Adam Bensman of the Roofing and Solar Reform Alliance warns that a March 11, 2024 federal rule change will reclassify many roofing contractors as employees if they earn 90% or more income from one company. The IRS whistleblower program offers 15-30% rewards, and companies face back taxes for seven years plus penalties around 12.5% of wages.
Questions this video answers
March 11, 2024.
Roughly 90% (worker earning ~90% or more of income from a single source may be considered an employee).
He recalls approximately 15% to 30% of taxes collected as the whistleblower reward.
Up to seven years.
He estimates up to about 12.5% of wages (example: $125,000 per $1,000,000 in payroll).
Chapters
These new laws will change the roofing industry forever. And they go into effect March 11, 2024. The gray area in which many of us have operated with 1099 independent contractors, by the way, including our installers, our crews versus employees. Well, this gray area is not gray anymore. Starting March 11, they are tightening the noose. And from my understanding and my prediction, they're coming after the trades. And roofing being one of those. Now, these changes will threaten the livelihood of your business, how you should operate, and the penalties if you don't jump on board. I'm bringing this to your attention because this industry, our industry is under threat. We have sudden changes that are changing how we need to operate. And one of those is legislative changes, not only at the state level, but on a federal level. And this is one of those. And by the way, it's one of the reasons that I founded the Roofing and Solar Reform alliance, to help unite the right contractors in the front lines to get inside information about what's working, what's not, and how to navigate through these changes. Which is why I'm bringing in an attorney for our members to help consult and figure out what we need to do together. So if you're interested in becoming a member of the Roofing and Solar Reform alliance, that's just one of the very many benefits. Click the link in the description to learn more and set up your private tour. Now, without further ado, let's jump into today's video. Welcome or welcome. Welcome back. Adam Bensman here, the roof strategist and also founder of the Roofing and Solar Reform Alliance. Before we jump in, I need to let you know I'm not an attorney. I'm not your attorney. This is not legal advice. And I'm no way, shape or form near qualified to give you legal advice. In fact, I'm just a massage therapist and colon hydrotherapist turned roofing sales guy. So I don't know anything about the law. But what I do know is from my research on this law school, speaking to an attorney and trying to navigate the complexities of what this law means. So let's jump into it, shall we? Let's get started. All right, let's jump into the Fair Labor Standards Act. I know what you might be thinking, Adam. This law has been in effect for a long time, and this is nothing new. They've been trying to enforce it. This state, this state, this state's been trying to enforce it, but it's far deeper than that. Yes, all of that is true, but what's happening March 11 is this. This gray area from the independent contractor side and the employee side is no longer gray. And what they've done is they've changed the definition of a independent contractor versus employee relationship and are putting this under a microscope. And what they're calling this is the quote unquote, economic reality test. Now, I'm going to give you this in the simplest of terms. In my digested plan, there's a whole bunch of criteria. There's like six main questions that they ask to determine whether this person, meaning maybe your sales team or even your crews or installers, are technically an independent contractor. Now, this economic reality test essentially states that if the person who's considered an independent contractor is making 90%, roughly or more of their income from a single source, meaning your business, then therefore they are an employee. In other words, if their livelihood depends on one company, then they are therefore an employee and not an independent contractor. Now, this economic reality test is one thing, but here's what gets really spooky. They know this industry is cutthroat, and it's no secret that having employees is more expensive, expensive than having independent contractors. So let's say, for example, that company number one, they go to W2 employees, they adopt to this law, and they're. They're competing with these other roofers who are undercutting them. Well, guess what? The IRS was kind enough to launch a new whistleblowers campaign. And yes, you heard me right. Whistleblowers, meaning there's an official way for you to blow the whistle on a competitor to rat them out to the irs. And in exchange, the company that blows the whistle or the person who blows the whistle will receive monetary reward. And I'm going to put an image up here. I'm going off memory. It was 15 to 30% of the taxes collected. The back taxes owed are paid basically by way of a referral fee as saying, thanks for blowing the whistle on somebody else. So, yes, the law has been in effect, but now that gray area, that's pretty much out the window. Now they're relying on whistleblowers, fellow people within the industry, to start ratting out other people. Now, the other thing that makes this threat even more real is the fines. The fines have always been there. But now that the gray area is tightened up, should you be exposed to, let's say, an audit or a whistleblower or some other discovery that says that gets the IRS to start looking into your business, if you are found to be having independent contractors who should have been employees, you are subject to a foundation financial penalty as well as owing back taxes on the wages that you paid for up to the previous seven years. Now that sum, the math will be calculated differently, but my understanding is those can range up to about 12.5% of all the wages that you've paid. So in other words, for every million dollars you have in payroll, you could be subject to $125,000 thousand dollars fine per million in payroll over the last seven years. So what does this mean? It means that not only does this impact how many of us have our team structured with 1099 independent contractors or sales reps, but they're also actually putting a really close microscope on our installers and our crews. So if you have a crew or an installer who is doing almost all of your work exclusively and they're making almost all their money from you, well guess what? If they end up looking into that and see he economically dependent upon your company, they are therefore then qualified as an employee, which means your installers could technically be employees. So the noose, my friend, is getting tightened. What you need to do next is consult with an attorney in your state, in your business attorney to figure out the complexities of how you should navigate this with your independent contractors from both a sales rep standpoint and as well as an installer standpoint. And if you want to join us in the trenches to learn what other companies are doing to stay on the cutting edge and maybe even meet with an attorney that we have brought in to rsra, then click the link in the description and join us in the trenches. You can also text the word demo to 303-222-7133. It's just one of the very many benefits of being a member of rsra including access to my sales system, our in person event, the endorsement and credibility of being a member, the logo on your website, the logo on your truck, and a whole bunch more Now. Thanks for joining me in today's video. Listen, I know that this is shocking, this is frightening news for many of us and I know there's some folks watching by the way, who are W2 already. They have all their people's employees like hey, we're ahead of the game, we're ready to rock. But remember, this also could include your installers take action today. Stay ahead of this so you know exactly what you need to do in order to adapt and to protect the livelihood of your business and so you can continue to thrive. Thanks again for joining me in today's video. Just because our time here is about to wrap does not mean your in my time has to. My guess is you're a member of leadership or an owner. And for that reason, I've got a hand selected video for you I think you're really going to love. So jump into that one right after this and I'll see you on the next one.
