Easy way to legally pay your Handyman

[Mark Updegraff]

I've got someone I think will make a pretty good overall "handyman" for the inevitable loose door knob, leaky sink, broken fence, loose step etc.

My question is this:
What is the simplest way to legally pay this person, obviously, without them being deemed an "employee"

Contracting would seem to be the safest, however, logistically writing contracts for this and that seems like a huge burden. Could I contract them on a yearly basis? If so how would that work? Does anyone have a sample contract they use with their handyman that they could share?

Thanks in advance!
MC

[Bill Gulley]

After posting in another thread, I'll qualify this by saying I'm not an attorney and you should seek legal advice. I think that's on my profile too.
Anyway, you can legally hire anyone you like and pay them almost anyway you like. It's when they get hurt or if you don't pay them that you have a problem. If you pay over X amount, you need to withhold as well, unless they are an independent contractor.

If this guy is going to a job, probably no big deal in reality, but throughout the year, you could have problems. Why don't you see what needs to be done in your state as far as putting him in business, nothing fancy, a business license and registration. That will do it for your tax requirement most likely, but liability is still an issue if he is uninsured.

Ask other landlords how they do it locally and what has been acceptable practice. Good luck, Bill

[Mark Updegraff]

Thanks Bill, If he is an independent contractor, I'm assuming the burden of proof will be on me if S hits the fan. I'll give a call to my attorney to see if there is anything state related I'm missing... It looks like I would basically be contracting him for "Property Management" - that way he could be on call to take care of tenant issues, and I wouldn't have to worry about writing specific contracts for various small tasks... I'll call some local PM cos and see how they structure things... Good point on the insurance!
Mark

[J Scott]

Yes, the IRS will look to you to prove that he is an independent contractor, but may talk to him as well. Keep in mind that if he gets hurt, it may be in his best interest to claim to be an employee, in which case he'd probably tell the IRS lots of stuff you don't want him to tell (and may not even be the truth).

So, with that in mind, make sure you look out for your own interests first!

Here are some things you can do to help the IRS make a determination in your favor:

http://www.biggerpockets.com/renewsblog/2010/05/26/are-you-sure-your-independent-contractors-really-are/

As for contracts, I'm a big proponent of them. Even if it's just a master ICA signed up-front with short one-page template form for each job.

[Vikram C.]

J Scott's article on this is excellent. In addition, here are some cheap things that can help prove the independent contractor status:

1. Have the guy print his own business card.

2. Even if he cannot create a business entity, have him register a business under a fictitious business name. (DBA)

3. Have him sign the ICA and provided a signed W-9.

4. If the handyman has his own tools and other assets (e.g. vehicle) that he uses for his business, get a list of those assets from him. This helps to show that he is an independent contractor and not an employee because employees typically use the employer's assets.

5. Get the IC to obtain insurance coverage for his work and get the proof of insurance from him.

6. Issue a 1099 to him if you pay him more than $600.

7. Try to get him to provide an employer identification number rather than a SS# if possible.

8. Most importantly, try to get him to do work for at least one other customer of his. This is very strong evidence that he is an independent contractor and not an employee.

[Bill Gulley]

Hey, tenant issues, did you mean as a property manager? If so, he will likely need a RE License...

J's right, if it hits th fan the IRS audits you, they will cross reference him and check that side. What ever your game plan and story, keep it simple and off the same sheet of music if you're going to sing. Ask your attorney...

[Tracey B.]

Mark, I recommend you use him a few times and see how things work out. I have a few guys I have been using for years and they eventually started their own business but in the beginning I just wrote up a standard one page contract that they were independent contractor and were doing a one time job and what the job and pay was, had them sign it and if under $600 I pay in cash, if over $600 I pay via check and 1099 them at the end of the year.

[Dale Osborn]

What state requires a "real estate license" for managers? The thread seemed to be discussing handyman issues and then we jump into real estate license required. For independent contractors - I believe I saw on another thread an Independent Contractor Form. Have the individual fill that out, add a copy of the business card, surety bond and liability insurance and that should cover most everything.

[J Scott]

Originally posted by Realtyman:

What state requires a "real estate license" for managers?

I can't speak for all states, but I believe both California and Georgia require property managers to have an agent or broker's license in order to handle many aspects of the job, including advertising for rentals and collecting rent.

There are probably plenty of other states that require this as well...

[Richard Warren]

Originally posted by Realtyman:

What state requires a "real estate license" for managers?

Nevada requires that property managers have a real estate license and property manager certification. They also require additional continuing education hours.

:cool:

[Greg B.]

Originally posted by Realtyman:

What state requires a "real estate license" for managers?

Texas

[Don Hines]

This is exactly the oposite of what you want to do But....
I hire my son and some of his buddies occasionaly. I have a contract with a temp service and pay them through the service. The service provides Worker's comp and does all of the FICA and with-holding for me. It cost about 35% of the wages. But, still keeps me at or under budget for minor stuff like demo and lawn stuff.
Don

[Bill Gulley]

Don, this is a great way to stay clear of the employee problems. I have used a labor force as well. I have also gotten with a GC and used employees when they needed work at a cut rate, keeping workers earning is a concern of any GC who needs to keep his crews.
I have also worked with non-profits, who are exempt from many of the liability issues, as volunteers work and you contribute to the cause.
There are also work release programs from the county and court ordered community service, where they work for the non-profit.
The last time I needed labor, I used an organization that ran a rehab, halfway house. The worked and the house got the donation, they were really happy to get the work, just make sure they aren't fresh out of the slammer as some come out with problems haunting them....sorry, didn't meant to get off topic. Maybe your guy can work for someone else that can cover him and allow him to work for you, that was the point.

Mo, Ar, La and Ok require a license for property managers that are not employees of the owner. Most states have this requirement for non-employee property managers, I would bet they all do. But keep them coming folks, where does this apply?

[Michael K.]

Originally posted by Richard Warren:

Originally posted by Realtyman:

What state requires a "real estate license" for managers?

Nevada requires that property managers have a real estate license and property manager certification. They also require additional continuing education hours.

:cool:

...and Wisconsin UNLESS it's a personally owned property (i.e. in your own name, not a corp/trust).

Mike