Govt contractors what would you do

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Elysium
Posts: 1809
Joined: Mon Apr 02, 2007 6:22 pm

Govt contractors what would you do

Post by Elysium » Tue Jan 15, 2019 5:57 pm

Govt is shutdown with no answers on when it will open. Expecting a very long and/or unknown future, if you were a self employed contractor what would you do with business income. Let's say still working, but not guaranteed if shutdown goes beyond this month. Assume, normal practice is to run payroll monthly, pay federal & state taxes, FICA, i401k deductions, and other business expenses. What is remaining then is taken as distributions periodically.

In the new situation, possible to not run payroll given uncertain business income stream, and leave most of the business income minus expenses in business account until there is solution, and/or private work is picked up. That will allow taking distributions to cover any essential expenses, and leave some for later. When income stream picks up back again, payroll can be run to compensate for the months not taken.

For instance, one possibility to not run payroll for Jan/Feb and file zero in deductions, then overcompensate in March/April.

Consider for the sake of this discusion, emergency funds are not to be touched, and there will not be enough business income to last several months if normal payroll is run.

123
Posts: 5135
Joined: Fri Oct 12, 2012 3:55 pm

Re: Govt contractors what would you do

Post by 123 » Tue Jan 15, 2019 6:04 pm

If the business has cash reserves and wishes to retain existing employee(s) then the best approach is to continue payments to employee(s).

If the business does not have cash reserves it will have to shut down if it does not receive income to pay employee(s).

If the business does not have cash reserves to pay employees it may lose employees who will need to seek employment elsewhere.

Heavy reliance on a single customer has been known to cause businesses to fail when there is heavy reliance on a customer who experiences financial dificulties.
The closest helping hand is at the end of your own arm.

Iridium
Posts: 519
Joined: Thu May 19, 2016 10:49 am

Re: Govt contractors what would you do

Post by Iridium » Tue Jan 15, 2019 7:59 pm

I am a bit unclear on a few things:

1) Do you have employees or is it just you?
2) Do you have other clients who are open or are all of your clients shut down?
3) How much, if any work did you do in January?
4) Is your question mostly about how much salary you are required to take from a pass-through entity such that the IRS will not come down on you for ducking social security?

DrGoogle2017
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Joined: Mon Aug 14, 2017 12:31 pm

Re: Govt contractors what would you do

Post by DrGoogle2017 » Tue Jan 15, 2019 8:02 pm

When government shut down for my husband as an employee this is what I did, I upped the maximum withholding so he got paid the same amount, both for federal and state tax. People were worried but I didn’t. There’s always a way to solve this problem. And the rumor mill about shutdown was long before the actual shut down so we got many weeks to prepare. Plus he was still getting paid, just less hours that’s all, unlike now.

MnyGrl
Posts: 251
Joined: Tue Apr 11, 2017 3:44 pm
Location: DC

Re: Govt contractors what would you do

Post by MnyGrl » Tue Jan 15, 2019 10:09 pm

I'm a fed contractor for a small company close to DC. Since our customer is closed due to the shutdown, my employer chose to do a temporary layoff for all of us on the contract starting Jan 1, allowing us to file for unemployment. We are receiving nothing from the company this month, and have to send them a check soon for our portion of health insurance for January.

I'm worried that my company won't survive a multi-month shutdown. I'm applying for other jobs, since who knows how long this shutdown will last?

ccieemeritus
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Joined: Thu Mar 06, 2014 10:43 pm

Re: Govt contractors what would you do

Post by ccieemeritus » Wed Jan 16, 2019 5:26 am

My wife works for a NASA contractor, normally at a NASA facility.

The contractor was already funded into January, so she’s still working...but from home (she’s a software programmer/manager).

Recent update is that she’ll be furloughed Jan 25th when money runs out. Health insurance will run to end of month.

I’ll suggest she use vacation hours into Feb so insurance will run through end of Feb. After that its COBRA time.

BHUser27
Posts: 650
Joined: Mon Jan 18, 2016 3:07 pm
Location: A Midwestern Town

Re: Govt contractors what would you do

Post by BHUser27 » Wed Jan 16, 2019 7:44 am

Here is an example of how my employer is handling it:
I work for a large engineering contractor to NASA & USGS.
We accrue our PTO per pay period as the calendar year progresses.
Employer approved charging up to -80 hrs PTO when shutdown started. This allowed us to keep getting paychecks even if we had used all PTO last year.
Employer is expecting to be able to file a contract claim when this is all over so they can reimburse the PTO time we used.
If an employee exceeds -80 PTO hrs, then they must go to a leave without pay (LWOP) status.
I just started LWOP this week.

ddurrett896
Posts: 1095
Joined: Wed Nov 05, 2014 3:23 pm

Re: Govt contractors what would you do

Post by ddurrett896 » Wed Jan 16, 2019 9:00 am

Elysium wrote:
Tue Jan 15, 2019 5:57 pm
Govt is shutdown with no answers on when it will open. Expecting a very long and/or unknown future, if you were a self employed contractor what would you do with business income.
Anything past 30 days allows for a RIF (Reduction In Force) where positions can start to be eliminated. This includes high level positions, which in my humble opinion don't do much, and causes people to start working together in an effort to save their position.

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