SEP eligibility when independent contractors become employee
Company has employed numerous young folks for irregular office work and classified them as independent contractors but with the IRS crackdown, company’s CPA is changing all these part-timers to employees as of 1/10/2011. Question is–does the 3-year work requirement for SEP eligibility begin on Monday, 1/10/2011 or must the company count time already worked while classified as an independent contractor??
Permalink Submitted by mk foss on Fri, 2011-01-07 19:05
Do you have a copy of the original adoption of the SEP? Often owners will give themselves credit for working in the business before the plan was adopted. – that could mean that they have to give these people the same opportunity.
I’m not sure of a definitive answer though.
Permalink Submitted by Ron Beaton on Fri, 2011-01-07 19:31
Thanks. My original question is a bit misleading; three years is the longest the employer can wait before covering an employee otherwise eligible (age and earnings). The owner can choose to make anyone instantly eligible as an employee benefit. In this case, with the CPA saying they must now consider these workers employees rather than independent contractors, we wonder if the time already worked while not classified as an employee must count toward that 3-year period.