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Thread: Are investigators Employees or Independent Contractors?

  1. #41
    Steven Ungles is offline Licensed Private Investigator

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    Quote Originally Posted by Joe Shuman
    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.
    I am a licensed P.I. in California. Here, if you are non-licensed and working under another P.I.'s license, you are not required to carry your own insurance. It would be incumbent upon the licensed P.I. whom you are working for to carry you on his insurance. No doubt this varies state-to-state.

  2. #42
    Steven Ungles is offline Licensed Private Investigator

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    Post Employee v. Independent Contractor

    Quote Originally Posted by Steven Ungles
    I am a licensed P.I. in California. Here, if you are non-licensed and working under another P.I.'s license, you are not required to carry your own insurance. It would be incumbent upon the licensed P.I. whom you are working for to carry you on his insurance. No doubt this varies state-to-state.
    I should add to my previous posting, that you can be unlicensed and work under another P.I.'s license/insurance (in California) as I stated. Under those circumstances, you are an employee. The only way you can become and independent contractor as a P.I., is if you are a licensed/insured P.I. I hope that answers your question. Again, this no doubt will vary state-to-state.

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    Quote Originally Posted by Steven Ungles
    I should add to my previous posting, that you can be unlicensed and work under another P.I.'s license/insurance (in California) as I stated. Under those circumstances, you are an employee. The only way you can become and independent contractor as a P.I., is if you are a licensed/insured P.I. I hope that answers your question. Again, this no doubt will vary state-to-state.
    Thanks Steve!

    Do the regulations in California specifically state that you need to be licensed as an IC -or- that an unlicensed individual must be hired as an employee? Ohio only addresses employees of a licensed firm or individual, but doesn't address IC's at all. It's not clear in the regulations if Ohio requires "trainees" to be employees.

    This is my "big question" right now - in Ohio you need 4000 hours over two years to get licensed, if your not there are limited exceptions to the nature of the work you can do. I'm probably going to be limited in the amount of time I can dedicate per week to doing PI "trainee" work, and can't see anyone wanting to hire me as an employee under this restriction. Then I'm bound by the restrictions, and frankly, I don't see how you can get the breadth of training needed for licensing without a license. It just don't make good sense!

    Thanks for your time!

  4. #44
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    Thanks,

    You have answered my question for the day?
    What is IC?=Independent contractor

    This is good to know!!


    PI Trainee
    Flora Porter

  5. #45
    Steven Ungles is offline Licensed Private Investigator

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    Quote Originally Posted by Joe Shuman
    Thanks Steve!

    Do the regulations in California specifically state that you need to be licensed as an IC -or- that an unlicensed individual must be hired as an employee? Ohio only addresses employees of a licensed firm or individual, but doesn't address IC's at all. It's not clear in the regulations if Ohio requires "trainees" to be employees.

    This is my "big question" right now - in Ohio you need 4000 hours over two years to get licensed, if your not there are limited exceptions to the nature of the work you can do. I'm probably going to be limited in the amount of time I can dedicate per week to doing PI "trainee" work, and can't see anyone wanting to hire me as an employee under this restriction. Then I'm bound by the restrictions, and frankly, I don't see how you can get the breadth of training needed for licensing without a license. It just don't make good sense!

    Thanks for your time!
    Hi Joe, I don't profess to know everything about the laws re. P.I.' being employees and I.C.'s. However, I do know that if you are not licensed, you must be an employee of the licensed P.I., you are working off his license, and you do not need to carry the requisite insurance that the P.I. does. (S)he will have to carry you on their E&O and General Liability insurance. Also, in CA, you need 6,000 hours of experience (in essence 3 years full-time experience working under another P.I., or if you are an insurance claims adjuster/examiner, that qualifies you to take the test for P.I. in CA.--Go figure!) The required insurance amount MINIMUM is 1,000,000. total. I have 500K Errors and Ommissions, and 500K General Liability, because I am armed. ( I am a retired deputy sheriff, with a CCW.) I was told at an investigator's meeting the other day, that a million is the bare minimum, and it is not cheap. I am a sole proprietor, and my insurance is $1,217. per year. I just started out in the business about a year ago, after having to retire on a disabiliy after an on-duty car crash that messed me up bad. Keep in mind, all this information is good for the Golden State, California. This stuff varies from state to state. Just like California does not allow, by statue, a private investigator to carry a badge while in the perfomance of his/her duties. Whereas in other states it is just fine. I do understand their reasoning on one hand, but then Security Guards wear badges, and they could be mistaken for a govenment official, which by the way is the reason given for not allowing badges. I am not badge happy, so I don't care. I have my retired badge and that means a lot to me. If in doubt, always check it out, to keep your butt out of hot water, and the best of luck to all newcomer Private Investigators. It is a dog-eat-dog world out there sometimes, but you can make a living doing P.I. work, but you have to spend money to make money, so be prepared to shell out some money for equipment, business cards, stationary, laptop, camera(s), video recorder, business phone, cell phone, etc. You may already have some of these things, but I was shocked at how much money I spent first of all, just to get my license from the State of California. Then it was the equipment. I have been doing this about a year, not only am I still learning (which is not unusual), but I am still buying new "toys" to make my job easier. But remember, much of the equipment you buy for work is tax deductible, so contact your CPA, or tax representative for more information. It is a pleasure to share my experiences with others here in this forum. If anyone has questions about being a P.I. or Peace Officer here in California, I am more than willing to answer them if I can, and if I can't I will either find the answer, or direct you to where you can.

    Sincerely,

    Dep. Steven Ungles, Solano S.O. Retired
    Owner, Southport Investigations
    Private Investigator, Lic. # 23786
    W. Sacramento, CA

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    Thanks, Steve. I appreciate your time!

  7. #47
    Steven Ungles is offline Licensed Private Investigator

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    Someone else mentioned it in another forum. The one BIG advantage of being an I/C as opposed to an employee, is quite often, you make your own hours, or you at least have a lot of flexibility, and that is GREAT!! I have my own (sole propietorship) P.I. business, but I work as an I/C for much larger P.I. companies and making good money at it (when I get the work.) The flexibility is something I have never enjoyed in my past career as a Deputy Sheriff. Being an I/C had been very, very good to me. (So far.)

    Steve Ungles

  8. #48
    Steven Ungles is offline Licensed Private Investigator

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    Quote Originally Posted by Steven Ungles
    Someone else mentioned it in another forum. The one BIG advantage of being an I/C as opposed to an employee, is quite often, you make your own hours, or you at least have a lot of flexibility, and that is GREAT!! I have my own (sole propietorship) P.I. business, but I work as an I/C for much larger P.I. companies and making good money at it (when I get the work.) The flexibility is something I have never enjoyed in my past career as a Deputy Sheriff. Being an I/C had been very, very good to me. (So far.)

    Steve Ungles
    P.S. No problem Joe, anytime you have a question, please feel free to ask.

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    Hello everyone,

    A big thanks to all of you, for your continued investigation into the FAQ's of this business. I have been contemplating and researching this myself. I have learned a great deal here, in this forum.

    So correct me if I am wrong, which....I know, it really does happen, LOL , I can have a small business license, be an IC and file my own taxes (w/ CPA, for optimal success), and be an employee of another company as well, filing a separate income tax form for this? Has my brain exploded from information overload? I am waiting for my book and badge at this point, however, it is never to soon to plan an action. To be a IC you have to be a licensed PI, or is this in accordance to the State reg's? Also, an IC can be in training, working towards the license?

    Thanks for the input clarification, Deborah

  10. #50
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    This topic has been moved to the PI Licensing Forum because there have been some comments made that are not correct according to the individual state laws pertaining to Licensing and the Exemptions to licensing.

    In short, you do not need a PI License to perform all types of private investigations. Each state has a list of the exemptions. Therefore, read your state topic first.

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    Wow, that is a great subject that we all need to research ahead of time. I have a certification in financial planning so I will go back through my books and study that subject and see if I can’t shed some new light on it. Taxes are a very tricky thing and I know the Federal Tax will stay the same State to State but each individual State may have to be researched separately for State taxes. But it is definitely worth the research because that’s the last place you want to mess up!

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    Great info! Alot of things here, that I had not thought about!!

    Thanks to all for sharing!

  13. #53
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    Thanks for info.

  14. #54
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    Alexandre Marra investigator forum member

    Quote Originally Posted by Donna Reagan
    This topic has been moved to the PI Licensing Forum because there have been some comments made that are not correct according to the individual state laws pertaining to Licensing and the Exemptions to licensing.

    In short, you do not need a PI License to perform all types of private investigations. Each state has a list of the exemptions. Therefore, read your state topic first.
    dear Donna

    What type of investigations can you do without License I am in New York State

    Yours
    Alexandre Marra

  15. #55
    Lisa Frye -'s Avatar
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    Quote Originally Posted by Alexandre Marra
    dear Donna

    What type of investigations can you do without License I am in New York State

    Yours
    Alexandre Marra
    Alexandre,

    Each state has a list of the exemptions. Therefore, read your state topic first. This should clear up any questions you have. If not, post your question in that topic.

    Thank you

    Lisa

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    Thanks to everyone for all of the information. Extremely helpful!!


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    Thank you all for the info your helping along in my search for clearity & guidance.

    Again Thank You All

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    Quote Originally Posted by Peggy Thornhill
    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

    I wonder why I have only certain permissions to access certain forums for I'd like to get licensed and start ASAP....

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    This was a very informative thread, and I will definitely consult a tax advisor in the near future.

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    There is some great information available. Things that I have thought of as well as things I had not thought of previously to ask. Thanx to all who have contributed with this information...keep it coming!!!

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    Wow this is a fantastic thread!!! Very informative. It has answered many of my questions and informed me of things I haven't thought about.

  23. #63
    I just want to thank everyone for all the hopefully information here. I will be checking into the laws for my state and do some more research!


    Patricia A Jernigan

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    Lightbulb Quarterly Tax Payments for 1099 Work

    In my case, since my wife has a W2 job and we file our taxes jointly, I do not need to make quarterly tax payments because my wife pays taxes from every paycheck, tax payments are already paid since we both file joint tax returns, and she pays tax already from her W2.

    Quote Originally Posted by Lynn A Piecuch
    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.

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    Wow! Thanks for the info. It was very beneficial.

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    Thanks Everyone,
    There is a lot of good information here. I know I gained some knowledge. There were some interesting questions. I am glad I came cross it.

    Stacy

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    Thanks to everyone for all the great information. It helps a lot.
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    Wow I must say that this is some very resourceful information. I have been spending a lot of time reading on the forum here and it has been helpful in answering some questions I have had.

  29. #69
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    Re: Are we "self-employed?"

    Quote Originally Posted by Thom Briggs
    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?

    Thom
    "Independent Contractor" is defined by the IRS code as anyone who is responsible for setting his/her own hours to work, and not limited by the demands of the employer. In this case you would be responsible for your own income taxes, and only get the 1099MISC from the hiring agency when you get paid the minimum reportable as required by the IRS. If you are paid any less than the minimun, I think it is $600. now, the hiring agency is not required to send you a 1099MISC, so you should keep accurate records of your income, as well as your expenses.

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    Re: Are investigators Employees or Independent Contractors?

    Thank you everyone for the great info. I have a question, I hope this is the place to ask it. Should we have our own liabilty insurance as a private investigator?

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    Re: Are investigators Employees or Independent Contractors?

    Quote Originally Posted by Jan C Dillard
    Should we have our own liabilty insurance as a private investigator?
    See the other topic for Agency Insurance and liability options. (Typically it is a matter of measuring risk, such as how likely it would be for an undercover operative to make a simple observation and submit a report, only to find themselves a target for personal negligence. Bodyguards and armed investigators have more risk than most)
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    Re: Are investigators Employees or Independent Contractors?

    thank you.
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  33. #73
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    Wink Re: Are investigators Employees or Independent Contractors?

    Quote Originally Posted by Lynn A Piecuch
    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.
    As an accountant for the past 35 years, and tax preparer for the last 25, I can tell you:

    1: If the employer takes payroll taxes out of your check you are an employee, and will, or had better, receive a W-2 for filing your tax returns. Any unreimbursed expenses for your job can be reported on form 2106, Unreimbursed Employee Expenses, and in most cases vehicle expenses and depreciation can be taken on this form.

    2: If there are no taxes witheld from your checks, and the employer does not report you on his 941 (quarterly payroll tax reports), then you are an independant contractor, and responsable for your own tax liabilities. You should file a Schedule C with your tax returns, where you will report all your expenses, depreciate your vehicles and equipment. The Client/employer is not obligated to send you a 1099-misc unless you are paid $600 or more during the tax year. Ultimately it is the "contractor" who is responsable for the record keeping and filing of the Schedule C, Income or Loss from Self Employment, with his/her 1040.

    Partnerships and Corporations are handled under different tax laws.

    I hope that this has been helpful, and do not hesitate to ask if you have any further questions.

  34. #74
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    Re: Are investigators Employees or Independent Contractors?

    That's great information, thanks Vicki!

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    Thumbs up Re: Are investigators Employees or Independent Contractors?

    I know that Jim already "thank you'd" but I had to say myself thanks for this information. I always have questions regarding taxes, which forms have to be filled out, etc. Great post!
    Luke A. Slowik
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  36. #76
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    Talking Re: Are investigators Employees or Independent Contractors?

    Quote Originally Posted by Luke A Slowik
    I know that Jim already "thank you'd" but I had to say myself thanks for this information. I always have questions regarding taxes, which forms have to be filled out, etc. Great post!
    Any time you have a question, just ask, I love helping people.

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    Re: Are investigators Employees or Independent Contractors?

    Alot of great info here! My personal advice is to contact a CPA so as to be on the safe side. The old saying, "don't show up to a gun fight with a knife", is especially applicable to federal and state taxation laws.

  38. #78
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    Talking Re: Are investigators Employees or Independent Contractors?

    Quote Originally Posted by Donald Papp
    Alot of great info here! My personal advice is to contact a CPA so as to be on the safe side. The old saying, "don't show up to a gun fight with a knife", is especially applicable to federal and state taxation laws.
    I personally have tought three CPA's right out of college how to keep a set of books, I had my own public accounting business in California, and I am currently in public accounting and a certified Income Tax Preparer. I have my "Gun" and know how to use it.

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    Re: Are investigators Employees or Independent Contractors?

    WHOOAA Vicky,
    I think you misread me. Please don't shoot! That wasn't a veiled threat I hope(about the gun). I simply was implying that if someone doesn't have alot of tax knowledge they "should" contact someone like "you" for advice. Certainly someone would probably have more than just one question and would need additional help.

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    Re: Are investigators Employees or Independent Contractors?

    Quote Originally Posted by Donald Papp
    WHOOAA Vicky,
    I think you misread me. Please don't shoot! That wasn't a veiled threat I hope(about the gun). I simply was implying that if someone doesn't have alot of tax knowledge they "should" contact someone like "you" for advice. Certainly someone would probably have more than just one question and would need additional help.
    Sorry to have sounded so tense. I just get a little peeved when people pay a CPA such high wages, then ask me to train them. CPA's don't necessarily know how to do taxes. What I really was trying to do was qualify myself for the advice that I had given.

    And the gun has never been aimed at a human, only the coyotes out on the ranch when they tried to eat my stock.

    So if you don't come running out of the hen house with a chicken in your mouth, you have nothing to worry about

    Welcome to the IPIU Donald, hope to count you amongst my friends.

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