Maybe its because it was in a big budget bill that was full of dumb shit?
If I put caviar in the middle of a plate of dog shit, would you eat it just because you like caviar?
No Democrat is going to vote for a Trump budget bill that the Republicans cooked up without any Democratic input (because they don't need Democratic votes so there is no need for them to make concessions). This is politics 101.
What input would Democrats offer, pray tell? Because they've made their entire mission to obstruct anything and everything Trump does. Why should Republicans bother with Democrats after everything they've done?
Uhm....this is what people hire lawyers and accountants for. To legally beat the tax man. The more outs they put in the law, the more outs people will ask me to find for them.
They could theoretically lower their costs, instead of paying 100K salaried, they would offer 90K where a lot of it is OT and taxed at a lower rate for employees.
They wouldn't increase their labor costs at all, they would just negotiate a payment structure so it comes out roughly the same amount of compensation but more work time is classified as overtime for their own and their employee's benefit. They would likely even lower their costs because an employee would be willing to accept a lower rate in order to get the tax free benefits.
They wouldn't be increasing their labor costs. Imagine you're paying a salaried employed $50k for a week of work. Your employment costs are based on the $50k. Their tax burden is based on that $50k.
Now your employee comes to you and says "I only want to get paid hourly. My per hour wage is $15/hr. That's $30k in wages. But I also want 10 hours of over time a week @$40/hr. That's $20k in overtime. To you, the employer, the employee cost is still $50k. $30k in base pay, $20k in OT. But to the employee, that's $20k tax free.
Obviously an oversimplification to illustrate that it's just a simple math question to break salaries into 2 components - base + OT. Then pay the base and guarantee the OT.
Uhm....this is what people hire lawyers and accountants for. To legally beat the tax man. The more outs they put in the law, the more outs people will ask me to find for them.
Not arguing that. But to think that corporate America will all of sudden start handing out OT to salaried employees like it's candy is not realistic. Not to mention most of them don't get OT pay to start with. Self employed is a different story and more than likely will the issues will come from. Which I already said.
Official sources on the tax elements of single member LLCs or official sources on hiring yourself into your single member LLCs. The only thing that's required is that the LLC elects to be treated like a C corporation for tax purposes.
I'm fine providing that. I've been doing partnership tax since law school and building out LLCs for entrepreneurs my whole career. You give me a legal tax free employment structure, I'm going to tell every new client how to exploit it.
If you want examples of people exploiting tax free overtime, there's no sources for that because it's not legal at
How do circumvent the managerial aspect of FLSA restriction on OT? So you set up a single member llc..do you just structure it so you're not listed as a decision maker? Even though it's obvious you are?
For a worker to be protected by the minimum wage and overtime pay requirements of the FLSA, the worker must be an “employee” of the employer, meaning that there is an employment relationship between the worker and employer. Independent contractors do not have these protections. Whether a worker is an employee or an independent contractor under the FLSA is determined by looking at the economic realities of the worker’s relationship with the employer. If the economic realities show that the worker is economically dependent on the employer for work, then the worker is an employee. If the economic realities show that the worker is in business for themself, then the worker is an independent contractor. The economic realities of the entire working relationship are looked at to decide whether a worker is an employee or an independent contractor. Employment under the FLSA is not determined by technical concepts or common law standards of control; it is broader than the common law standard often applied to determine employment status under other Federal laws.
Not arguing that. But to think that corporate America will all of sudden start handing out OT to salaried employees like it's candy is not realistic. Not to mention most of them don't get OT pay to start with. Self employed is a different story and more than likely will the issues will come from. Which I already said.
Yes, they 100% will start handing out OT to salaried employees. Most salaried employees already work more than 40 hours/week, they're just exempt from OT because their pay is high enough to qualify for an exemption. This wouldn't necessitate a change in work hours or work product.
I suppose the legal element to understand is how people qualify for OT vs. not. An employer lists an employee as exempt vs. non-exempt for certain labor protections. Those protections include minimum wage protections and overtime protections. It is the employers choice on who is exempt vs. not. In order to be exempt, the wage being paid has to exceed a certain amount.
If an employer wanted to switch all of their employees to non-exempt, it's just a paperwork issue.
Now, why would employers make this switch? Because the labor market will demand it. Employees with desirable skills will want to maximize their compensation. So, when seeking employment, they will demand the most tax advantageous compensation package possible and that means putting as much money into a tax free format as possible.
The employer can say "no" but their nearest rival will absolutely say "yes" so that they can poach a talented employee. Or to seduce a new grad to join their company instead of their competitors. Since salaried work tends to be white collar intellectual work, the employee's knowledge set tends to be the most valuable thing they have and it travels quite easily. This forces companies to beat their rivals for those employees. It's no different than the elaborate amenities packages employers currently offer to attract new talent.
Sensible? "Yeah, I won't dig into this very deeply to realize what's really going on. I'll just cross my fingers and hope for the best!" GTFO. And after they realize they have been F'd in the A they will vote the bastards in again.
I think you'll find the mere act of him waiting to give a verdict on the back off a hint of skepticism will be far ahead of just about any other right-winger in this thread, or many others, in terms of being sensible.
How do circumvent the managerial aspect of FLSA restriction on OT? So you set up a single member llc..do you just structure it so you're not listed as a decision maker? Even though it's obvious you are?
For a worker to be protected by the minimum wage and overtime pay requirements of the FLSA, the worker must be an “employee” of the employer, meaning that there is an employment relationship between the worker and employer. Independent contractors do not have these protections. Whether a worker is an employee or an independent contractor under the FLSA is determined by looking at the economic realities of the worker’s relationship with the employer. If the economic realities show that the worker is economically dependent on the employer for work, then the worker is an employee. If the economic realities show that the worker is in business for themself, then the worker is an independent contractor. The economic realities of the entire working relationship are looked at to decide whether a worker is an employee or an independent contractor. Employment under the FLSA is not determined by technical concepts or common law standards of control; it is broader than the common law standard often applied to determine employment status under other Federal laws.
First, LLC's aren't a federal thing. They're a state level entity that provides legal liability protection. Federal tax law completely ignores them. So a single member LLC at the federal tax level is just...you. And you can't be an employee of yourself. Federal tax law does cover partnerships but that's for all business entities that involve more than one person engaged in some kind of business venture. And the entire purpose is about how to allocate the profits/losses for tax purposes. And the partners can't be employees of themselves because the partnership itself is not a legal entity but the money it creates still has to be taxed properly. This is all in Subchapter K.
However there are 2 actual legal entities that the tax code does address, Subchapter C and Subchapter S entities. They are legal fictions -- meaning that they are legal entities that exist separately from the owners/creators. And these are handled differently from LLCs and partnership because they issue ownership shares. Because C and S entities are legal entities under the tax code, separate from the founders who are just shareholders, they have employees. And there are no rules that prevent shareholders from also being employees. Hence why many companies like to provide stock options and ownership shares to highly valued employees.
Swinging to overtime and exempt vs. non-exempt status. Everyone who works for a Subchapter C or S entity is entitled to overtime and minimum wage protections. The corporate entity has to voluntarily seek exemption. That means when someone takes salaried job, their company has to get permission to avoid paying overtime. The employee has to opt out of OT and MW and FSLA protections, otherwise they are applicable.
Back to LLCs, remember when I said that they don't exist in the federal tax code and are only state level? Every person who forms an LLC in their state gets to choose how the federal government views their LLC and thus how it is taxed.
Pass through taxation:
Why would people choose C/S corp. vs. LLC? The tax issue of "pass through taxation". Because LLCs are non-existent under the tax code, any income they generate goes straight to the member and they pay taxes based on their personal tax rate. In a C/S corp, which is a legal entity of it's own, the C/S corp pays taxes based on it's income. The "owners" don't get that money, it belongs to the corporation. So, a person can own a C corp that makes millions of dollars but never get a penny from the company (unless the company issues dividends). So the owners don't pay taxes on the corporation's income.
Double Taxation:
The other issue is that the C Corp first pays taxes on its revenue. Then it has to pay employment taxes on the wages it pays to employees. Then the employees pay taxes on their wages. The same money gets taxed multiple times (there are deductions to help with this to an extent).
Tax Differential.
For many small business owners, their personal income tax rate is lower than the corporate rate, especially with creative deductions, so they don't want the corporation to pay a corporate tax rate on money that they could pay a lower rate on if it passed through the LLC instead. And if the corporation is paying them enough money to exceed the corporate tax rate, they're going to have to pay the higher rate anyway on their personal returns.
So, for single member LLCs, the cost of treating their businesses as standalone legal entities, C/S corps, doesn't necessarily provide any tax benefit while increasing the amount of rules they have to keep track of.
FINALLY THE POINT:
However there is no rule that requires entrepreneurs to form their businesses as LLCs for tax purposes. The IRS very much allows single member C corps. And a single member C corps, as separate legal entities, can hire owners.
And since companies must elect exemption status for their employees, otherwise they are bound by FSLA rules, the company simply chooses to not make that employee exempt.
HANDFUL OF DETAILS:
1) Employers must prove independent contractor status otherwise the worker is classified as an employee.
2) Employers from choose to treat employees as exempt from OT and then prove that the exemption is warranted. Otherwise OT is the the law.
The end result is the law treats all workers as OT entitled employees until the employer requests that the law shouldn't. So any line of reasoning that starts with the premise that the worker will have to establish their entitlement to OT is pretty much the opposite of how it works. The employer has to opt out of OT, not opt in.
Writing a tax exemption that would apply to only service workers is nearly impossible. For example, what's stopping me from running a consulting business or being a lawyer, where I charge a really low rate but "wink wink" tipping me a huge lump sum is the expectation?
This is the same silly policy making like Kansas, where they eliminated taxes on pass-through income and then suddenly the number of businesses using that tactic almost doubled in a year.
What is so impossible about it? Service workers know who they are, the IRS knows who they are and the IRS knows lawyers are not them.
The example you gave is funny because nothing is stopping you from doing that now. Why wait for a law to pass for you to do it? Let people pay you fuck all and then stiff you the way they do with waitstaff. You can wink wink nod nod all you want but a tip is not mandatory.
Writing a tax exemption that would apply to only service workers is nearly impossible. For example, what's stopping me from running a consulting business or being a lawyer, where I charge a really low rate but "wink wink" tipping me a huge lump sum is the expectation?
This is the same silly policy making like Kansas, where they eliminated taxes on pass-through income and then suddenly the number of businesses using that tactic almost doubled in a year.
Tipped employees currently have a different MW (or used to, it was like $2.13 when I was a bartender in my 20's, not sure what it is now), and are only forced to declare 8% of their ticket sales as tips. So, however they determine who gets that lower MW and minimum tip declaration today I am guessing is the same way they'll handle the new tax exemption.
Not saying people won't find some loopholes, who knows, but I am guessing it is industry dependent.
What is so impossible about it? Service workers know who they are, the IRS knows who they are and the IRS knows lawyers are not them.
The example you gave is funny because nothing is stopping you from doing that now. Why wait for a law to pass for you to do it? Let people pay you fuck all and then stiff you the way they do with waitstaff. You can wink wink nod nod all you want but a tip is not mandatory.
Actually, we are service workers. The law is a service industry.
The problem is that most people tend to think of service workers as low wage workers. But doctors, lawyers, accountants, etc. are all service workers. They're just higher paid service workers. And they tend to be salaried because they are rarely tied to strict 40 hour work weeks. The nature of the work makes it very difficult for the employer to calculate the hours required on a weekly basis. A case, patient or tax filing might be particularly bad one week and next to nothing the next week. The employee gets the same money for down week as up weeks and the employer gets to avoid being hit with unexpected OT.
As for why no one takes their income in tips now? Because tips are still taxed as income and the employer still has to report them. So the employee gets no benefit from making the consumer pay a tip, just more paperwork, and there's no benefit to the employer since they still have to report how much income is being generated via tips and pay FICA on it.
More paperwork, no additional benefit.
Obviously, this changes if the income is tax free. A good modern example is carried interest in the finance world. Financiers try to get as much compensation as possible characterized as "carried interest" because it's taxed as long term capital gains which is a lower tax rate than ordinary income. To get this benefit, they defer the compensation long enough to meet the criteria. If the benefit didn't exist, they'd probably structure their compensation differently.
Not arguing that. But to think that corporate America will all of sudden start handing out OT to salaried employees like it's candy is not realistic. Not to mention most of them don't get OT pay to start with. Self employed is a different story and more than likely will the issues will come from. Which I already said.
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