Doom314 wrote:The law that screwed him is something of a mess, and it's more about that than him being an idiot
The law speaks to brokered third party independent contractors, not to people making a living on their own as a programmer. If Stack:
(1) did his own marketing
(2) found his own customers
(3) properly formed a business entity (LLC or C/S corp) that gave the government visibility into his revenue streams and ensured he was complying with federal, state, and local taxes and fees
he would have had no issue. It is true that the government doesn't like the idea of having people who are just coders-in-a-can: people that can code but have no business sense and hence no ability to comply with or even know about federal tax code working through a
third party marketing firm that has no tax liability for what essentially amount to their employment and receiving full compensation without regular federal tax deductions coming from their pay. This same group of contractors are also very likely not to pay workman's comp or comply with various state and local commercial taxes. I am not saying that the law was a not bad one, it is just Stack had no clue how to deal with it.
Hell I ran a commercial software, networking and engineering business for 5 years on a DBA basis (Doing Business As) without using an LLC or C Corp from 1993-1998. I handled all of my own income, paid estimated taxes, filed my schedule C and dealt with all of my customers' 1099 issues. All of that was done above board and without issue including business expense accounts, depreciation and capital expenditures. Of course, I was not using a
brokered service to find work; I did it all myself. I have friends right now that do this exact thing and have been doing it for years without issue. The trick is to talk to an attorney and talk to a CPA that comes recommended by other small business people and
take their advice so you do not get into tax trouble.
People get into trouble when they earn 1099 income and fail to pay estimated taxes, fail to separate business income from personal finances, fail to keep the required records, fail to report income earned, fail to properly depreciate capital equipment and a host of other things. Stack never talks about what exactly happened related to his first run in with this law, only about the "broker's moles" in "our (a group of coders ?) organization". Hell the way Stack tells it, there were others dealing with this same issue. WTF wouldn't they just pair up or group up into an LLC and
viola no more "independent contractor" concerns. Something is completely bullshit about his story. Top that off with his admission that he got involved in "tax code readings" early on, which right away is a red flag saying he was trying to bypass the federal tax system and the fact that his wife had $12,500 in unreported income (since income that is reported is by definition reported, unreported income means his wife was failing to report income and hence trying to cheat the system as well) and a picture begins to form about Stack.
Finally, the federal tax system is a byzantine pile of shit. This *one law* is not a deal breaker, the entire code is full of dealbreakers. The government is not keen on
any tradesperson (think electrician, plumber, dog groomer whatever) setting up shop and not paying estimated/actual federal taxes. The fact that some fat-cat senator took a bribe to write something specific for technical people does
not absolve every other tradesperson or even technical people from their tax liabilities. Stack somehow believed that this
one law was a barrier to his doing whatver the fuck thing he was trying to do when clearly that is not the case. Yes it makes third-party arrangements less beneficial, especially if one of the benefits the worker hoped to get was tax free income and I am sure it hurt legitimate contractors that relied upon third party arrangements for access to customers. However, I'll give even money that the entire law was a sham put in place by Moynihan to appease anyone looking to make sure his tax break for IBM was offset by additional revenue elsewhere; I mean, do you seriously believe that without this law, technical tradespeople would have been absolved of the taxes they owed? This law is going to "bring in money? Only an idiot would believe that. Moynihan just wanted to have plausible deniability; he wanted to be able to say "these here third party situations make it easy to cheat on taxes so I am closing that loophole" and anyone from the CBO could just nod their head and walk away.
If Stack wanted to avoid trouble, he should have followed very basic advice, which he absolutely would have or should have gotten had he cared about it:
*Do not try to cheat the system, do not even looking like you are trying to cheat the system
*Act in good faith based upon the advice of licensed professionals
*Keep proper and sound records
*Never, ever, fail to report income.
Stack failed at every one of these basic tenants and that is why he was smacked down even if this law is an unfortunate one.