The shortage in the workforce; does it mean that people working remotely have an advantage? And does all of the bad news about San Francisco portend trouble ahead for business? Tax credits for employers.

Episode Transcript

Intro:

Welcome to the Practical Tax podcast, with tax attorney Steve Moskowitz. The Practical Tax podcast is brought to you by Moskowitz, LLP, a tax law firm.

Disclaimer:

The information contained in this podcast is based upon information available as of date of recording and will not be updated for changes in law regulation. Any information is not to be considered tax advice or legal advice and does not form an attorney/client relationship. Further, this podcast may be construed as attorney advertising. You should see professional consultation for your individual tax and legal situation.

Chip Franklin:

Welcome to practical tax with tax attorney, Steve Moskowitz. I'm Chip Franklin. Steve, how are you today?

Steve Moskowitz:

Doing great. I'm always happy when I get to talk about taxes and when I say that people laugh, but you know I mean it, because we did radio together for so many years.

Chip Franklin:

One of the things obviously we're going to talk about today is unemployment. So I got a question for you to start things off. Do corporations like 10 99 employees or full time employees, what do they prefer?

Steve Moskowitz:

They're different. So what happens is, from the employer's point of view with a 1099, you only pay the amount, that's it. There's no benefits, there's no healthcare, vacations, et cetera, et cetera. With an employee then of course, usually there's the payroll taxes, the worker's comp and everything else that goes along with it and vacation, health benefits, pensions and so on and so forth. Some companies choose to have part-time workers because if somebody works for you less than a certain number of hours a week, you can not give them any benefits. So some companies do that.

So it's a variety of factors and where a lot of businesses get in trouble because they don't want the hassle of all those payments and the expenses. So they misclassify employees as independent contractors. If you're doing that, if the IRS comes down, you're going to come down really hard. Because there's the unpaid taxes and social security and penalties and all that. But the IRS has this great voluntary program and what it is, if you otherwise qualify, basically you pay a tiny and I mean really tiny little pittance. All is forgiven. And then you switch people to employees, but you can't do that when you get caught. You have to do that before you get caught.

Chip Franklin:

Joining us right now is Casey Hastem she's director of recruiting at, weareVIP.com. Casey, great to have you here. Thanks.

Casey Hastem:

Hello. How are y'all today?

Chip Franklin:

Great. Casey, let's start with this question. Unemployment numbers are steady, but we just can't seem to get good people to fill positions in the workplace. Is that right?

Casey Hastem:

Yeah. And that's kind of what I do for a living is I help businesses find good people to join their team interestingly and I didn't realize we were officially in a recession because I'm not an economist. And so I pulled the jobs report that I think it just came out today, as a matter of fact, I don't know if you guys have seen this and I believe we exceeded expectations. We added almost 375,000 more jobs.

Steve Moskowitz:

Hmm. Good job.

Casey Hastem:

Yeah. And so even before, for every person out there looking for a job there were two jobs. Now there's like two and a quarter. So I think this is why you're seeing that unemployment go down. But I do want to say one of the trends that we've seen recently, because we work with companies from your small mom and pops to Fortune 500s. Those are our clients across all industries. This last week, we've started to see a little turn. You hear Tesla's starting to lay off. He said, he's going to reduce his salaried positions by 10%. But, and that's like, okay, that's Tesla. That's way out there. We don't have to worry about that. We had three clients this week, pull back their searches and tell us that they had a hiring freeze.

Steve Moskowitz:

Well, you know what, Casey, my mind always goes back to taxes. If you me ice cream cone, I'll somehow think about taxes, but you're talking about hiring. And the government both takes money from us, but they give a lot of money away. And one of the things they're giving to employers is a credit for hiring certain groups of people like veterans and people who've been unemployed for a while. And a laundry list of people they'll give the employer up to $9,600 per employee. So imagine some restaurant that says I can't be open my full hours because I don't have enough people. Well, what if they hired 10 people under these circumstances, they could get up to $96,000. What a difference that would make. And for the most part, the big businesses know about this, but the small businesses, I bet you never heard about it, but that $9,600 a head would make a big difference to them.

Casey Hastem:

Absolutely. And I didn't know about that. I'm going to share that with some of my clients.

Steve Moskowitz:

Well, you see, that's the thing about being a tax attorney. I've dedicated my life to this minutia. And what I've said to Chip is the big companies have an army of people like me who say do this and don't that. Think of it like this, I called the magic business card. If I gave you a magic business card and said, "Casey, take this down to the IRS and they'll give you a million dollars." I bet you would. Wouldn't you?

Casey Hastem:

Yeah.

Steve Moskowitz:

I took that magic business. I put it in the back of a dump truck, stirred it up with a million other business cards, regular business cards and dumped it all in your office. You walked in and said, "Oh my God, look at this mess. I'll have somebody just haul this out of here so I can get back to work." You didn't know the million dollar business card was there. You threw it away. That's what small businesses do. We know where the magic business cards are and we say, "Wait, wait over here, take this one, take this one. Throw the rest of them away."

Chip Franklin:

But even if you give a company, a tax break, if there's no increase in demand, are they still going to go out and hire people?

Steve Moskowitz:

Chip, when you talk about increased demand for products, that's why we have marketing departments and sales and research. Oops, there we go. R&D, research and development credit. The government gives you more money to research and I can't help it Casey

Chip just sits back because he's put up with years of this with me. You're new. You're just getting it today. But what happens is you say, okay, so the government gives you some more money and you say, you know what? Here's a product that you can use. Or here's an improvement in a product. Look at all the cars. We didn't really need more cars, did we? But all of a sudden we have all these electric cars. Why is that? Now look at the electric cars when they first came out, look at them now. So the bottom line is you go into an area where there was lots and lots and lots of cars, but somebody said, you know what? We need to make more cars, but we'll make these different. And we'll have an advantage here and look at them now with the prices of gas going up and up more and more people that thought they'd never do it are now looking at that electric car.

Chip Franklin:

Steve, how does a government or the IRS feel about the hustle economy or the gig economy?

Steve Moskowitz:

So that works both ways, because the government would like to see everybody be an employee because taxes are withheld and reported to the government. The reason the government is so against 1099s, is that a lot of people that don't have taxes, withheld just don't file returns and just don't pay taxes. It's wrong, it's illegal. But the government has to hunt them down one by one. So the government really prefers employees to independent contractors. However, ever since the pandemic, the side hustles have just jumped up because all of a sudden somebody's home. Now they say, "Well, wait a minute. I'm home anyway, I can do such and such. And my employer just shipped my job overseas and I don't want to go back in the office and do that, but I can do this", or I like having a job. And I like having the benefits, but for whatever reason, either I'm not getting enough money or I just want to put some away or I want to pay off some debts, whatever. I pick up the side hustle. So I see both areas are going to grow.

Chip Franklin:

Casey, I know you work with companies trying to find people, but people also come to you as well. Are they looking for full-time jobs or side hustles?

Casey Hastem:

So, okay, so I'm going to address the W2 versus the 1099 first because I think that's really interesting. We just had a conversation in the office as a whole about this. We have three different pillars within our organization. We have the direct hire side, which is where I sit. So I'm your W2. If you need a W2 candidate or talent, you're going to come to me. We have a contract and contract to hire, which that's going to be your 1099, but they're actually not 1099s because they go on our payroll. We pay their wages on behalf of the company. Of course, then we add a burden and all that kind of stuff so that we make our money off of it.

Steve Moskowitz:

And that's popular with a lot of employers too. Because you take all care of all the hassles.

Casey Hastem:

Yes. And so, but they're still getting reported as employees. And then we have our solutions, which doesn't really apply to this. But it's just think long term projects. So what we are seeing, we just had a contractor convert to full time. So they went off our payroll,