Switch to W2 employee of client

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#1
BFStax  
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I have a client I have been doing accounting work for since they started in 2015. It started as a small company but has since grown to a multimillion dollar firm and growing exponentially. This year the client also hired a CFO that is outside the US and runs a firm similar to mine. So right now, CFO and me are both contractors. The client has asked if I would switch to W2 employee and I am on the fence about this for various reasons. One big reason for the switch is because of a state tax credit for the investors who need 50% of employees to be in CT. Another is they (investors) want someone on their payroll dedicated to the company.

1) Are there ethical issues? Independence issues? Etc..
2) The client is in favor of me keeping my business and growing it, but wants to please his investors too. He wouldn't tell the investors I still have my own business. I feel this is extremely easy to check as they could simply google my name and see my website, company, etc.. and then start asking questions.
3) Any other reasons why this is a bad idea?

I am definitely leaning No on this setup but figured there may be other big reasons to say No that I can tell my client.
 

#2
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BFStax wrote:The client is in favor of me keeping my business and growing it, but wants to please his investors too. He wouldn't tell the investors I still have my own business.


Forgive me for asking, but how does hiring you as an employee vs an independent contractor please his investors?
 

#3
sjrcpa  
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BFStax wrote: because of a state tax credit for the investors who need 50% of employees to be in CT
 

#4
ATSMAN  
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BFStax I think you already know the answer! The Company is doing this to fool your state for their benefit. What happens if there is an audit and you are questioned for the real motive?

If I were in your shoes I would say NO and if they can't handle that I would disengage. You know this is a slippery slope before they ask you to do another favor that may not be in your best interest.

BTW is the parent company or Owner from India, Pakistan or any country in that continent? Just curious.
 

#5
BFStax  
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ATSMAN wrote:BFStax I think you already know the answer! The Company is doing this to fool your state for their benefit. What happens if there is an audit and you are questioned for the real motive?

If I were in your shoes I would say NO and if they can't handle that I would disengage. You know this is a slippery slope before they ask you to do another favor that may not be in your best interest.

BTW is the parent company or Owner from India, Pakistan or any country in that continent? Just curious.


I was leaning NO on this and you are absolutely right, I already knew the answer. I just needed that final, really good answer to put me over. It's a fantastic client who I really feel is just trying to do the right thing, but it does come down to "fooling the state" and I don't want to be a part of it. If I explain it this way the client won't have any issue with it as he is all about following the rules.

And no, the owner is not from that area.
 

#6
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It seems a bit strange that investors would be unhappy if their accountant had side work. Honestly, it would almost be weirder to expect an industry accountant to have no side work unless they're high up in a large enough company. It's beneficial to the company to have their accountant stay on top of trends and a great way is to encourage them to have side work.

I don't know CT state credits at all, but does the entitlement for a state credit require you to be a full-time employee instead of just an employee? If so, would the hours you generally work classify you as full-time? That would be a problem just in general.

I don't know if I'd say that it's fooling the state if you agreed to enter into a legitimate employer-employee relationship. They'd be paying unemployment taxes, etc. That said, lying to investors is a really good way to piss off the investors.
 

#7
BFStax  
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missingdonut wrote:That said, lying to investors is a really good way to piss off the investors.


Exactly.

missingdonut wrote:I don't know CT state credits at all, but does the entitlement for a state credit require you to be a full-time employee instead of just an employee? If so, would the hours you generally work classify you as full-time? That would be a problem just in general.


No, they don't have to be full-time. It's a credit to encourage hiring employees within our state.
 

#8
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I might be confusing something, but when did it become a problem for a company to hire an accountant out of an accounting firm?

I see more of an issue in the future if they decided to change you from being a W-2 employee to no longer being an employee ...

And not knowing what your compensation level is, would you be risking losing the QB I deduction?
 

#9
BFStax  
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HenryDavid wrote:I might be confusing something, but when did it become a problem for a company to hire an accountant out of an accounting firm?


Obviously there is no problem hiring someone from an accounting firm. I think the real issue is saying to the investors that I'm full time when I'm not. And of course becoming W2 status and therefore under the clients "control".

QBI deduction won't come into play.
 

#10
Frankly  
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With a company formed in CT, offices in CT, performing services in CT, how is having an employee in CT fooling the state?
 

#11
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Knowing that your hours will be misrepresented to investors and going along with it/keeping silent would be an ethical issue for me.

I am dedicated to all of my clients. One doesn't need to be an employee to be dedicated to a company.
 

#12
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I wouldn't do this if they're going to claim you as full time W2 while you also have your own full time job or firm.

I did transition into private accounting via an existing client, but they had made it known from the start that they hired accountants from CPA firms once their companies are large enough. Lasted about 15 months and I was back on my own--complete hell of an experience from a demand and hours standpoint, certainly was not worth the money relative to lack of life outside of work.
 

#13
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FWIW, my "opinion" is don't do it.

If this client has outgrown your practice's target demographic or if they have grown to where they need something more than what you normally offer, then do them a favor and let them go completely

Sometimes a solid "no" is better than a weak maybe. Allow them to hire what they really need and get on with running their growing business.

Also in my opinion, it is better to have several smaller revenue producing clients than a few high paying ones. It's much safer and steadier that way. That's one of the huge benefits of being a practitioner, in my opinion.

If one of my "bigger" clients fire me, go out of business, or if I have to fire them, I still would never take more than a 2% hit to my revenue.

Plus, as stated in other responses, big clients will work you too hard.

Again, just my opinion and philosophy.
 


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