Friday, October 26, 2012

CEOs urge Congress to reduce federal deficit

There was a piece this morning in the LA Times saying that CEOs from more than 80 US companies are pressing Congress to reduce the deficit by raising taxes and reducing spending especially in the area of entitlements.. The article goes on to say that the CEOs say a $1 trillion deficit the last 4 years is dampening business hiring .


A yearend deadline looms and if these cuts and taxes are not implemented an across the board spending cut and tax increases will automatically be put in place. The cuts would be about $100 billion and taxes would be increased $400 billion according to the Times.

What do you as a small business person think?



Scott Hauge

President

Small Business California

2311 Taraval Street

San Francisco, CA 94116

shauge@cal-insure.com

415-680-2188

Monday, October 15, 2012

Jim Baird - member profile

This is our first membership profile. Jim has been a great supporter of Small Business California but more than that a great supporter of California small businesses

Thank you Jim.



Scott Hauge

President

Small Business California

2311 Taraval Street

San Francisco, CA 94116

shauge@cal-insure.com

415-680-2188






September 2012: Jim Baird, CEO, Bay Area Development

Member since: 2005

For more info, please click here: Bay Area Development



Mission Statement: "It is the vision of Bay Area Development Company to be the highest quality provider of SBA loans in the entire industry"

1. What is your reason for joining SBC?

It is so critically important that real local small businesses band together and make sure that it is their voices being heard on the essential issues of the day. Small Business California fills this critical need by truly understanding the needs and diversity of the small business sector and by talking to all sides about practical rather than polarizing solutions to key small business policy issues.

2. What do you feel is the most important issues effecting SBC?

Small Business California is very important to us, and as someone who has worked with small business financing on Main Street as well as small business legislation in Washington DC.I know that often times small business does not get what they want because they are not well represented by groups that really understand the problems and issues small businesses face.

3. How has SBC benefited your company/organization?

Small Business California does two very important things for our organization. The first is that they keep us up to date and informed on a myriad of issues effecting small business that otherwise, we would not be knowledgeable or up to date on. The second is that SBC is always a well informed voice of reason when advocating for small businesses that we can always count on SBC to take good positions on issues affecting small business. With SBC, we feel like our voice is being heard.





Small Business Acton Committee

On the November ballot two very important Propositions will be on the ballot.

Proposition 30 which is called the Governors measure will raise about $9 billion in taxes.

Proposition 32 which will ban automatic deductions by corporations, unions and government of employees wages to be used for politics.

Small Business California does not take positions on ballot measures and we know there are small businesses on both sides of the issue.

We are however very concerned about an organization called the Small Business Action Committee. This Committee is sponsoring adds asking voters to vote yes on 32 and it is expected they will also sponsor adds to vote no on 30.

This organization does not represent small business.

Over $21 million has come from Charlie Munger a Stanford physicist and brother to Molly Munger who is funding Proposition 38 and his father who is an executive for Warren Buffets Berkshire Hathaway. If Proposition 32 passes he will be able to contribute to PACs in unlimited amounts.

I don’t know if any small businesses have contributed to the Small Business Action Committee but clearly they are not making the decisions on where to spend the money.



Does this bother you that very wealthy individuals that have no history of representing small business are using the moniker of small business as if they are representing your interest?



An interesting piece in the Sacramento Bee yesterday. Yuba City announced it would be paying attorney George Louie $15000 not to file ADA lawsuits. In June of 2011 a Contra Costa Superior Court placed Louie on a state list of “vexatious litigants “in California courts. But he was still free to file in Federal Court until this agreement.

The agreement was exclusively with Louie and I am sure there are many other attorneys that will pick up the slack.





Scott Hauge

President

Small Business California

2311 Taraval Street

San Francisco, CA 94116

shauge@cal-insure.com

415-680-2188















Friday, October 12, 2012

64 out of 74 Businesses Cited for State Labor Code Violations


The Independent Contractor[IC]/underground economy is a huge issue for California small business. On the one hand we hear from small businesses that the state and IRS audit them and nitpick to find ways to reclassify independent contractors as employees. Small Business California is working with one of our members who had an attorney and Human Resource person develop their contract for ICs and still the state insist these people are employees. It also should be noted that our member is following standard industry practice.

However there are numerous situations where the employer is clearly breaking the law. Charles Welsh who is a member came to us awhile back as many of his competitors were paying their employees under the table. We reported this to Christine Baker head of the Department of Industrial Relations who turned it over to Renee Bacchini her Special Assistant. See below results of their investigations. Looking at the reasons for citations none of these are nitpicking in my opinion. These people are competing with people like Charles who is playing by the rules and is clearly at a competitive disadvantage.

What do you see in your industry?



Scott Hauge

President

Small Business California

2311 Taraval Street

San Francisco, CA 94116

shauge@cal-insure.com

415-680-2188

















Hello Charles,



I hope your fall is going well too.



Please see below from the inspections conducted statewide in the salon industry. Our enforcement is to level the playing field, educate the employers and bring them into compliance if there are violations found. It is not within our jurisdiction to regulate how much they charge. There is high competition in this industry, it’s possible for the businesses to try to remain competitive with their rates in order to stay in business. Again, that is beyond what we enforce. We conducted 74 inspections throughout these counties and brought them into compliance with state labor law. Of the 74 salons inspected, 64 were found out of compliance.



Here are the results of the salon industry inspections during the week of April 16 – 20, 2012 in the following geographic areas:

SF/Alameda/Marin/Contra Costa/Sonoma/Napa counties; Tehama/Shasta/Placer/Sutter counties, and Santa Clara and Monterey counties.



Number of inspections……. 74

Citations issued .....……...… 64

WC amount….…………....….. $ 399,283.59 / 50 citations

Cash Pay 226 cites………….. $ 67,250.00 / 11

Minimum Wage Cites…….. $ 3,360.00 / 2

Overtime Cites……..……….. $ 350.00 / 1

Total Penalty Assessments $470,244.00



Please let me know if you have further questions.



Renée Bacchini

Special Assistant to the Director

Department of Industrial Relations

1515 Clay Street, 17th Floor

Oakland, CA 94610

510.286.1106 o

415.859.6005 m

510.622.3265 f











From: Charles Welsh [mailto:cvwelsh@mac.com]

Sent: Wednesday, October 10, 2012 5:48 PM

To: Bacchini, Renee@DIR

Subject: Re: Question on Independent Contractor Contact



Hello Renee,

Hope you are having a great fall!



Can you please share what the results were of the audit? It appears that most of the under the table, non-compliant "bad players" are still doing business at their low price point, I was wondering what the results were of the hair salon audit.



Many thanks!

Regards,

Charles



On Jul 24, 2012, at 4:37 PM, "Bacchini, Renee@DIR" wrote:



Hello Charles,



I found out DLSE BOFE Division went out and found quite a bit of non-compliance. Unfortunately it doesn’t necessarily close them down. I don’t know that we can publicize names of businesses, but overall results. Also, it had to be compelling enough for someone to write about it.



Renée Bacchini

Special Assistant to the Director

Department of Industrial Relations

1515 Clay Street, 17th Floor

Oakland, CA 94610

510.286.1106 o

415.859.6005 m

510.622.3265 f







From: Charles Welsh [mailto:cvwelsh@mac.com]

Sent: Monday, July 23, 2012 7:56 AM

To: Bacchini, Renee@DIR

Subject: Re: Question on Independent Contractor Contact



Hi Renee,

Hope you had a great weekend. I was wondering what the outcome was of your enforcement action. Also, do you think publicizing results might help garner more compliance?

Regards,

Charles



Sent from my iPhone



On Jun 13, 2012, at 11:12 AM, "Bacchini, Renee@DIR" wrote:

Hello Charles,



I checked in with our BOFE Division. This has been assigned and they are currently planning strategic enforcement.



Please let me know if you have further questions.



Renée Bacchini

Special Assistant to the Director

Department of Industrial Relations

1515 Clay Street, 17th Floor

Oakland, CA 94610

510.286.1106 o

415.859.6005 m

510.622.3265 f







From: Charles Welsh [mailto:cvwelsh@mac.com]

Sent: Tuesday, June 12, 2012 9:40 AM

To: Bacchini, Renee@DIR

Cc: Scott Hauge; Baker, Christine@DIR

Subject: Re: Question on Independent Contractor Contact



Hi Renee,

Hope your year is going well. Was driving down "Underground Economy Row" and thought of you. Sure hope that the State can do some meaningful enforcement on this. These businesses who hire employees and mis-classify them as "contractors" can cut hair for about half the price of legitimate businesses.

Regards,

Charles





On Jan 30, 2012, at 9:55 AM, Bacchini, Renee@DIR wrote:







Hello Charles,



Thanks so much for bringing this to our attention. This is interesting information. We will take a look and I will be in touch.



Kind regards,



Renée Bacchini

Special Assistant to the Director

Department of Industrial Relations

1515 Clay Street, Room 901

Oakland CA 94610

510.286.1106 o

415.859.6005 m

510.622.3265 f







From: Charles Welsh [mailto:cvwelsh@mac.com]

Sent: Sunday, January 29, 2012 6:41 PM

To: Bacchini, Renee@DIR

Cc: Scott Hauge

Subject: Re: Question on Independent Contractor Contact



Hello Renée,

It is a pleasure to meet you. I appreciate your interest in helping us to address the rampant mis-classification of workers we see in the Bay Area salon industry. I am a franchised hair salon owner with two locations in San Jose, CA. I've been operating since 2002 and working with Scott to help address the misclassification of salon workers in the Bay area.



What first alerted me to this problem, was the large number of salons with price points for haircuts that are ridiculously lower than virtually any other place in the country. For example, even in super-cheap cost-of-living places in the Midwest, you can't get a haircut for under $12 or so. Yet there are huge numbers of $6.99 - $9.99 salons throughout the bay area. Of course because a haircut service is pure labor -- no technology improves productivity to make it cheaper. So how could it be that one of the most expensive places to live in the country has the cheapest haircuts? Something didn't seem right.



Next, in our salon business, we began having job applicants come to us -- people who had been working at those cheap haircut places. Many of them would try to convince us to pay them all cash under the table. We told the applicants that we don't do that -- they were puzzled since they said this was common practice elsewhere.



Finally, when I sold one of my locations a few years ago, it was bought by an independent salon owner. He took over my old staff, my old location, put up his own price board, schedule, and simply made the employees sign agreements saying they agreed to split the cash take 50 - 50 (which he would pay them every two weeks) and they proclaimed that they were independent contractors. (No chair rental, no risk, all control of the business his, a regular payroll schedule, the works.) He told me he'd done this two times before with other salons he had bought and had made good money doing so. That's when I realized that people -- business owners, accountants, and lawyers are, on a massive scale, reconfiguring the beauty industry in California by misclassifying their workers.



To share with you the scope of the problem in San Jose, here are all the super cheap salons within just a mile radius of one small section of San Jose. These are all commercial storefront businesses-- not people working out of their home. I created this in January '10 by walking the mile radius and stopping in every salon and asking the owners and employees questions. Then I took all the information, mapped it in Google Maps. Every one of these ~25 salons has multiple chairs and multiple employees (not just a sole proprietor). It appears that most of these have misclassified their employees as "contractors". And as I mentioned earlier -- look at those prices -- on the left side of the map -- you won't find these kind prices even in the low-cost-of-living areas of the US. It is amazing how little one can charge when one chooses to misclassify workers, doesn't follow labor laws, doesn't buy insurance, and doesn't pay taxes.



http://g.co/maps/v5jc3



On a related note -- I recently found an article of an IRS audit that was done. While the audit and article occurred in the Midwest, the issues we face here are the same. The article does an outstanding job of illuminating:



a. the way professionals including accountants and lawyers give new owners bad advice about setting up workers as "independent contractors" ("Just have them sign a contract, then they are contractors.")

b. the method these businesses use to operate -- and why even the owners think everything is legitimate ("My attorney/accountant told me this was the way to do it.")

c. how when businesses that use these practices are put under scrutiny, they are found to be clearly in violation of the law

d. some crystal clear criteria that serve as a bright line between IC's and employee businesses.



http://www.nailsmag.com/article/916/youre-being-audited-one-salon-owners-harrowing-irs-journey



If we had a few well-publicized investigations in our region with significant penalties, there would be much more compliance.

Some suggestions that I think would be effective to pursue this might include:



a. Choose regional areas to target (San Jose, San Francisco, Sacramento all come to mind)

b. Select 3-5 businesses in each locality to audit.

c. Throw the proverbial book at the offenders

d. Publicize the result in papers and through professional organizations (Bureau of Cosmetology, in our case)

e. Send case outcomes to Attorneys and Accountants, remind of clear requirements for contractor status to ensure they are not mis-advising their clients.



I hope some of this is helpful. There are many others in my franchise who could share their stories with you, as well. If you are interested in talking with them, let me know and I'll introduce you, to them. Do call or write if I can be of additional assistance - and thank you so very much for helping us to get better industry compliance with the law. Without your help, I fear we are likely to see our industry taken over by under-the-table operators.



Regards,

Charles



On Jan 26, 2012, at 1:33 PM, Bacchini, Renee@DIR wrote:









Thank you for the introduction Scott. Charles, please feel free to send me information that you have.



Renée Bacchini

Special Assistant to the Director

Department of Industrial Relations

1515 Clay Street, Room 901

Oakland CA 94610

510.286.1106 o

415.859.6005 m

510.622.3265 f







From: Scott Hauge [mailto:shauge@CAL-INSURE.com]

Sent: Thursday, January 26, 2012 1:03 PM

To: Bacchini, Renee@DIR

Cc: Charles Welsh

Subject: RE: Question on Independent Contractor Contact



Charles meet Renee. She works with Christine at DIR. She is Christines point person on the underground economy.

You may want to send her information that you have discovered with hair salons and some ideas you have to deal with this.

Scott



From: Bacchini, Renee@DIR [mailto:RBacchini@dir.ca.gov]

Sent: Thursday, January 26, 2012 8:17 AM

To: Scott Hauge; Baker, Christine@DIR

Subject: RE: Question on Independent Contractor Contact



Mr. Hauge,



I will be available this afternoon. Is there a good time to call you?



I heard you speak at the legislative hearing in December. I look forward to working with you.



Renée Bacchini

Special Assistant to the Director

Department of Industrial Relations

1515 Clay Street, Room 901

Oakland CA 94610

510.286.1106 o

415.859.6005 m

510.622.3265 f







From: Scott Hauge [mailto:shauge@CAL-INSURE.com]

Sent: Thursday, January 26, 2012 8:14 AM

To: Baker, Christine@DIR

Cc: Bacchini, Renee@DIR

Subject: RE: Question on Independent Contractor Contact



Ms Bacchini, I would like to talk to you to see how Small Business California can work with you.

Thank you in advance for talking to Denise.



Scott Hauge

President

Small Business California

2311 Taraval Street

San Francisco, CA 94116

shauge@cal-insure.com

415-680-2109

















From: Baker, Christine@DIR [mailto:CBaker@dir.ca.gov]

Sent: Thursday, January 26, 2012 8:08 AM

To: Scott Hauge

Cc: Bacchini, Renee@DIR

Subject: RE: Question on Independent Contractor Contact



Hi Scott,



We just signed an MOU with DOL. I am asking Renee Bachinni to contact Denise.



From: Scott Hauge [mailto:shauge@CAL-INSURE.com]

Sent: Thursday, January 26, 2012 7:34 AM

To: Baker, Christine@DIR

Subject: FW: Question on Independent Contractor Contact



Who do I tell her to contact



From: Denise Collins [mailto:dcollins@auntanns.com]

Sent: Wednesday, January 25, 2012 5:17 PM

To: Scott Hauge

Subject: Question on Independent Contractor Contact



Hi Scott..



This is a link about the IRS/DOL effort to work together to prevent independent contractor mis-classification.

Here’s the announcement: http://www.dol.gov/whd/workers/MOU/irs.pdf



Do you know Who would be the reporting agency in California.. I'm looking for the California Underground Task Force Personnel so I can discuss a couple hundred agencies that are using independent contractors .



Denise Collins

Aunt Ann's In House Staffing

Aunt Ann's Homecare

www.auntanns.com

650 757-2000

Staffing homes since 1958

Please LIKE us on Facebook!





________________________________________

From: Tom Breedlove [mailto:Tom.Breedlove@mybreedlove.com]

Sent: Wednesday, January 25, 2012 4:07 PM

To: Denise Collins

Subject: RE: Counselor's Corner

Hi Denise,



Here’s the announcement: http://www.dol.gov/whd/workers/MOU/irs.pdf



I hope that helps.



Best,

Tom



Tom Breedlove

Breedlove & Associates

phone 888-273-3356

fax 512-347-9331

website www.myBreedlove.com











Payroll & Tax Service for Household Employers





From: Denise Collins [mailto:dcollins@auntanns.com]

Sent: Wednesday, January 25, 2012 4:36 PM

To: Client Service

Cc: Tom Breedlove

Subject: RE: Counselor's Corner





Hi Tom... Where can I find a IRS and DOL reference about the following? Who could I contact?





WARNING: The IRS and the Department of Labor have recently announced a collaborative effort to aggressively enforce worker misclassification,

which costs taxpayers billions of dollars in lost tax revenue.

The household employment industry has been listed as one of the primary targets for this enforcement initiative.





Denise Collins

Aunt Ann's In House Staffing

Aunt Ann's Homecare

www.auntanns.com

650 757-2000

Staffing homes since 1958

Please LIKE us on Facebook!





________________________________________

From: Tom Breedlove [mailto:tom@breedlove-online.ccsend.com] On Behalf Of Tom Breedlove

Sent: Wednesday, January 25, 2012 12:25 PM

To: Denise Collins

Subject: Counselor's Corner



Counselor's Corner



JANUARY 2012









"You guys are the most efficient

and responsive people

I have ever met in my life."



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$1,800: Social Security & Medicare ("FICA") reporting threshold





$1,000: Unemployment reporting threshold (some state thresholds are lower)





$2,500: Total childcare tax breaks available for families who pay legally





1.5: Overtime rate of pay when live-out employees work more than 40 hours in a 7-day work week





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TAX ID REMINDER

As families work to prepare their 2011 tax returns, many will be looking to itemize their childcare expenses in order to maximize their tax breaks. Qualified childcare expenses include 1) gross wages paid to the caregiver, 2) employer taxes on those wages, and 3) any fees paid to your agency.

If you get requests for your agency's tax ID (they may call it "FEIN" or "EIN"), we strongly recommend that you make sure your agency's tax ID is not linked to the caregiver's wages or the employer taxes. The client -- not your agency -- is the employer so their tax ID should be associated with those expenses.

Your agency tax ID should be linked only to the fees you received from the family during the tax year (this includes fees for perm and temp placements).

If you or your families have any questions about tax breaks, visit our Expert Advice section or call us at 888-BREEDLOVE (273-3356).





FORM W-2, GOOD. FORM 1099, BAD.

By early February, your caregivers should be receiving Form W-2s from the family(ies) they work for (we've mailed them to every employee -- and posted electronic copies online -- on behalf of our clients, but the deadline for employers is to have them postmarked by January 31).

If your caregivers get 1099s from their families, it's a problem for both parties. First, the caregivers have to pay an additional 7.65% in taxes (independent contractors must pay both the employee and employer portions of Social Security & Medicare taxes "FICA"). Second, by issuing a Form 1099, the families are subject to worker misclassification charges, which is considered felony tax evasion.

WARNING: The IRS and the Department of Labor have recently announced a collaborative effort to aggressively enforce worker misclassification, which costs taxpayers billions of dollars in lost tax revenue. The household employment industry has been listed as one of the primary targets for this enforcement initiative.



If you or your families have any questions about worker classification, visit our Expert Advice section or give us a call at 888-BREEDLOVE (273-3356).









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Tuesday, October 09, 2012

Affordable Care Act/Proposition E in SF/ Data Breeches

Today in the Kaiser Health News there was a piece about an analysis prepared  by Urbans Health Policy Center  saying that if the health law was implemented this year, the number of Americans covered by  employer sponsored insurance would increase by 2.7% and cost for small businesses with under 50 workers would decrease by 7.3%. For businesses less than 100 employees health insurance cost would be reduced by 1.4%. The report goes on to say that businesses with 101 to 1000 would see a 4.6% increase.
I am a supporter of the Affordable Care Act but these numbers for small  businesses with less than 50 employees seem pretty optimistic. What do you think?

For those of you in San Francisco you know that Proposition E is on the ballot for November.  This would change the current payroll tax to a gross receipts tax. There is no opposition but in a recent poll it was found that one third of those surveyed support the measure,one third oppose and the remainder were undecided. Small Business California has no position on this as it is a local issue but most small business associations in SF support this. I think most small businesses support this measure but we have to do a better job of talking to our employees, customers and friends encouraging that they support the measure. San Francisco is the only City or County in California that has a payroll tax.

I have put together  a short piece on how a small business can protect itself from security breaches. This is a serious problem for small businesses and most have not taken steps to protect themselves. I don’t send attachments on my emails so if you would like a copy please let me know.


Scott Hauge
President
Small Business California
2311 Taraval Street
San Francisco, CA  94116
shauge@cal-insure.com
415-680-2188 

Wednesday, October 03, 2012

Presidential Debate/ Voluntary Classification Settlement Program

You all know that tonight there will be a debate between President Obama and Mitt Romney. As a small business owner what would you like to  hear them say?

The IRS recently announced a new program called the  Voluntary Classification Settlement Program. This program will allow taxpayers to voluntarily reclassify their workers from Independent Contractor status to employees. Under VCSP a taxpayer will pay 10% of the amount of employment taxes calculated  under the reduced rates of section 3509[a] of the Internal Revenue Code for the compensation paid for the most recent tax year to the workers being classified under the VCSP. In addition ,the taxpayer will not be liable for  any interest and penalties on the payment under VCSP, and will not be audited for employment tax purposes for prior years with respect to worker classification of workers.
This appears to be a great opportunity for small businesses. You all are aware that the IRS has stepped up their audits in this area. Talk to your accountant about this.


Scott Hauge
President
Small Business California
2311 Taraval Street
San Francisco, CA  94116
shauge@cal-insure.com
415-680-2188