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Thread: Are investigators Employees or Independent Contractors?

  1. #1
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    I assume that earnings through referals are on a contract basis...(?) As opposed to an employer/empolyee relationship.

  2. #2
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    It is mixed with different agencies.

    As a rule, you will earn more on a contract basis than as an employee. But some firms still prefer to place investigators on the payroll for a variety of reasons.

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  3. #3
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    wondering

    im wondering if we have to take out our own taxes or does every company take them out for us
    Tracey Tonkovich

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    As an example, most California agencies can easily place a trainee under their license for an assignment or two if considered an employee, rather than an independent contractor.

    The issue is based on the type of work, the licensing laws in the state (and even if they apply or not), and that of a tax question for both the agency and the trainee.
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  5. #5
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    Question Are we "self-employed?"

    I have been wondering about this since I first applied to IPIU.

    I am used to doing freelance work, which is why I'm asking this question(s):

    Are we to assume that we will be "independent contractors" to any agency we get placed with for training? Will we receive a 1099 form at the end of the year from each agency we work for?

    I have been recording EVERYTHING relative to my expenses pursuant to my becoming a Private Investigator Trainee. Some examples are:

    1. My IPIU fees.
    2. Photos/fingerprint card fees.
    3. Mileage to/from police station, library, etc.
    4. Internet connection fees.

    I've read in other posts/books about things being deductible, such as:
    1. Mileage/gas
    2. Food
    3. Clothing
    4. Supplies/gadgets

    Since we will be "trained" possibly by more than one agency, I would only assume that we are "hired help," and not necessarily hired as employees of any agency.

    Can someone help clarify my assumptions? Thanks!


    Thom

  6. #6
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    Hi Thom,

    That is a good question, and I have assumed the same as you that this is a "contractor Job" and a "1099" tax situation also. It only makes sense that if you can refuse and decline assignments that this would be the only way to do it. I could be wrong and I too would like to know, as I am doing the bookkeeping too. So I will wait to see what the answer is and if we have "solved our first assiugnment"!!!
    Dianne
    The only thing that is constant is change.

  7. #7
    I have been wondering the same exact thing......I am calling my tax guy in the morning to get his thoughts on this.

    I want to be sure that I take the correct tax credits that are allowed....so that I can for once get ahead in this game we call "life"

  8. #8
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    I merged your thread with this topic.

    Take a few moments and read the previous posts by Robert Donovan. Agencies differ in their practices.

    I think the best advise is to keep accurate records of all expenses for each job and/or agency and whether or not you were reimbursed for the expense. (Don't forget receipts!)

    Discuss the situation with a trusted tax advisor. Keep accurate records for each job or agency. When tax times comes, you should then have all your "ducks in a row".

    Clear as mud now!?!?!?

  9. #9
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    Regardless of whether you receive a wage earners paycheck with taxes deducted or just a straight assignment check, it is the advise of IPIU that all private investigators file a year-end tax return as a small business because of the many exemptions that are allowed under the business expense code.

    So a wage earner would have their tax return, and they can still add a part time business return that will OFF SET the income from the wage earner portion and may return many tax dollars to your wallet.

    Rush Limbaugh said, "Everyone in America should have a part time business just because of the tax benefits of off setting personal wage income."

    How much does your gasoline cost you are the pump?

    Many self employed private investigators have said their gasoline costs at the end of the tax year on costs 80 cents a gallon!
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  10. #10
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    Originally posted by Thom Briggs
    Hmm..

    I am hoping to have this P.I. stuff as my only "gig." I always thought that people who are self-employed or run a small business, must file QUARTERLY on their taxes.

    Your recommendation was to file a "year-end" tax return for the P.I. work, which to me, sounds like a once a year tax filing.

    Is there any hard and fast rule to filing our taxes?

    Thanks again!

    Thom Briggs
    The filing of an annual small business tax return is always after the end of the year. The quarterly tax deposits for a small business is to make a projection to the amount of tax that is owed at the end of the year. That is not a "return", but a tax deposit so that the business person does not come up owing at the end of the year.

    But a wage earner already has withholding taken out each paycheck, and most will show a refund due at the end of the year. That can offset the tax owed for any business income.

    Even more, most private investigators that work a wage job and run a part time investigative business do not have to make quarterly tax deposits on their business income, because they expend all the income out, leaving little or no taxable FICA due at the end of the year. It is a science worth making a study, as the real challenge is not to find business expenses for the sole owner (non-corporation), but to find ways and means to find business expenses that are also exempt from FICA (Social Security tax on a sole owner non-corp business).

    Incorportation these days is cheap and has many more tax exempts than ever before (including more than the sole owner version).

    The US Tax code has a code for most professions, but not journalist. Why? Because journalists and news writers can virtually deduct everything in the pursuit of their job (writing). And, they can run a loss for at least three years before showing a profit. Does that mean they don't eat, live, drive, have clothes? Nope. Write-offs. (I knew a guy who wrote off ALL of his clothes because he wrote short reviews and submitted the stories. Did he get published? Doesn't matter. He saved 33% in after tax dollars because he did not have to pay taxes on the clothes.

    (The above is my personal opinion and is not to be relied upon solely without consulting a professional CPA).

  11. #11

    Talking How we get paid

    "NEVER LOOK BACK,LIVE FOR THE DAY AND NO REGRETS"
    I don't think this has been on the board, I have not seen it so if it has please excuse me. I was wondering when we do start working how will we get paid, will we have to take out our own taxes or will they already be out for us like any other pay check? Or is it some other form of pay that we will get? Any help with this will be appreciated.

  12. #12
    William R. Larson - is offline (Retired from Forum Activity)

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    Amy -

    Your questions have been addressed, in different locations.

    There is a timeframe thread in this forum which will detail the road to assignments. It can be a long road, but worth the wait.

    Regarding payment, taxes, etc. those issues will be addressed upon receipt of your referral letters. The agency(s) you are referred to will communicate pertinent information such as that with you. Some agencies have that information in their designated forum here (which you will be upgraded to upon confirmation of receipt of your referral letter, if that agency is part of your referral(s). )

    Long story short, when your referral letters come, follow the instructions completely, and the other pieces will fall into place!

  13. #13
    I know this is an older thread, but tax implications can be really important and I'm glad I came across this thread! Thank you to all who posted their insights and of course, the excellent advice to consult with a tax expert.

  14. #14
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    If you're ever confused about whether you're an employee: Did you fill out a W-2 Form? Are you providing your own transportation and equipment? Did you read your contract? Do you have a business name? Is someone withholding your taxes for you?
    If you're in doubt - chances are that you're NOT an employee.
    Most investigators are contract and have a business.

    See an attorney - in fact, most investigators who have a new business should have an attorney and an accountant to help them - it's well worth the few hundred dollars in consultation fees to get your business running correctly from the beginning.

  15. #15
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    Cool Thanks Again!!

    Just wanted to say thanks to all who provided information on this subject. I found it to be very informative and to be honest, something I had not previously thought about.

    Good Luck All!!
    Peggy

  16. #16
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    Hi Thom,

    The question you asked about being self-employed and all that includes was a great question! Thank you for the tips on expenses too, I hadn't thought of those things yet. The more I read in these Forums, the more I like participating!

    Thanks to all for sharing their ideas!

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    This is good info, my wife and I were curious about how all of this works. I didn't think about the fact that I could write off my internet, gas and so forth, that stuff will add up to a pretty penny when I'm done at the end of the year. It will be a new to me to keep all of my reciepts and such though. I've never been good at remembering to keep reciepts for stuff like that. Definately a new mind frame to be in so I don't forget my reciepts for everything.

  18. #18
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    Dont forget mileage is better to deduct than gas...you get about .33 a mile for mileage.

    Theres also clothing, tools of the trade, home office and supplies. Taxes from a contractors stand point makes you more money at the end of the year. As long as the work is there steady enough for you. There is also less security but more flexability.

    The new guy

  19. #19
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    we all have the same questions and I am glad to see that someone else has asked them for me...NOw I have some ofthe answers.

    Thanks,
    Mark B Littman
    Florida

  20. #20
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    Do books also count? I just ordered the Idiots Guide... last night. I would imagine anything that pertains to the job.

  21. #21
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    I was wondering the same thing . Would you please let me know when you find this out.

    Thank you,
    Chris

  22. #22
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    Employee or contractor

    I agree that it mostly depends on state licensing regulations. Some states require you to be an employee (full or part time) with an state certified agency. Some will grant individual license. Other states do not require a license if you are an investigator for a single corporation and only do investigations in house.

    If you are an independent investigator all expenses should be taxed deductible if you are not reimbursed by the client. Most often you will find that investigators will bill clients on a hourly basis plus expenses. All of which means keeping good records.

  23. #23

    Exclamation

    This is all great information. A helpful book that I recommend that I have used to save me literally thousands of dollars the past couple of years is called "It's How Much You Keep That Counts"

    Not all of the information is geared towards Independent contractors, but the majority of the information is well suited for our profession and what we do. You can find it clicking the link above or going to the site below.

    Home Business Tax Savings

    Hope you enjoy the info like I did

    Kevin Nathaniel

  24. #24
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    Awesome link Kevin. I think I'll pick that up. Thanks.

  25. #25
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    Thank you Kevin. That's a great link. I will be checking into the book.
    George

  26. #26
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    You can also deduct space that you are using in your home for your office. It really does help to keep track of expenses for tax time. I worked many years for CPA's and you cannot believe what people deduct legally.

    Thanks for the great info Kevin

  27. #27
    You are all welcome!!! Just wanted to share information with the family here who have always provided me with excellent resources. Using the concepts in that book has allowed me to save honestly more than a couple thousand dollars a year.

    Kevin

  28. #28
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    Great advice in this thread, but one thing I can think to add to assist in keeping records of everything spent and earned. Use a CD-RW drive to keep all records digitized in the event of a system crash so you can easily recall the information. Also most public librarys have computers that will read the burned cd's and charge a few cents per page to print any records you need so they can be presented to your tax consultant. Also you can archive many pages of information on a CD and store the CDs in a safe deposit box. Hope this helps someone in the future, Mike.

  29. #29
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    Thanks everyone for the info! I started doing Mystery Shopping a couple of months ago and wasn't quite sure how I handle the reimbursement I get when it's a restaurant assignment or even if mileage was deductable. And you are all right about keeping really good records. It definately helped me last year with my relo.

  30. #30
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    Thanks to everyone for all the great information.

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    Thanks for the info. Taxes are a big issue and a good accountant can save you a ton of money in the long run.

  32. #32
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    Private investigaor member

    beeing working with a lienseed private investigator as an independent contractor, this is meant that you in training for the purpose to get your license

    advise me on this


    Alexndre marra
    private investigator member

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    Investigators

    thanks to all who have contributed. Great info.

    Daniel Clark

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    I have recieved the book that is mentioned and it is very helpful in knowing what can be done on taxes in a legal way from the government, I always appreciate the help i get out of these forums.
    LONNIE BOSWELL, CMPI
    Certified Missing Persons Investigator
    Illinois, USA

  35. #35
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    Thank you everyone for all of the information you posted here. It will REALLY be a big help. I am just buying my first home and this is helpful info for tax breaks. Thanks a million!!

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    Question Confusion Central

    I am young and very inexperienced with taxes. Many of you are saying that you keep a log of all of your expenses related to this job. Should I be doing that? I'm still a trainee and I still need to take my test so I haven't done any jobs yet, but I have had the dues and the fingerprint expenses and such. Should I be logging all of that? What else should I be keeping track of?

  37. #37
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    Alexandre Marra private investigator

    Yeas Ana
    you should keep any peny spend on file, but you can only applied them against any income, that is meant any dollar you make in this profession.

    good luck

    Alexnadre Marra

  38. #38
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    Thanks IPIU,

    This is good to know info.

  39. #39
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    The Insurance Question

    I have been an independent contractor for several years (not in the PI business), and all the information here is good advice. I can't stress enough the need to find a CPA you can trust and work with her to figure out your best alternative. I have not set-up a small business for one reason - insurance.

    The field I work in has a very high risk factor, and insurance for me as a consultant runs about $5K per year, with a minimum 3 year contract, non-refundable, paid up front. I don't know about you, but coming up with $15K just to work was impossible. Discussing this with my CPA, it has been more cost and tax effective for me to negotiate with my clients to be included on their insurance as an individual, and not as a small business. The attorneys for my clients all had the same attitude - as an individual the insurance company would cover me, but if I was a small business, they wouldn't. I don't know what the difference was to them, but to me I got a lower hourly rate than I planned, but then again I wasn't $15K in debt to start out.

    I don't know how things will work out in the PI field. I have not investigated insurance costs as of yet. Once I get to the assignment phase of this adventure, you bet I'll be talking with my CPA!

    Good luck to all.

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    Exclamation Taxes & Bookwork

    Good Morning to all,

    Thanks for all the input and information. I do have a good accountant, this day and age everyone should have some kind of professional looking over or maintaining their financial records. Taxes are serious, and keeping track of expenses (every little one & large ones, too.) is probably the best thing you can do for yourself and your family's well-being, financially. Patience and meticulous bookkeeping are very important in this business

    Brad Watson

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