I know this is long but I promise it is well worth it to read to the end.
Ok I really don't know where to start. I am trully sorry if you felt as though I was bashing your company, that was not my intention. I have been in this wonderful industry for over 10 years now and have worked for both net branch operations (alot of which are closed now) and corporations, which ever you chose is irrevelant as long as you do it the right way.
Now on to some facts. First I will not pretend that I know all the laws for all the States so I will only discuss Fereral and The State of Michigan regulations regarding this topic.
Fact 1- The difference between W-2 and 1099 is the difference between an employee and a sub-contractor. How do you clasify the difference? Here is the attachment from the Internal Revenue Service that determines this
http://www.irs.gov/businesses/small/...=99921,00.html
One of the easiest rules regarding this that makes us non-contractors is the fact that we cannot work for more than one mortgage company (broker) at a time (at least in Michigan this is the law). This makes us employees.
Fact 2- If the broker we work for in any way at all instructs us on how to originate, process, handle, or close any loan than we are now an employee. (similar to automotive salespeople)
Fact 3- if you have an office and require the worker to work a certain schedule or have mandatory meetings than that worker is now an employee and not a contractor.
Here is another link to a 160 page manual from the IRS regulating what is and is not an employee. The only reason I am so aware of this is I have been to court in the past about this very issue.
I also do not know where you got your figures for the percentages you can write off for a w-2 vs a 1099 but I do not think they are correct.
Again I am sorry if you take this the wrong way, I have done the research and I have also paid the price in the past and thought it was important to inform the loan officers who might read this thread to at least do their homework before they blindly jumped into something before doing their homework.
Now for the good news. There is a way to protect yourself under a tax shelter and still do things legally as a net branch owner. I can explain it in great detail to those who like (No I am not trying to get anyone to work for me) as the matter of fact if the Midas organization offered this I would reccomend them very highly.
First you need to set up an S Corporation (Most states this cost about $100) or an LLC. Call it a management company.
Second- you become a full fledged Branch Manager w-2 employee of the company (Midas Financial) and are paid a 10% commission (W-2) on all your closed loans. Now you are an employee of the company with proper IRS status.
Third - the company (Midas Financial) pays "your management co" 90% of the commission minus their corporate fees. For services rendered such as advertising, and processing (kind of like hireing an outside processor)
Since Corporate hired your management company as a "contractor" and it is a business to business expense it is not to being reported by the payor (Corporate)
Fourth- at the end of the year you report your w-2 income as usual. The income you report from your management company can either be reported on a schedule C or from the S Corp 1120s form. Either way you now can deduct 100% expensis for your business and not have any of it subject to income tax other than what you allocate as payroll.
I know this may sound kind of confussing but it is actually quite easy once you understand it.
So again as I stated in my first post, I think having a net branch is a great idea and i think Midas is a great company, my only suggestion is to be cautious in how you set up the financial end so you do not get burned from the taxing side.
Thank you for letting me explain in detail.
Jim
