FedEx Wins Ruling That Contract Drivers Seeking Benefits Aren't Employees

Let’s hope those contract employees have been making their quarterly estimated tax payments…

From Bloomberg.com:

FedEx Corp. drivers were found by a judge to be independent contractors in a nationwide series of lawsuits claiming the company treats them as employees and owes them full benefits.

U.S. District Judge Robert Miller in South Bend, Indiana, yesterday threw out claims of drivers in 20 class-action cases in California, New York, New Jersey and other states alleging the company misclassified their employment status and owed them back pay, overtime and other damages.

“We are very pleased with today’s significant rulings from the federal District Court in Indiana,” Maury Lane, a FedEx spokesman, said yesterday in an e-mail. FedEx, based in Memphis, Tennessee, is the second-largest U.S. package-shipping company after United Parcel Service Inc.

FedEx saves money by using contractors because it doesn’t offer them the same benefits and vacation time as it does employees. The company has encouraged its contractors to consolidate routes and hire their own subcontractors in an effort to bolster its position that the workers are small- business owners and not employees.

The contractor model gives FedEx’s Ground unit a cost advantage of as much as 30 percent over Atlanta-based UPS, University of Pittsburgh business professor Marick Masters has estimated.

Miller found that the drivers are independent contractors in 20 of the 28 remaining group lawsuits, and ruled in favor of FedEx on some claims in the other eight class-action cases, Lane said. In three cases, the court ruled against FedEx on at least one claim, he said.

Questions for the Tax Lady: May 24th, 2010

Check out the following new Questions for the Tax Lady answers and feel free to ask me questions through one of the links below. You can send me an email, direct message or @ reply, and I will do my best to get an answer for you!

Question #1: I have been doing some graphic design for a company as an independent contractor. How much money do I have to make in order to be taxed?

Self-employed individuals are required to report any income earned over $400. If you work for a company, as a contractor, the company is required to send you an IRS Form 1099. The IRS Form 1099 will have the exact amount the company paid you for your contracting work.

Question #2: I just started working as a waitress in a upscale restaurant, do I need to report my tips to the IRS?

Yes. All tips you receive should be reported to the IRS and are therefore are subject to federal income taxes. Technically you should keep track of your tips, and include the yearly total on your next tax return.

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Questions for the Tax Lady: August 23rd, 2009

Check out the following new Questions for the Tax Lady answers and feel free to ask me questions through one of the links below. You can send me an email, direct message or @ reply, and I will do my best to get an answer for you!

Question #1: I recently filed late returns for years 2000-2008. All income was from traditional employment. All but 3 years show a return, and total owed for the 3 years is about 8K. I fully expected to be fined/penalized/interest assessed, etc. for those owed taxes. However, the last 3 years (06,07,08) should have given me a refund of over 60K. I got notices from the IRS that ALL of the money was applied to money owed from the tax years 2002 and 2004. It seems like I should be getting some type of refund, what should I do?

First of all, I would suggest getting a full review of your tax account with the IRS to determine exactly what money is owed, and from which years. My law firm offers a Tax Account Review service, as do other tax resolution companies. You could even call the IRS and work to get the information yourself, but IRS representatives can frequently be difficult to work with.

Since your refunds should have come from the past three years, then you are not entirely out of luck. Unfortunately, the IRS will only hold a taxpayers refund for three years, but they can come after you for taxes owed from over ten years ago. Once you get the information from your tax review, you should be able to request any refund you are owed. On the other hand, if you find out that you still do owe the IRS, then you can always negotiate for a settlement. Call 1-888-TAX-LADY to speak with one of my representatives who can help you determine the best solution to your tax problems.

Question #2: I'm an independent contractor. If I include extra expenses while filling my tax returns will I be more likely to get audited?

No, as long as all of the expenses you list are legitimate business expenses you will have nothing to worry about. According to the IRS, “a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your trade or business. An expense does not have to be indispensable to be considered necessary.”

Questions for the Tax Lady: July 27th, 2009

Every Monday I am going to post a set of answers to tax questions I’ve received over the past week. Additionally, I also seek out a few general tax questions from other users in the social communities I am active in. If you have a question you would like to ask me then check out the following links to my profiles. You can send me either a direct message or @ reply, and I will do my best to get an answer for you!

Question #1: Hey Roni, I am thinking about moving to Oregon as property values are lower there. I am hoping my income tax and property tax situation will be better as well as my business. I have one part time employee, and costs here in California are killing me! Would Oregon be better for me personal and/or business-wise?

This is tricky question as there are a lot of things you are going to want to consider in making your decision. First of all, I am going to assume that you have a business that can easily be moved to Oregon without suffering any reduction in revenue. Depending on where you move to you might find a property in Oregon cheaper then the average home in California. However, according to Wikipedia, the minimum wage in Oregon is actually 40 cents higher then in California.

As far as taxes, Oregon has no state sales tax while California levies a hefty 8% sales tax (the highest in the country). According to reports, business tax rates are lower in Oregon then they are in most places in the country. However, the type of taxes you are going to pay will depend on the type of business structure you have (sole proprietorship, corporation, etc). With regard to income taxes, California has a very progressive income tax range of between 1% and 10.3%. California’s 9% tax rate is only for taxpayers making between $47,056 and $1,000,000 per year, and the 10.3% rate is only for those making over a million dollars a year. On the other hand, Oregon’s income tax rates are much less progressive. The top tax rate is 9%, but it’s assessed on all taxpayers making $7,601 or more per year.

No matter what, moving to a different state is a big decision. To better understand if it would be a good financial move, I would recommend researching tax rates and property values in cities you are thinking about moving to.

Question #2: What are the tax and legal complications of either short selling or a foreclosure? Do I have to claim to the difference from sales price to loan amount as income on my taxes?

No. Whether you go with a short sale or foreclosure, you will not need to claim the difference between the sales price and new value as income. Unlike forgiven credit card debt, the Mortgage Debt Relief Act of 2007 prevents the IRS from taxing you on forgiven mortgage debt. If you do get a 1099 next January from your mortgage company then you will simply need to file Form 982 with the IRS to exclude the debt from your taxable income.

Question #3: Food blog tax deduction question… Someone told me they write off all their grocery expenses because they blog - is that possible?

Probably not. Moreover, the person could actually get in trouble with the IRS for writing off all of their grocery expenses.

People often make the mistake of assuming that just because they do something for a little extra income means then can deduct all kinds of unrelated expenses. Although your friend might be able to deduct certain qualifying expenses related to their blogging (if they are in fact earning income), they must be able to verify the expenses claimed were ordinary and necessary for the type of business he or she was in. An ordinary expense is one that is common and accepted in the industry. A necessary expense is one that is helpful and appropriate for the trade or business. An expense does not have to be indispensable to be considered necessary. Thus, if your friend blogs about food or cooking as a source of income, then he or she may be able to claim the grocery bills.

It is important to note that the IRS auditors are very aggressive with the self-employed and independent contractors when it comes to claiming business expenses. So, your friend should definitely seek professional advice if he or she plans on deducting any expenses related to his or her blog.