self employment taxes and medicare taxes. Companies like the contractor model because it saves them the administrative overhead of managing W4/W2 payroll and also lets them off the hook for their half of the social security tax burden. That's fine...unless the "contractor" is really a dedicated employee who works for no other business. That is labeled an attempt to evade the tax responsibilities on the part of the defacto employer.
Every law created by governments is an arbitrary law. You don't get to choose which ones to obey.
I thought I was the only one who despised DHL.
No kidding. They will even freeze access to your bank accounts before you've had a shot a due process. It's pretty hard to defend yourself when the attacking party is free to seize control of the very assets you require to mount a defense.
I’d like to think I am one of the nice Amazon CSR’s.
and read all the complaints about Amazon. I want to order a couple of things from them but am afraid to after reading all the complaints.
How is FedEx the contractors sole customer? Who are all those people they pick up packages from and deliver them to?
PS: I am a real estate bvroker and I am the sole contractor for the associates, by state regulation. Can they be on a 1099 basis?
Does the IRS does not track 1099s?
I suspect the IRS does not want to deal with “independent contractors” due to the extra paperwork.
Then why in the hell should this make any differenceIt's all about withholding.
Taxing the same job differently for different workers is social-micro-engineering. Only the most arrogant or the most clueless think they know how to create utopia by such engineering.
Sorry, but classifying ground drivers as “independent contractors” and placing all the business risk upon those drivers PLUS the ‘demand of their time’ driving around in a FedEx truck and wearing a FedEx uniform makes them EMPLOYEES.
FedEx was skirting their employer responsibility by whoring out these people who simply want to fed their families. ESPECIALLY when they have a WHOLE NEW DEPARTMENT that micromanages the mileage and state-by-state fuel purchases of these so-called “independent contractors.”
I think the IRS is out of control, but corporations pimping the poor schmuck who needs to feed his family is even worse.
Been shopping with Amazon for 10 years and never had any issues. DHL on the other hand...just avoid them when ordering.
And that is precisely the reason that the IRS should be abolished. They have placed themselves above the law and the very constitution itself. Why this is allowed to go on is beyond me.
Meanwhile, CompUSA, which has been good for me, is shutting its doors after the holidays.
Not only the SS and income tax withholding, it can also be a way to avoid obtaining Workers' Compensation insurance and quite likely all or part of the liability insurance bill. This type of thing used to happen a lot in the trucking business but most states have tightened their laws.
Last year I was tracking a Fed Ex ground shipment....and sure enough it arrived on time in Montana. Problem was....I’m in New Jersey.
I have an account with FedEx, print my own labels at home, and drop the packages at any FedEx Kinkos or many Mailboxes etc too. In 5 years of shipping several hundred packages a year via FedEx Ground, they have never once misdelivered or not delivered a package. Insurance up to $100 is included with the shipping charge.
FedEx Ground is significantly less expensive than UPS, plus their workers are non-union as opposed to UPS, which of course is union. And we all know which political party those union dues get donated to ...
I think most people understand that the mean old IRS will come after ‘you’ on any number of issues.
But you are missing the point.
Why should the ‘free’ American people put up with this KGB IRS crap???
Read and Heed:
Bump for bookmark since I work there.
I've been purchasing from Amazon almost as long, and haven't had any problems. I have returned things a couple of times, and the process was simple and seamless both times. Also, their prices are quite often the lowest on the web or locally as well (I shop diligently for price, once I know what item I want), and if Amazon is shipping it, as opposed to a third party, I usually get free shipping.
You’ll be glad to hear that Comp USA has finally closed ALL of their stores. :) Good riddance.
Who bankrolls these horrible companies for years on end? Yeesh!
Did FedEx dictate whether the "contractors" could charge those other people additional delivery charges in the conduct of their "business". An independent contractor would be setting their own rates to charge FedEx, and also whatever they could charge their "other" customers for pickup, storage, transportation, and delivery.
That's what "businesses" do.
If the FedEx contract restricted the "contractor's" ability to charge "other customers" whatever their particular markets would bear, then they were not very "independent".