How do I get a temp agency to pay me through my corporation?
San Jose, CA |
I am getting a temp job with a temp agency. I am wondering how to set it up so that the money goes to my corporation instead of to me. I work freelance a lot and the money goes to my corporation, but how do I set it up that way with the temp agency?
You may not be able to if you are hired as an employee. The law presumes that people who are hired to provide services to an employer are employees unless certain criteria is set which distinguishes that individual as an independent contractor. If you are truly an employee, you must provide your social security number for tax reporting purposes, and the employer must make the required tax withholdings from your paycheck. I am not aware of temp agencies that hire individuals as independent contractors. It invites a number of potential problems with the EDD, the Labor Commission and various tax agencies.
If you believe there is a way you can do this legally, you should hire a business attorney to help you set up your business in compliance with state and federal law.
They say you get what you pay for, and this response is free, so take it for what it is worth. This is my opinion based on very limited information. My opinion should not be taken as legal advice. For true advice, we would require a confidential consultation where I would ask you questions and get your complete story. This is a public forum, so remember, nothing here is confidential. Nor am I your attorney. I do not know who you are and you have not hired me to provide any legal service. To do so would require us to meet and sign written retainer agreement. My responses are intended for general information only.
You need to consider what is in it for the temp agency. What would compel it to consider you to be an independent contractor -- allowing payment to the corporation -- as opposed to an employee?
If the temp agency misclassifies you, then it has substantial risks. For example, because it did not withhold personal income tax or payroll taxes, it could be liable for the payment of those, plus interest and penalties.
If you want to be considered an independent contractor, you should consider explaining to the temp agency the reasons supporting your position. The primary factor is whether or not the temp agency has the right to control the method and means of your work. If it does, you are probably an employee. Other factors are also relevant. The IRS uses a "20 Factor Test." You can see the test and an explanation of its factors at http://www.comptroller.ilstu.edu/downloads/20-factor-test-for-independent-contractors.pdf
Your corporation would likely be considered a "personal services corporation" by the IRS. As my colleagues have identified, the arrangement you have described is not well received by the IRS. The Supreme Court, many years ago, decided that income must be assigned to the individual that actual earned it. You cannot assign income to another person or entity for any reason -- especially not to avoid taxes.
If you are employed by a temp agency, you will likely be treated by them as an employee of the agency not your corporation.
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