figure out ~user's relationship to Gratipay

[chadwhitacre]

@rohitpaulk is on the Gratipay team. He contributes work and was receiving payments under our old team/members system. What is his relationship to Gratipay, LLC?

"Global HR Hot Topic—July 2011: Overseas Independent Contractor or de Facto Employee?: Cracking the Classification Conundrum"

[chadwhitacre]

This could end up being a dupe of that, I guess.

[chadwhitacre]

I guess let's use #72 for Gratipay in particular, and circle back here to sort out productization for other Teams once we figure it out for Gratipay.

[chadwhitacre]

Intuit's wizard fully concurs with everything we've said so far. ;-)

[chadwhitacre]

I'm now leaning towards independent contractor, because on the one hand it seems genuinely unclear whether the IRS would classify @rohitpaulk as a contractor or an employee, and, on the other, #72 has me thinking that full-fledged legal ownership may not be the best way to encode Gratipay's openness, because of the rigidity of legal ownership compared with the FOSS-style fluidity we want to maintain.

One possible way to proceed:

• Bring back payroll, treating @rohitpaulk as a contractor.
• File an SS-8 with the IRS.
• Adjust course once the SS-8 comes back (~6 months).

The tl;dr talking to one lawyer (https://github.com/gratipay/inside.gratipay.com/issues/72#issuecomment-163690480) was that we're out ahead of the curve doing "advanced funky" stuff, and that only the most sophisticated (i.e., expensive) lawyers are going to be able to adequately advise us. We can't even really afford non-expensive lawyers at this point.

Reddit suggests that we would have a chance to adjust course if the SS-8 comes back negative:

Even if, because of the SS-8 filing, the IRS makes a determination that you're an employee, that determination is not binding on your employer. In order to put the employer on the hook the IRS needs to open up a worker misclassification examination.

Taking that with a mole or four of salt, I propose that we call the IRS to learn more about the SS-8 process. My sense from skimming the form is that it doesn't even make sense to file until we actually have a relationship with @rohitpaulk underway.

[chadwhitacre]

The IRS will acknowledge the receipt of your Form SS-8. Because there are usually two (or more) parties who could be affected by a determination of employment status, the IRS attempts to get information from all parties involved by sending those parties blank Forms SS-8 for completion. Some or all of the information provided on this Form SS-8 may be shared with the other parties listed on page 1. The case will be assigned to a technician who will review the facts, apply the law, and render a decision. The technician may ask for additional information from the requestor, from other involved parties, or from third parties that could help clarify the work relationship before rendering a decision. The IRS will generally issue a formal determination to the firm or payer (if that is a different entity), and will send a copy to the worker. A determination letter applies only to a worker (or a class of workers) requesting it, and the decision is binding on the IRS if there is no change in the facts or law that form the basis for the ruling. In certain cases, a formal determination will not be issued. Instead, an information letter may be issued. Although an information letter is advisory only and is not binding on the IRS, it may be used to assist the worker to fulfill his or her federal tax obligations. In other very limited circumstances the IRS may issue a courtesy letter that the worker may rely on to fulfill his or her federal tax obligations.

https://www.irs.gov/instructions/iss8/ch01.html#d0e80

[chadwhitacre]

It may be simpler to go through the SS-8 process with someone in the U.S. (@mattbk, @kzisme, @webmaven).

[chadwhitacre]

If you are requesting a determination for a particular class of worker, complete the form for one individual who is representative of the class of workers whose status is in question. If you want a written determination for more than one class of workers, complete a separate Form SS-8 for one worker from each class whose status is typical of that class. A written determination for any worker will apply to other workers of the same class if the facts are not materially different for these workers. Please provide a list of names and addresses of all workers potentially affected by this determination so that the IRS can contact them for information.

https://www.irs.gov/instructions/iss8/ch01.html#d0e165

[chadwhitacre]

Although if we land in Estonia (#438) we would need to go through the exercise with their tax authority instead.

[chrisdev]

I just think that it would be easier for @rohitpaulk to set up a company in India or Estonia and you guys can treat that company as an outsourcing provider that is doing open work

[chadwhitacre]

@chrisdev Right ... that's the "contractor" option, yes? In which case, the purpose of the SS-8 filing (or Estonian equivalent) would be to ensure that we're not going to be surprised by a misclassification finding down the road.

[chadwhitacre]

This is what we're trying to avoid:

https://en.wikipedia.org/wiki/Misclassification_of_employees_as_independent_contractors

[chrisdev]

@whit537 thats why I stressing on the setting up of legal Companies on the part of long term members of teams as opposed to them just being contractors.

[chadwhitacre]

@chrisdev Ah, gotcha. So then it becomes more like take-what-you-want self-billing (cf. https://github.com/gratipay/gratipay.com/issues/1199#issuecomment-67560748), rather than take-what-you-want payroll. Hmm ...

[chrisdev]

Yes! (I think). Yep I had to file for VAT reg although even when i went indie I worked through an agency. Our accumulated weekly time sheets were used to back the invoices billed on a quarterly basis I just wanted to stress that your non US and (maybe even your US) team members should consider setting up their own legal Companies, especially if they want to be in a long term relationship with Gratipay. Most of the complications that we are running into w.r.t employment law etc. disappear if you deal with companies.

[Changaco]

It's definitely not that simple. Most independent contractors legally are (single-person) companies, they can still be reclassified as employees if they meet the dependence and subordination criteria of employment.

[chrisdev]

@Changaco how likely to happen with Gratipay?

[chadwhitacre]

I mean, look: the bottom line is that we should treat employees as employees and contractors as contractors, just like everybody else. We're not special. And this is actually orthogonal to our payroll product, which simply needs to provide for withholdings per-person. It's up to the companies using Gratipay Payroll to decide what the withholding should be for any given person. We just give them the tools.

Since we're also a user of Gratipay Payroll, it looks like we need to decide which status to start with, and then see what happens. Over on #72 I'm coming around to thinking that we should keep legal ownership small, because the real sharing of control in Gratipay happens daily here on GitHub, not in an annual meeting. Therefore, when someone wants to get paid we should start them as a contractor, and then if they reach "some threshold" we should convert them to an employee.

[chadwhitacre]

if they reach "some threshold"

... and an SS-8 (or Estonian equivalent, if we follow through with #438) would help us greatly with pinning this down.

[chrisdev]

Believe it or not I agree with your previous comment :smile:

[chadwhitacre]

:-)

[Changaco]

I mean, look: the bottom line is that we should treat employees as employees and contractors as contractors, just like everybody else.

Very true. Liberapay has neither, that solves the problem quite nicely. :D

[chadwhitacre]

:-P

[webmaven]

Therefore, when someone wants to get paid we should start them as a contractor, and then if they reach "some threshold" we should convert them to an employee.

That seems reasonable, especially if, as an employee, they become a worker/owner in a cooperative, which would make @rohitpaulk a worker/owner.

[SimonSarazin]

Don't you think we could use the "payroll" as an indication for the team, not as a direct payment made by gratipay or made by the teams ? So that we could avoid this legal risk for the moment ? The owner would have to distribute the money as what people have taken in the "payroll", by asking an invoice to each person once by month or each time they get more than X00$. We could provide tools to help people to distribute the money, but just as an indication (as for exemple create your own legal company in estonia, or use the non profit system in France if you're in France, etc...) and also to reclaim if the owner is not giving the money as he should. That's what i actually do on my projects, but using spreasheets since payroll is not working anymore. I now have 6 spreadsheet, one for each project :-) Here is an example : https://docs.google.com/spreadsheets/d/153wK4wyuMrqplYIakrCWh34dDRzik_56_F6UxjnW-R4/edit?usp=sharing . As this could just be an indication of the money we have to distribute, we also could accept to put in distribution in the payroll not only the money from the gratipay donation, but also money from other donation system (for example in France, lot's of non profit get money using helloasso.com platform). For your information, i will speak about this gratipay idea in France today : http://irma.asso.fr/Journee-d-etude-sur-l-avenir-du . For me this "take-what-you-want" gratipay idea is one of the best idea i've seen this last years, thanks a lot for that :-)

[chadwhitacre]

For your information, i will speak about this gratipay idea in France today : http://irma.asso.fr/Journee-d-etude-sur-l-avenir-du .

Nice! How did it go? And will we meet at OuiShare Fest (#314)? :-)

For me this "take-what-you-want" gratipay idea is one of the best idea i've seen this last years, thanks a lot for that :-)

Thanks! If only it still existed. :disappointed: We will get there again!

Don't you think we could use the "payroll" as an indication for the team, not as a direct payment made by gratipay or made by the teams ? So that we could avoid this legal risk for the moment ? The owner would have to distribute the money as what people have taken in the "payroll", by asking an invoice to each person once by month or each time they get more than X00$.

If I understand you here (I'm also looking at https://github.com/liberapay/liberapay.com/issues/64), I'm not sure this really addresses the legal risk. The legal question is: how is the individual related to the group? What I hear you proposing is that the individual is an independent contractor (yes?), and that payments from the group to the individual contractor happen out-of-band from Gratipay. However, the mechanics of payment aren't where the risk is located: once we decide that the individual is an independent contractor, I don't see a reason not to use Gratipay to move the money itself. That's what we're here for! :-)

[chadwhitacre]

how is the individual related to the group? once we decide that the individual is an independent contractor

On the one hand, I think we want to keep Gratipay flexible so that each Team can decide for itself how to answer the question. The big question on this ticket is: how is Gratipay going to model the relationship with its own collaborators?

[chadwhitacre]

I don't think I've brought this in yet, but I learned under https://github.com/gratipay/inside.gratipay.com/issues/421#issuecomment-167798171 (here's the video link) that Loomio staff are all contractors, not employees—and it sounds like this is somewhat disjoint from membership in the Loomio cooperative.

[webmaven]

How disjoint? Are all staff members, but not all members are staff?

[chadwhitacre]

@webmaven Both, it sounds like. Members are given preference for staff positions, but there are staff who are not members (because the organization requires a specialty not represented amongst the membership, e.g.), as well as members who are not actively working day-to-day as staff on Loomio at the moment.

[mattbk]

I mean, look: the bottom line is that we should treat employees as employees and contractors as contractors, just like everybody else. We're not special. And this is actually orthogonal to our payroll product, which simply needs to provide for withholdings per-person. It's up to the companies using Gratipay Payroll to decide what the withholding should be for any given person. We just give them the tools.

Since we're also a user of Gratipay Payroll, it looks like we need to decide which status to start with, and then see what happens. Over on #72 I'm coming around to thinking that we should keep legal ownership small, because the real sharing of control in Gratipay happens daily here on GitHub, not in an annual meeting. Therefore, when someone wants to get paid we should start them as a contractor, and then if they reach "some threshold" we should convert them to an employee.

Okay, there's two potential action items:

• Because Gratipay itself will be using Gratipayroll, we need to build in tools to handle withholdings?
  • Alternatively, we drop this on the team owner and say "deal with taxes on your own." It's not the nicest, but in terms of moving forward it's easy.
  • So at the very least, could we add a checkbox for "employee" versus "contractor" as part of the team management page?
• Establish the "employee" threshold for Gratipay itself.

[chadwhitacre]

So at the very least, could we add a checkbox for "employee" versus "contractor" as part of the team management page?

How about an optional percentage withholding associated with each Team member? Because if we have "employee" and "contractor" we still need a way for managers to peg withholding amounts to those categories ... unless you were saying we should punt on withholdings entirely and make it the Team's responsibility out-of-band (which is what our current ToS do, though the site doesn't even allow that atm as you're pointing out).

[chadwhitacre]

Establish the "employee" threshold for Gratipay itself.

Assuming we land somewhere near https://github.com/gratipay/inside.gratipay.com/issues/72#issuecomment-166668883 (and what an id!), I think the CEO is definitely an employee. I think everyone else is a contractor.

Dialing out to ... the Radar (#462) to form a plan for all this ...

[chadwhitacre]

Psych. Let's go for #466 as the driver for all this.

[mattbk]

How about an optional percentage withholding associated with each Team member? Because if we have "employee" and "contractor" we still need a way for managers to peg withholding amounts to those categories ...

That's fine, if it's as simple as that. Do we require a W9 (or equivalent) on file within Gratipay? I assume each member sets their own withholding without needing to request the owner change it?

unless you were saying we should punt on withholdings entirely and make it the Team's responsibility out-of-band (which is what our current ToS do, though the site doesn't even allow that atm as you're pointing out).

I was saying that punting is an option, but if implementation is as simple as you're implying, we shouldn't need to [punt].

[chadwhitacre]

Do we require a W9 (or equivalent) on file within Gratipay?

Depends on whether we're an LLC or an ÖU (#438).

if implementation is as simple as you're implying

Well, implementation of withholdings is simple relative to building a vault (https://github.com/gratipay/gratipay.com/issues/3504), which so far is still on the critical path for payroll.

[chadwhitacre]

Do we require a W9 (or equivalent) on file within Gratipay?

And the purpose of building a vault (gratipay/gratipay.com#3504) would be to store NINs, in order to facilitate the filing process for Teams—whatever their particulars.

[chadwhitacre]

So yeah, the quickest way back to payroll is to not build a vault, and to make each Team responsible for collecting and verifying the national identity of their members out-of-band. I'm reluctant to go that route even though it's more painful (because it's way more work), because I think that's a really broken product and user experience. Not that we've worried too much about that in the past ...

[chadwhitacre]

I've dialed this ticket back from https://github.com/gratipay/inside.gratipay.com/issues/242#issuecomment-144123939 to reflect the re-focus on the relationship between ~users and Gratipay in particular.

[chadwhitacre]

Aaaand I think we're converging on "contractor" for everyone except the CEO called for at https://github.com/gratipay/inside.gratipay.com/issues/72#issuecomment-166668883.

[chadwhitacre]

Until such time as the Estonian equivalent of the SS-8 (https://github.com/gratipay/inside.gratipay.com/issues/242#issuecomment-166623949) should determine that another relationship is more appropriate.

[mattbk]

Aaaand I think we're converging on "contractor" for everyone except the CEO called for at https://github.com/gratipay/inside.gratipay.com/issues/72#issuecomment-166668883.

Agree on that.

[kawa-kokosowa]

Why not categorize the distribution of donations to team members as "donations?" Since... that's really what they are, I mean, who's actually going to be hiring people under 1099 to collect what'll probably be extra spending money? How does Bountysource handle this? It's not like every person is contracted out when they solve a bug, nor did they ever verify all of my members. But money has been flowing through!

I'd really like to see invite-only completely even donation sharing.

Honestly all I care about is, as a nonprofit, I want a way to just automagically evenly distribute our pool of donations, split evenly among our needy members (we train/intern trans women in software engineering). We also don't want to overly formalize the process of being on this team which receives donations.

Don't call it payroll just call it "donation sharing."

I mean, you can collect a ton of donations on Patreon and they just... seem not to bother you about a 1099. :p I haven't seen them ask me for it one and I've collected hundreds of dollars. These are donations to a direct person. This is not 1099 or self employed, I don't believe. So why can't we just say that the system is just a way to break up people's money into equal donations to a group of people?

I just really don't see this being a real payroll system for people. If you have a system that revolves around what's practically a donation, then people are going to use it like a donation system? And like, for most organizations, it's not one outlet like Gratipay that's making anything like "payroll," it's many of those types of sites combined with other online and passive sources of revenue. Personally, for HSO we're on Patreon, Paypal, Bountysource, Gratipay, something I'm forgetting probably.

You'll still need to do a W-9 for people making over 600.

[chadwhitacre]

Reading ...

What happens, legally speaking, when a group of people get together and decide to perform some task without filing any legal paperwork or establishing any formal legal structure? Whether they know it or not, they have formed an unincorporated association.

http://www.nolo.com/legal-encyclopedia/what-an-unincorporated-nonprofit-association.html

[chadwhitacre]

"Donations" is just what non-profits call "revenue." Whether it's revenue sharing or donation sharing, the question of legal status remains: what's the relationship between the individual receiving the share, and the entity (whether for-profit or non-profit, whether incorporated or unincorporated) to whom the money was given to share in the first place?

We could say that there is no entity, that the money is going directly from the givers to the individuals. (I believe this is what Liberapay says). The problem is that this discourages corporate givers, because companies want an invoice, and they don't want 50 invoices for $2 each from all the individuals who are "behind the curtain"—they want one invoice for $100 from Foo, Inc.

Insofar as we have an entity, then, we have to figure out the relationship. Maybe some of what you're pointing at, @lillian-lemmer, is that at small amounts it's not a big deal, and that's true (that last link I posted suggests $5,000/yr before it starts to matter). Patreon takes a hands-off approach, but I'm sure in their fine-print they say, "taxes are your job"—we say the same! There's two things going on here:

1. What's our story for Gratipay Teams? It'd be great if we could give some advice, like "below $5,000 per year, don't sweat it. Above that, here are your options: a) b) c)."
2. The main question on this ticket is, what is the Gratipay Team itself going to do?

We're already above a $5,000 per year threshold (we're currently grossing about $13,000 per year). When we ran with payroll under Gittipay 1.0 we definitely had multiple folks above $600 per year. How are we modeling that? Seems like we're arriving at 1099s for most folks, maybe employee for one or two.

[chadwhitacre]

this discourages corporate givers

And, for better or for worse, corporate/institutional givers are where the money is—that's where it starts to become possible to move beyond "extra spending money."

[kawa-kokosowa]

Your biggest goal is to facilitate corporate/institutional sponsors to official/"verified" teams/organizations?

Thank you for explaining all of this. :) You make it very easy to understand.

[mattbk]

Bountysource: https://github.com/bountysource/core/wiki/Frequently-Asked-Questions#do-i-have-to-pay-taxes-on-bounties-i-collect

Patreon: https://www.patreon.com/taxes

[chadwhitacre]

Your biggest goal is to facilitate corporate/institutional sponsors to official/"verified" teams/organizations?

My biggest goal is for Gratipay to not die for as long as possible, gradually building a community and a product until we can say we've achieved our mission—and have fun in the process. :-)

But yeah, companies and foundations are holding the wealth in the world, so playing nice with them seems advised. :)

[chadwhitacre]

!m @mattbk

What are the implications for us here? Looks like they're both doing the same thing, which means we probably should, too. What are the laws they're operating under? How does an additional entity in the money flow change the situation?

[chadwhitacre]

But yeah, companies and foundations are holding the wealth in the world, so playing nice with them seems advised. :)

On the other hand, big things come from little things, so we also need to play nice with small projects and project just getting started. We need a smooth process from "Hey! I've got a neat idea let's see if it works!" all the way up to "We're Wikipedia, pleased to meet you."