Should I Let My Employee Use His Own Car for Company Jobs? (Podcast) | Ep. #046

Elizabeth Larkin, Michael Kelly and Eric Dollinger

In episode #46, Elizabeth Larkin and Gene Marks answer the question:

“I’m starting out with a contracting business. I’m 22 years old, still living at home, and I’m mainly fixing up basements, bathrooms, and decks. I work a lot of hours, like 80 a week, and I’m looking to bring in some help. A friend is interested in working with me, and he has a pickup truck with which we’d be using in addition to my car. What do I need to know about having an employee use his own car or my car?”

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Transcript

Elizabeth: Welcome back to another episode of the Small Biz Ahead Podcast. It’s Elizabeth Larkin, and I’m here with Gene Marks. Gene, how’s everything going?

Gene: It is going well, Elizabeth. I’m a big TV guy, I watch a lot of TV, and I’m constantly in search of recommendations for shows. What are you watching now?

Elizabeth: I actually am watching a new show right now.

Gene: It is?

Elizabeth: I’m very excited about it. I read this book last year called Big Little Lies.

Gene: Why is that familiar?

Elizabeth: Because Reese Witherspoon and Nicole Kidman turned it into a mini-series on HBO.

Gene: Right, that’s how I remember it.

Elizabeth: It’s about moms and their issues raising children in this small, kind of upscale town in California. Of course, the book is obviously better, and that takes place in Australia. Again, in a beach side town. The show took a lot of the best parts of the book, and kind of softened the edges, and then added in more story lines, which I don’t really think are that great, but if you’re looking for a good beach read for this summer, or you’re looking for a TV show to binge in a weekend, I highly recommend Big Little Lies.

Gene: Wow, that’s fantastic. There’s no violence in it?

Elizabeth: No violence. It’s definitely an adult show though. Definitely adult themes.

Gene: Okay, adult themes.

Elizabeth: I don’t really think kids would want to sit around watching women drink wine and complain about the school their children attend.

Gene: Just kids? How about husbands. You think they’d want to watch that too?

Elizabeth: Yeah, no. I think men are pretty into it. And you have HBO right?

Gene: Oh, absolutely. I will definitely check it out. I’m constantly in search of stuff. I watch a lot of stuff on my own when I travel, and then I want to look for stuff I watch with my wife.

Elizabeth: I think your wife would like it.

Gene: Okay. I’m going to definitely look it up.

Elizabeth: I think she’d appreciate it, because it’s definitely a female focused show, but it’s not one of those shows that … I think a lot of female focused shows on TV are like reality shows or something. But this is like really good drama, great acting, a good story, very interesting.

Gene: We will watch it.

Elizabeth: You can watch it on your flight to London.

Gene: No, no, ’cause we’re gonna watch it together when we’re by the TV, so it won’t be a solo flight. Next time I’ll share with you some of the stuff I’m watching. A little bit different than this show.

Elizabeth: I’m gonna guess it’s Walking Dead possibly?

Gene: Actually I have a couple other ones to recommend.

Elizabeth: Alright, we’ll hear from Gene on the shows he’s watching in our next episode. I do want to remind people that the debate over iPhone or Android is still going on so leave us a review on iTunes.

Gene: I like the Android, okay? You like the iPhone.

Elizabeth: I like the iPhone.

Gene: Alright. I want to hear what you think.

Elizabeth: Ease of use is important. It’s more important. We’ll be right back with our first question.

QUESTION: Should I Let My Employee Use His Own Car for Company Jobs?

Elizabeth: Okay, we’re back with this weeks question, and we got no name attached to this. This was sent in anonymously, and no location. I just want to remind people, you can send in a question like this. We don’t need to know your name or your location. So if you want to protect your identity that’s fine. In order to submit a question, go to smallbizahead.com, look in the top navigation bar for Podcast. It’s all the way on the right. Click on that, click on any podcast episode, and there’s a link where you can submit a question, or you can email me, Elizabeth, directly at smallbizaheadpodcast@thehartford.com and submit your question. I can either use your name or not. Either way is fine.

Gene: Yeah, send us your questions. We got answers. If we don’t have the answers, we’ll just make them up. You’re not gonna know the difference.

Elizabeth: Gene knows them. I actually have to research them every week, but we will put some thought into your questions, I promise. Or Gene’ll just …

Gene: I’ll just riff.

Elizabeth: Here’s the question.

“What’s up Small Biz Ahead Podcast crew? I’m starting out with a contracting business. I’m 22 years old, still living at home, and I’m mainly fixing up basements, bathrooms, and decks. I work a lot of hours, like 80 a week, and I’m looking to bring in some help. A friend is interested in working with me, and he has a pickup truck with which we’d be using in addition to my car. What do I need to know about having an employee use his own car or my car?”

I’m not able to answer this, because I know nothing about taxes.

Gene: You’re right. Well you know it’s taxes and liability. It’s just like an insurance company is sponsoring this, and I do have to say the first thing that you want to do, tax aside, is talk to your insurance agent, because if this person is driving around on your company business, and doing your jobs, and this person is texting while driving, and runs over a puppy and you get sued or whatever, you got a big issue. You really want to make sure that this person’s car is covered under your insurance, your business insurance. That’s the number one issue.

Number two issue is how this person’s gonna be paid. If this person is just another contractor of yours, then whatever expenses that they’re incurring, gas or whatever, that’s between you and that contractor as to what you want to reimburse him for. They’re just sending you an invoice for his services. I worked 30 hours this week, and my gas expenses was $27, and you just basically pay him for his time and his expenses if he’s a contractor. That’s really easy. And then you take the deduction for it, and he’s got that coming in. That’s his revenue. And he’s dealing with the taxes on his own. You don’t have to worry about that at all.

Elizabeth: A 22 year old might be okay with that.

Gene: Yeah, absolutely. I’m gonna assume, and I might be wrong, but this person, let’s call him Batman, okay ’cause he didn’t give us his name. So Batman’s a 22 year old. He’s running his own contracting business. I’m gonna assume he’s either gonna have like, a friend of his is doing the work that he’s just contracting with. Remember, at the end of the year, if you pay him more than $600 you gotta send him a 1099 so that there’s records, and report that to the IRS. And then he then deals with it all on his own.

Now, if you’re thinking of bringing him on as an employee of yours, then that’s a whole different ball of wax. Now you’re gonna set him up as an employee, and you can have standard reimbursement that you can do. And if there’s any out of pocket expenses, you can claim reimbursement that you can also reimburse them for as part of being an employee. Those are all. The other final thing is, and this is up to him, if he’s an employee of yours, if you don’t reimburse him for expenses, he can still claim those reimbursement costs as a deduction on his own tax return if he’s filing a Schedule C, or other business expenses. The IRS has a reimbursement rate. It actually went down. It used to be 54 cents a mile, now it’s like 53.5 cents a mile.

Elizabeth: I figured it was like 55, somewhere around there.

Gene: Yeah, it was in that range. Bottom line, just take away. Insurance first. Make sure that you’re covered on liability. Call your agent and make sure you’ve got that covered. And number two, determine who this person is. Is he a contractor or an employee? That will determine how you’re gonna treat him for tax purposes.

Elizabeth: For tax purposes, let’s say this guys got a truck, but let’s say he just drives to the job, he gets out, he does the job, he gets back in, he’s not hauling equipment. He’s not bringing anything. Does that change it?

Gene: He’s basically just commuting to the job.

Elizabeth: He’s commuting to jobs.

Gene: Because this guy’s in the contracting business, the IRS rules are is that your normal commute isn’t eligible for reimbursement. But that’s the commute to your office. If this person’s office is 10 miles away, but the job site is 15 miles away, then that person can charge the extra 5 miles, and then get reimbursed for that.

Elizabeth: It’s so great having an accountant here. World’s worst accountant.

Gene: The world’s worst accountant. Everything I’ve just told you, please for God’s sake, check it out with your own accountant.

Elizabeth: Alright, great. We’ll be back with our Word of Brilliance after we hear from our sponsor.

WORD OF BRILLIANCE: IBM

Elizabeth: Alright, this week we’re gonna hear from Gene for his Word of Brilliance.

Gene: This will interest you, Elizabeth, because we’ve talked about this on previous podcasts, but some new information. I just wrote, and again, it was a highly read piece that I wrote about IBM. My Word of Brilliance, let’s just say it’s IBM. I know it’s an acronym, but it’s IBM. IBM-

Elizabeth: We don’t need to get technical about it.

Gene: We don’t need to. It’s IBM, okay everybody? That’s what they were assuming. IBM, they are telling their work from home workers to stop working from home. This is a company that is recently as 2009 had 40% of their workforce working from home.

This is a company IBM, in particular being a technology company has always been behind the technology that enables people to work remotely, and from whatever.

Elizabeth: That’s their thing.

Gene: That’s their thing. Now they’re telling their employees, “You know what? We want you to come into the office.” They’re setting up co-location offices, like various ones in various cities, and they’re telling their workers you either report to the co-location office, or you’re not working for IBM anymore. Some people are opting out and taking severance and leaving. And other people are accepting it, and going into the co-location office.

Elizabeth: So they have to work full-time in the office now?

Gene: They do. They’ve scaled back significantly the amount of time they can be working from home. They have to be based out of a co-location office and are expected to be reporting there.

Elizabeth: What’s the difference between an office and a co-location office?

Gene: It’s the same thing. It’s a great question. It’s just that IBM itself, they might not have, and I don’t know this for sure, they might not have an office in San Antonio, so they just … They calling them co-location office. They’re opening up a small office where people can rotate in and out type of thing.

Elizabeth: So you don’t have a designated cube or something.

Gene: That exactly it. It’s a co-location kind of thing. You’re expected to be in a certain amount of time. You can work from home a little bit, but it’s mostly you’re in the office.

Elizabeth: I have friend whose company, just did this. She was full-time work from home, and they said, “You need to start coming into the office four days a week.” So it’s been going on for about three months now. She said she got so much more work done at home. She said the people in the office waste so much time gossiping and eating.

Gene: Yeah, well listen. I’ve walked around your area where you work with your coworkers, I can understand where she’s coming from. You guys are getting nothing done over there. It’s all just a bunch of yakking away.

Elizabeth: That’s ’cause you’re there though.

Gene: Right, that’s the reason. The thing is companies like IBM, Facebook has been doing the same thing, Yahoo did the same thing. There are a few other larger companies starting to bring their employees in, because they say that they’re losing creativity, they’re losing innovation. They’re using collaboration when employees are all separate from each other. What makes it a fascinating issues is that in survey after survey, the millennial generation, the 18 to 34 year olds who make up half of the work force, they all say the opposite. They want to work more mobile, more independent, more out of the office. They want to have a life style work balance, all that kind of thing. And yet your employers now, who have tried this, are now coming back and saying, “Not so fast.”

Elizabeth: What’s gonna happen? Are the millennials just gonna opt out, and be like, “I’m just not gonna work.”

Gene: I don’t know. It really depends on the kind of culture that you build in your company, and then I think a decision has to be made by both the employer and them all. My company, we don’t have an office. We’re virtual, so everybody works from home. Like I told you a thousand times before, we’re incredibly dysfunctional. I think that if we did have an office … Well we had an office, and nobody came to it, because everybody was working out at their clients. It depends on your company.

Elizabeth: Your employees are not sitting at home, they’re at clients.

Gene: No, they’re at clients all the time. I used to sit in the office by myself with the coffee pot and a cat. It was very lonely. That’s why, you know, I had a rent check that had to be paid. But in IBM’s case they took a look at it, and they said, for example, the example I worked about the most recent department is their marketing department. Rather than having all their marketing people spread all out and working from their homes, they want them and groups of them together so that they can talk and create.

Elizabeth: I feel like we’re gonna be talking about this for so long.

Gene: I don’t think anybody’s gonna figure it out.

Elizabeth: We’re on episode 46 of this podcast right now. I feel like in the first-

Gene: I know. We talked about it early on.

Elizabeth: Yeah, we talked about how at Harvard there’s a group that they just said to their employees, “You can work from home or wherever any hours you want as long as you’re in the office between 10 a.m. and three p.m. on Wednesdays. They found that it worked great for them.

Gene: Right. Depends on the culture. Depends on the company. But I think it’s interesting particularly if you’re running a business, you look at what some of the large companies are doing, and the pendulum is swinging back.

Elizabeth: I wonder with the whole millennial thing, I mean, obviously it’s just so strange to me, because there are so many college graduates now. There just were not that many college graduates back in the ’60s, so if you had a college degree, you got a great job. Now, I feel like there’s so many college graduates, there’s so few good jobs, so the millennials are really gonna say, “I’m just not gonna work then, because I want to be able to-” I mean, they’re gonna be forced to go along with this.

Gene: Yeah. I mean, listen to me. I think the other thing is IBM is a great company, and if you graduate college and you want to work for IBM ’cause you like the company, you like what they’re doing, you like the compensation. And they’re like, “Well, to work for us, you’re gonna have to work in the office.” That’s just the judgment then some employees are gonna make, and some employers are gonna have to make that same judgment too when they’re recruiting.

Elizabeth: Some companies are gonna get all of the really good millennials, because they allow them to work from home-

Gene: No.

Elizabeth: … and some companies are gonna get the “eh” millennials.

Gene: I disagree with that. I think that … yeah, ’cause all the good millennials … There are plenty of good millennials that want to come into the office and work. I go to a lot of companies with offices, these open spaces. That’s a whole other issue about open space how horrible it is.

Elizabeth: I hate open.

Gene: But it brings people in and they’re working there, and they’re not working from home, and this is people in the millennial generations. It’s just, you said it earlier, and you’re absolutely right. We’re never gonna … This is always gonna be a constant issue. My advice is if you’re running a business, what’s the culture of your company? That’s what you have to figure out.

Elizabeth: You have said in your company there is no team building at all.

Gene: No. We have no culture whatsoever. Everybody is just independently working on projects. I do think that we suffer because of it, and I’m absorbing those costs of suffering.

Elizabeth: You have such a low turnover rate though.

Gene: We do.

Elizabeth: People love to work for you.

Gene: They do. I’ve had the same people working for me for years, because they like that independence. Honestly, I meet plenty of other people that could never work for me, ’cause they like to go into an office. They would think it’s weird that they’re working from home or running out to clients. Against the culture-

Elizabeth: They want a pat on the back from the boss once in awhile.

Gene: They do.

Elizabeth: And you’re just like, “Eh, go away.”

Gene: I’m not … Yeah, like in email, “Good job. Get back to work.”

Elizabeth: We’ll talk to you in the next episode of the Small Biz Ahead Podcast later this week.

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