WHAT CONSTITUTES EMPLOYED OR SELF EMPLOYED??

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His princess - 30 Oct 2004 15:48 GMT

My us fiance is president/CEO of his corporation which is a dealership
working with water purification. Although he is president/CEO - he is
the major stock holder - he works for his corporation also so for the
I-134 is he employed or self employed. We cant work out which
category he falls into.

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sphyrapicus - 30 Oct 2004 16:10 GMT

> My us fiance is president/CEO of his corporation which is a dealership
> working with water purification. Although he is president/CEO - he is
> the major stock holder - he works for his corporation also so for the
> I-134 is he employed or self employed. We cant work out which
> category he falls into.

How does he report his earnings with the IRS?

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Michael D. Young - 30 Oct 2004 16:16 GMT

<!doctype html public "-//w3c//dtd html 4.0 transitional//en">
<html>
<blockquote TYPE=CITE>My us fiance is president/CEO of his corporation
which is a dealership
 working with water purification.  Although he is president/CEO
- he is
 the major stock holder - he works for his corporation also so for the
 I-134 is he employed or self employed.  We cant work out which
 category he falls into.</blockquote>

 RS 01802.000 Self-Employment - Trade or Business:
<A HREF="http://policy.ssa.gov/poms.nsf/lnx/0301802000">http://policy.ssa.gov/poms.nsf/ln
x/0301802000</A>
RS 01802.001 Trade or Business General Policy
Sec. 211(c) of the Act provides that the term trade or business shall
have the same meaning as when used in sec. 162 of the Internal Revenue
Code (IRC).
Although the IRC does not define the term trade or business, certain
criteria have been set forth in court decisions and IRS rulings for determining
whether a trade or business exists.
RS 01802.002 Factors Indicating the Existence of a Trade or Business
A. POLICY - GENERAL
-- Consider the following in determining the existence of a trade or
business:
-- the good faith intention of making a profit or producing income,
-- continuity of operations, repetition of transactions, or regularity
of activities,
-- regular occupation,
-- holding out to others as being engaged in the selling of goods or
services.
NOTE: A single factor is not sufficient upon which to determine the
existence of a trade or business. All the factors need not apply.
B. POLICY OTHER FACTORS
1. Personal Services
The fact that an individual derives his/her income from a trade or business
is controlling not the nature or extent of the services.
2. Seasonal
Although length of time is usually an important factor, certain activities
are seasonal, e.g. selling ice cream during the summer months.
3. Illegality
An illegal activity may constitute a trade or business. Individuals
engaged in such activities are required to report their income and pay
SE taxes.
4. Multiple Enterprises
An individual may have more than one trade or business . On the other
hand, an individual may have more than one business enterprise, but one
or more may be excluded from the definition of trade or business.
5. Hobbies
The buying and selling involved with a hobby is generally done for the
purpose of improving or otherwise furthering the hobby. In these cases,the
activities do not constitute a trade or business.
RS 01802.010 Development of Questionable Trade or Business
A. BACKGROUND
Self-employed individuals report NESE and SEI on their Federal income
tax returns. In most instances there is no need to question the existence
of the trade or business. The following guidelines are provided to assist
in development when required.
B. PROCEDURE
 The following list of questions provide general guidance in gathering
information to determine the existence of a trade or business. Adapt the
questions to fit the situation.
-- Has IRS issued a ruling to the individual regarding the existence
of a trade or business?
-- What documents has the individual executed? (e.g., SS-4, tax reports
or returns, . . . etc.)
-- Why does the individual feel the activities constitute a trade or
business?
-- Associating with other individuals? In what capacity? (i.e. partner,
helper etc.)
-- What business firms or other organizations did the individual deal
with?
-- How was income reported on tax return?
-- Business licenses, permits, registrations?
-- Place of business?
-- Indications of availability to others for transacting business?
-- Member of business or trade association?
RS 01802.015 S Corporation
A. DEFINITION
Like any other corporation, an S corporation is separate and distinct
from its shareholders. See RS 02101.555. The basic difference from other
corporations is it does not pay Federal corporate income tax. Income is
passed directly to the shareholders for Federal income tax purposes. The
corporation is carrying on any trade or business. The shareholders are
not self-employed nor is their income NESE.
B. POLICY - COVERAGE
The income from an S corporation may take three forms:
Wages, received by shareholders as employees of the corporation,
SEI, for fees paid to a corporate director,
Dividends, paid to shareholders.
RS 02101.555 Small Business Corporations
<A HREF="http://policy.ssa.gov/poms.nsf/lnx/0302101555">http://policy.ssa.gov/poms.nsf/ln
x/0302101555</A>
A. GENERAL
Subchapter S of the Internal Revenue Code permits certain small business
corporations (called S Corporations) to elect not to be subject to Federal
corporation income tax. (RS 01802.003 explains that shareholders of such
a corporation are not engaged in a trade or business.) An S Corporation
is in every respect a corporation. The only difference between S Corporation
and others is liability for Federal corporate income tax. Each shareholder
of the electing corporation on the last day of the corporation's taxable
year must include on his/her individual tax return his/her prorata share
of the annual corporate income whether such income is distributed or undistributed.
The electing corporation, although not liable for corporate income tax,
is required to file an informational return on Form 1120-S (U.S. Small
Business Corporation Return of Income).
The purpose of this law is to aid and foster small business corporations.
Rather than taxing the S Corporation, the individual shareholders are taxed
similar to the way partnership earnings are taxed. In general, this treatment
permits businesses to select the form of business organization desired
without an additional tax burden.
B. CORPORATION ELIGIBILITY REQUIREMENTS
This law applies only to businesses that are legally incorporated. A
corporation makes an election by filing a Form 2553 (Election of Small
Business Corporation) with the District Director of Internal Revenue. To
qualify, all shareholders must consent to the election and the corporation
must meet certain requirements as to number of shareholders, class of stock,
etc.
This tax election may be revoked if the owners of a majority of the
shares votes to do so or if the corporation no longer meets the requirements
for S status. Termination of the tax election does not terminate the corporate
structure. However, it does mean that the corporation becomes subject to
Federal corporate income tax in the same manner and extent as if an election
had not been made.
An election made by the shareholders does not change the character of
the corporation income. The income is still earned by the corporation.
When the corporation carries on a trade or business, the individual shareholder
will never have NESE from that trade or business. But, it is proper, and
not unusual, for a shareholder to be an employee of the corporation and
to be paid wages. Also, from time to time, the shareholders may receive
dividends payments on their investments. Dividends paid on captial investments
are not earnings.
Questions may arise in connection with claims involving individuals
who are shareholders in this type of corporation relating to the bona fides
of the corporate entity and its operation. In general the approach set
forth in RS 02101.540-RS 02101.550 applies in resolving such questions.
An election not to be subject to corporate taxes is not adequate grounds
for questioning the bona fides.
RS 01802.032 Corporation Directors
<A HREF="http://policy.ssa.gov/poms.nsf/lnx/0301802032">http://policy.ssa.gov/poms.nsf/ln
x/0301802032</A>
POLICY
 Corporation directors are self-employed. In rare situations an individual
may be self-employed as a director and also perform services as an employee.
B. REFERENCE
 Corporation director is defined in RS 02101.018 and RS 02101.505
RS 02101.018 Director of a Corporation
<A HREF="http://policy.ssa.gov/poms.nsf/lnx/0302101018">http://policy.ssa.gov/poms.nsf/ln
x/0302101018</A>
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  </html>

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meauxna - 30 Oct 2004 16:29 GMT

Based on your story at VJ, I maintain that he is an employee.
If his tax return is late and he won't hire an accountant to complete
it, what should we do? Go over to his place and rough him up? Hold him
down with a #2 pencil ? :)

Many people read both groups, princess, so summarize your situation and
maybe someone will have an idea of what you can do about the missing
currnet tax return for your K1 visa peititon.

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sphyrapicus - 30 Oct 2004 16:41 GMT

> Based on your story at VJ, I maintain that he is an employee.
> If his tax return is late and he won't hire an accountant to complete
[quoted text clipped - 4 lines]
> and maybe someone will have an idea of what you can do about the
> missing currnet tax return for your K1 visa peititon.

OK, I read the case on VJ.

If your fiance is a bonehead and refuses to file his taxes, he will be
denied. Simple. There is no point in bickering over whether he is an
employee or not and whether he can get away without filing income taxes
if he classifies himself as self-employed. This is ridiculous. He MUST
file income taxes.

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USA & Pakistan - 31 Oct 2004 06:51 GMT

If the company is a corporation, then he is an employee. A corporation
is a seperate entity with its own tax id number. He may own the largest
share or even all of the shares, but that does not change his status or
the corporations. He is paid a wage from the corporation and possibly
dividends, but it is not self employment income. If he were self
employed, then he would pay self employment tax.

That is the whole point of incorporating - it separates you from the
company.
It does seem odd that the president/CEO of a corporation does not even
know the definition of one.

And after two newsgroups telling you that he is not self employed and to
go see an accountant, if you still dont GET IT, then do a search online
to read about the differences in a sole-proprietor, a partnership, an
LLC, S-corp, & a C-corp.

Good Luck
-Marnee

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ian-mstm - 31 Oct 2004 15:06 GMT

> If the company is a corporation, then he is an employee. A
> corporation is a seperate entity with its own tax id number. He
[quoted text clipped - 16 lines]
> Good Luck
> -Marnee

My concern here - well, as concerned as I usually am about this sort of
thing - is that it looks as though the guy is trying to dodge IRS for
some reason. IMHO this does not bode well for a long-term relationship!
The OP should get out while she can, before her fiance puts her name on
something as a tax dodge and she ends up in financial ruin.

Ian - ever the optimist

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Jacob24 - 31 Oct 2004 19:45 GMT

> My concern here - well, as concerned as I usually am about this sort
> of thing - is that it looks as though the guy is trying to dodge IRS
[quoted text clipped - 4 lines]
>
> Ian - ever the optimist

So now you are not only an expert in the immigration field, but also a
financial adviser, tax professional, relationship consultant and fortune
teller? I must say you are multitalented. Glad you are in KY (hillbilly
country). I am sure your neighbors may believe all of this but not here.
Why dont you come down from the hills once in a while and go to the
library where you can learn something. You may not be from KY but the
mentality is showing up in you.

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meauxna - 31 Oct 2004 21:32 GMT

> So now you are not only an expert in the immigration field, but also a
> financial adviser, tax professional, relationship consultant and
[quoted text clipped - 3 lines]
> and go to the library where you can learn something. You may not be
> from KY but the mentality is showing up in you.

Jacob: you have made your point--you don't like Ian.
Give it a rest now. Stalking is bad for your health.

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Rete - 31 Oct 2004 22:08 GMT

Jacob

Continue the harrassment and you will receive a ban for a unspecific
time period.

If you don't care for a poster's personality, then mark them as "ignore"
and let it be.

You not only are bad mouthing a poster who is not a borne Kentuckian,
but an entire State of the Union. The stereotype hillbilly as you call
it, can be found in every State of the Nation, in every corner, in every
city, town and 'burb. You put down of a particular segment of the US
population only affirms your bias and bigotry.

Rete

Moderator

Signature

I'm not an attorney. This disclaimer is valid in NYS!

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anon - 31 Oct 2004 10:05 GMT

Based on the information, he appears to be an employee of the
corporation. Didn't the corporation pay him a salary and send him W-2's?
Additionally, income earned from stock sales, or dividends would cause
him to receive 1099's. He could also be self employed in some way, but
there isn't enough information to indicate this. For example, if he sold
products for the corporation as a independent contractor.

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Immigration Forum / USA Marriage Base / October 2004

WHAT CONSTITUTES EMPLOYED OR SELF EMPLOYED??