Tax liabilities/benefits of paying a telemarketer?

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I've left United American and will be captively working for American General. One of the other agents who still works with UA has a wife that is GREAT at telemarketing. She generates interest on cold calls, and then hands it off to him to work. In order to supplement my own prospecting efforts, I've talked to him about the possibility of engaging in a business arrangement where she will generate leads and I will pay her based on appts kept and appts closed. If our arrangement goes as well as I expect, a decent sum of money will change hands over time. If possible, I would like to get a credit on my taxes and I also want to make certain that I won't owe have any tax liabilites. Since I am technically working for AIG, it's not like it is my own business and she is my employee - right? If so, what are the tax liabilities? The way I'm thinking, I can deduct what I pay her by calling it a work expense.
 
You may be a captive but I question if you are an employee of AIG. They are paying you wages that will show up on a W2?

If you have 1099 income the cost of the leads (including telemarketing expense) can be deducted on your Schedule C.

If your income is all W2 you may be able to deduct those expenses on form 2106 or you may be limited as an itemized deduction on Schedule A.

Be careful about paying per app. If you pay a flat fee you may be able to avoid issues with the DOI. If you pay as a percent of the premium you are walking on thin ice.

You may also be liable for your telemarketers FICA taxes if you are not careful.

Best to check with your tax accountant before walking too far out this plank.
 
You may also be liable for your telemarketers FICA taxes if you are not careful.
quote]

This is one of my main concerns.

BTW, she is a licensed agent -- she just doesn't go out in the field. Thus, there shouldn't be any problems on the commission splits.

Furthermore, I wasn't really thinking of doing a split.
I was more thinking of $20-25/appt KEPT and $50/Sell off of one of her leads. Does that seem reasonable or is it too high or low?
 
Even if you are a W-2 employee of AIG, you can file a Schedule C and deduct the expense of the telemarketer. If you pay her more than $600 in a tax year, you must file a Form 1099-MISC and issue a copy to her. Of course you will run into Schedule SE, Self-Employment Tax, if the net income from the side business earns more than $400. The SE Tax can be offset to an extent by the FICA taxes AIG deducts on your W-2. You do not have to pay her FICA because she is an independent contractor from the way you describe the set up.
 
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If your earnings are all w-2, rules out the schedule c. If you were 1099 earlier this year then you are good to go on sked c for 2007.

Form 2106 flows to the sked a, and you can only deduct business expenses
that are greater than 2% of agi (adjusted gross income).

Of course if your itemized expenses are less than:
Single: $5,350
Married Filing Joint: $10,700

Then you won't be writing any of it off.
 
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My bad. I misinterpreted the post. I thought he was doing this telemarketing for a side business rather than stictly for AIG. If he has 1099 income from other carriers then W-2 income from AIG would not preclude Schedule C. I don't believe it was made clear to me if he was strictly W-2 in which case, of course, he has to use Form 2106, Employee Business Expenses and Schedule A. I guess`I read too much into it.:cry:
 
He indicated he was "captive with AIG" which by definition would preclude 1099 commissions from other carriers . . . unless it was under the table . . .

But captive does not mean W2. Could still be 1099.
 
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True. Insurers that pay life insurance agents as W-2 place them in a special class provided by the Internal Revenue Code whereby income tax is not withheld, but FICA (1/2) is. AS you ststed , he could be a 1099 captive which means he is responsible for self-employment tax as well as paying any income tax.
 
True. Insurers that pay life insurance agents as W-2 place them in a special class provided by the Internal Revenue Code whereby income tax is not withheld, but FICA (1/2) is. AS you ststed , he could be a 1099 captive which means he is responsible for self-employment tax as well as paying any income tax.

It's called a Statutory Employee. I've never understood it. Perhaps some kind soul will explain what it is? I believe realators are often in the same 'boat'?

Al
 

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