Brazos Real Estate Investors Club

Author: Mark Valenti (1 articles found) - Clear Search

 Who is the Right Person to Buy Your Fix and Flip Project Materials?

CT Real Estate Investors Association

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Some gurus will tell you to let the trade people buy the materials for themselves. There apparently have been some issues in their experiences that have supposedly clouded the issue of whether these people are employees or contractors. Apparently, this issue went deeper than material acquisition.

For Example:

If you tell someone that they must be on the job from 9 to 5 and you will be paying them an hourly wage, they will be viewed as an employee. The material purchases will be irrelevant. However, if you buy the construction materials and the trade people set their own time of when they come and go, and charge by the job, they should be viewed as contractors. My experience as a flipper and accountant tells me that whoever bought the materials is irrelevant to determining whether someone is a contractor or an employee.

Knowing whether a worker is an employee, or a contractor is relevant from a tax perspective. If the person is an employee, you have social security taxes and Medicare taxes that must be withheld and paid. You also must withhold income taxes. You really don’t want to have to deal with that situation if you can avoid it. At year end you must provide a form W-2 as well.

On the other hand, a contractor is on his own for paying the appropriate taxes. The contractor is in business and must fill out his own tax return forms and account for the taxes appropriately. You only need to provide the contractor with a form 1099 if you pay that person $600 or more. Read More...