Hi Larry,
I have employee questions concerning an unemployment claim given to me from a contractor.
History: My family has temporarily relocated to Houston Texas since June. I had a skin studio in Denver Colorado that I had to close in October, 2009 due to a contractor that could no longer work on Thursday, Friday or Saturday performing facials, chemical peels, body waxing, makeup and lash extensions during my absence in Denver until my return. The claimant is my sister-n-law so I never made a contract.
Starting date - 5/6/09. Ending date - 10/21/09. Business closing date - 10/29/09.
She was paid gross payment from reported hours at $12-$14 per hour. She never worked more that 30 hours in a week and requested cash (or no taxes taken out) until the 7th pay period when I held $285.62 from four pay periods -numbers 7,8,9, 10.
When the claimant informed me she would no longer be able to keep business running at any time in the month on Thursday, Friday or Saturday it ended in a result of more client loss. The claimant requested I stay open only on Monday, Tuesday or Wednesday and force scheduling then. This decision was made by her because she picked up another job on those days. We were unable to meet that request as some clients could not visit in that time of the week. The loss of business was too overwhelming to keep up and running.
I did not apply for unemployment insurance as I saw her as a contractor most of her pay time. She ended with 13 pay periods in all in gross payment including tips. I wanted to ask you if I am filling out the paper work properly and what other rights I might have.
The paper work needs to be tomorrow. Sorry for the rush. What are your prices for phone consultations?
Carol
Carol, what a mess. As I understand it, the person is filing an unemployment claim against you. If I am reading this correctly, you paid her as an independent contractor for a while and then in the last few months withheld from her but did not file a payroll tax report as of yet.
The real question is, “is this person an employee or an independent contractor?” Since she apparently filed for unemployment she thinks that she was an employee, at least for the last few months when you were withholding. My experience with state Departments of Labor is that they always side with the worker so you may just be stuck.
I presume that you need to file the payroll tax reports for the time that you withheld and pay the necessary payroll, unemployment and workman's comp. On the amounts that you paid cash you need to make sure that you provide her with a 1099 for those amounts and also a W-2 for the wages. As I said… quite a mess.
If you need some assistance with the reports we can help but it is going to be somewhat expensive. Normally this would be a couple hundred dollars but with your situation there is going to be more work involved. We may need to file for ID numbers in addition to the various reports and W-2 and 1099. I would imagine that we are looking at fees in the $600 to $700 range. Let us know if you are in need of assistance.
Larry Kopsa CPA
