Know Your Rights When Debt Collectors Call

At some point you may be on the receiving end of a debt collection phone call. It could happen any time you are behind on paying your bills, or if there is an error in billing. In the U.S. there are strict rules in place that forbid any kind of harassment. If you know your rights, you can deal with debt collection with minimum hassle. Here are some suggestions.
 
Bullet Point Phone Ask for non-threatening transparency.When a debt collector calls, they must be transparent about who they are. The magic words they must utter are: "This is an attempt to collect a debt, and any information obtained will be used for that purpose." In addition, debt collectors cannot use abusive or threatening language, or threaten you with fines or jail time. The most a debt collector can truthfully threaten you with is that failure to pay will harm your credit rating, or that they may sue you in a civil court to extract payment.
 
Bullet Point Rules Know the contact rules. Debt collectors may not contact you outside of "normal" hours, which are between 8 a.m. and 9 p.m. local time. They may try to call you at work, but they must stop if you tell them that you cannot receive calls there. Debt collectors may not talk to anyone else about your debt (other than your attorney, if you have one). They may try contacting other people, such as relatives, neighbors or employers, but it must be solely for the purpose of trying to find out your phone number, address or where you work.
Bullet Point Action Take action. If you believe the debt is in error in whole or in part, you can send a dispute letter to the collection agency within 30 days of first contact. Ask the collector for their mailing address and let them know you are filing a dispute. They will have to cease all collection activities until they send you legal documentation verifying the debt.
Bullet Point Stop Tell them to stop. And, whether you dispute the debt or not, at any time you can send a "cease letter" to the collection agency telling them to stop making contact. You don't need to provide a specific reason. They will have to stop contact after this point, though they may still decide to pursue legal options in civil court.
If a debt collection agency is not following these rules, report them. Start with your state's attorney general office, and consider filing a complaint with the U.S. Federal Trade Commission and the Consumer Financial Protection Bureau as well.

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Contractor or Employee?

Knowing the difference is important
 
Is a worker an independent contractor or an employee? This seemingly simple question is often the contentious subject of IRS audits. As an employer, getting this wrong could cost you plenty in the way of Social Security, Medicare, and other employment-related taxes. Here is what you need to know.
 
The basics
 
As the worker. If you are a contractor and not considered an employee you must:
  •  
  •  Employee Pay self-employment taxes (Social Security and Medicare-related taxes)
  •  Employee Make estimated federal and state tax payments.
  • Employee Handle your own benefits, insurance and bookkeeping.
 
As the employer. You must ensure your employee versus independent contractor determination is correct. Getting this wrong in the eyes of the IRS can lead to:
 
  •  Employer Payment and penalties related to Social Security and Medicare taxes.
  •  Employer Payment of possible overtime including penalties for a contractor reclassified as an employee.
  •  Employer Legal obligation to pay for benefits.
  • Things to consider
 
When the IRS recharacterizes an independent contractor as an employee they look at the business relationship between the employer and the worker. The IRS focuses on the degree of control exercised by the employer over the work done and they assess the worker's independence. Here are some guidelines:
 
  • Bullet Point Consider The more the employer has the right to control the work (when, how and where the work is done), the more likely the worker is an employee.
  • Consider The more the financial relationship is controlled by the employer the more likely the relationship will be seen as an employee and not an independent contractor. To clarify this, an independent contractor should have a contract, have multiple customers, invoice the company for work done, and handle financial matters in a professional manner.
  • Consider The more businesslike the arrangement the more likely you have an independent contractor relationship.
While there are no hard-set rules, the more reasonable your basis for classification and the more consistently it is applied, the more likely an independent contractor classification will not be challenged.

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