How do I pay my captain???

[releck97]

Hey guys,

My business has grown to the point that I need to hire a captain for approximately 2 months on a relatively full time basis. He has his own dba and plans on working down south during the winter (we're in upstate NY). He and I would both prefer that he be hired via a 1099 misc. A W2 hiring might be the only way to go. If so, he would be my only employee. Temp agencies won't touch him because of the "nature of the work". What do you do? What is the proper way to go about this? I can go through a payroll service for a reasonable rate, but what about worker's comp? How does the jones act figure into this, if, at all? I have an accountant looking into it all, but this isn't exactly maritime country, and he's never dealt with this situation before. Any help/insight is greatly appreciated!

Thanks,

Capt. Rick

 

[Tortuga James]

Interesting question. I look forward to hearing the correct answer. I would think he could just invoice you at an hourly rate for contract services. I helped out a local fishing boat that was having intermittent Captain issues and that is what I did. I ran the payments through my LLC as sales revenue.

 

[Wookie]

You may hire him as a 1099 employee. In order for you (and he) to do this, you may not contribute materially to any of the requirements for him to be a Captain. He must be able to walk off your vessel and onto someone elses without a hitch. The things you need to consider (and use as proof) is that he needs to have and pay for his own drug testing consortium membership and training. You may not pay for his STCW, his twic card, or anything he uses as training. He needs to have his own tools ("Tools" is a biggie for the IRS). Tools might consist of his charts, though not likely because they are ship specific, binoculars, GPS, life vest, spreaders and compass, etc. I have a 1099 captain who shows up at the boat with a pelican case with his "tools" in it. Do not pay him anything other than his dayrate (or hourly rate, or whatever). Do not reimburse him for gas, or haircuts, or housing, or anything else. He is a subcontractor and is expected to provide all of that for himself.

 

[releck97]

Capt. Frank, thank you for your thorough reply. I got the "go ahead" from my accountant with similar guidance, although he didn't mention anything about the tools. Makes sense, though. Otherwise, everything looked ok to the accountant and the captain is now billing me weekly for services rendered. It is a fine line and I wanted to make sure we were both doing things according to the law.

Time to fill the boats!

 

[Wookie]

Yeah, the tools thing is from an IRS website that describes fully what is an employee and what is a subcontractor. My welder is a subcontractor, he has his own welding machine and grinder and etc. I buy the plate or materials. My mate is an employee. I withhold from him, and he can file unemployment. Way better to have subcontractors than employees.

 

[catalina_mike]

It is a fine line for sure. As someone who has gone through a audit they dig real deep and 1099's automatically flag interest. Follow the rules and not relay on just the accountants advice. He might be completely correct but they don't care.

 

[Wookie]

And it always works better if they have a business name, even a DBA. Writing the 1099 to "Boat labor co." is better than "Joe Smith". My welder is "Coastal Welding". No problem with audits.