The Rest of the W-2 Story

Yesterday was quite entertaining. I spoke on the phone with a pimp late in the day about a contract at a former client site of mine. This pimp was obviously not a native and was subbing work through the industry bottom feeder, US Tech (they’ve actually managed to take the title away from EDS which should tell you just how low the firm is.)

The hilarious part of the conversation wasn’t hearing from the pimp, but rather hearing a voice which was obviously not from the midwest of the USA lament about how the off-shoring and influx of illegals had trashed billing rates and slaughtered the quality industry wide. He received hundreds of positions every day he didn’t bother to post or work because the billing rates were so low you could only get someone that would end up putting you in prison via the sponsorship clause. (For those who don’t understand that, some time around the time of the Patriot Act the rules changed for sponsorship. If you sign on the line for someone who is caught planning or committing an act of terror against the country or the people you get the same sentence they do. If they get the death sentence, you’ll be the very next person strapped into the chair on that very same day.)

I found it odd that someone, who obviously knew his company made money with these people, would be so dead set against even working the positions. At least I found it odd until we got around to discussing my working on a 1099 basis only. He hem-hawed around about really prefering W-2, but finally admitted they could work 1099. They just had to fill out a bunch of paperwork for their lawyers because of some recent problems.

Ah, the truth starts to leak. Why haven’t we heard it on the news? I guess, indirectly we did. There were some business announcement about tax collections being up this year without any explanation as to why. Now, the truth has slipped out. Plane load after plane load of IT and other “consultants” have been coming here for years on tourist visas which do not allow for income generating work to be done. Well, a few firms finally got caught. You see, the tourist workers just plucked a company name out of the air without getting an EIN (Employer Identification Number), because they couldn’t.

Well, somebody slipped up and tried to issue a W-9 to one of these people. The IRS came to visit. The IRS went to a judge and got all of their payroll records for the past N years. The IRS collected all of the taxes on every person they had issued a check to, even if that person had already paid the taxes. It was a pay us now and fight to get your money back later situation. When the IRS got done collecting taxes and issuing fines, they sent all of the information they had gathered over to the Department of Immigration and Naturalization. When INS showed up it wasn’t a free visit either. I didn’t hear it from him, but there were a few contracts which suddenly re-opened within a few days of the INS visit as the people working on-site had to leave.

You’ve heard me complain for years about the incestuous relationship these off-shore companies have. When one of them gets a contract, the automated subbing network is so large that they all have the contract and are all trying to take a $5/hr cut. Well, the IRS is currently “following the family love trail”. If you watch postings on DICE it is pretty entertaining. You can almost chart the progress of the IRS. Off-shore companies which always flagged things CON_IND are suddenly updating positions to flag them CON_W2 or FULL_TIME. You can pretty much chart the day the IRS arrived.

Since none of those people could legally work here, none of them paid taxes. When they got sick they went to the emergency room and the taxpayer, not the off-shore consulting company, picked up the tab. Well, the bill is coming due. Guido and Vic are making the rounds and suddenly IRS collections are way up for the year.