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Comment by sammcd | Hacker News Reader

I remember an episode where this american life explained why health insurance came to be like it is.

I was specifically interested in the fact that they said during WWII wages where not allowed to increase, so the only things that employers could increase were benefits. This was the biggest factor in making Health Insurance employer-based.

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Also having it be a tax write-off. If an employee were to buy it on their own it would be with after tax dollars and thus much more costly. (That's even discounting group rate discounts.)

Health insurance premiums are tax deductible.

Not if you have an employer. The deduction is for self employed people.

Right, sorry. I was speaking in the context of being an entrepreneur. If you are not self-employed, health care costs must clear 7.5% of your AIG before they are deductible.

which begs the question, if your company is so small that you can't offer health insurance, 401(k), etc then what is the point of having your employees salaried.

You might as well have them as contractors so they can enjoy the maximum tax write offs (health insurance, %age of their home as office, all hardware and software, %age of electricity, internet, etc).

It's not like you can just pick what to call them. An employee is an employee and a contractor is a contractor. If you want someone to work in your office 9-5 and commit their code changes to your server each day, they're an employee, and you can't call them a contractor.

I think you can actually.

EDIT: What's with the downvotes? Companies do call them a contractor. It happens every day. They're are special concerns but they can certainly work 9-5, etc.

You are basically right. There are companies specifically set up to allow employers to hire contractors but treat them as employees. Search for "Employer of Portable Record"

The IRS has cracked down on this practice. You can't just call someone a contractor that meets the conditions to be an employee. You can be mindful of these conditions and work around them but just calling an employee a contractor is not good enough. Even intentionally working around the IRS rules can get you in trouble.

You might get away with it but if you want to make the IRS happy, you better not call an employee a contractor if you don't want to deal with the fines, reclassification and back taxes that go with it.

If you tell someone to come in to your office 9-5 and tell them how to do the work, they're an employee. If you call them a contractor, and the IRS audits you and talks to that person, they're going to fine you for all the unpaid payroll taxes you'll owe. These are words with specific definitions in the tax code.

You could put it under 'unreimbursed expenses'. Yeah, you might get audited, but it's something you may be able to argue.

Alternatively, go self-employed and have the employer pay you enough to cover the extra FICA/SS numbers. If they're not providing insurance coverage for you, there aren't many other reasons to be an 'employee' of a company.

Also, employers expense health insurance premiums and pay no payroll taxes on the contribution as they would on normal wages.

Ah, the law of unintended consequences.

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