Am I Being Screwed?

[smokin goose]

I was an Allstate agent for 25 years. I do not think that is a good deal for the OP. If you sell at those levels, you are giving too much back to the Allstate agent and not getting enough for yourself. The only way I would do that deal is if you are doing it for the training. If you think that is the case, it might be an option. Otherwise it is a horrible decision, IMO.

Wooooooooooooooooooooooo!

 

[glang1992]

I was an Allstate agent for 25 years. I do not think that is a good deal
for the OP.

If you sell at those levels, you are giving too much back to the Allstate
agent and not getting enough for yourself.

The only way I would do that deal is if you are doing it for the training.
If you think that is the case, it might be an option. Otherwise it is a
horrible decision, IMO.

It is my first job in the insurance industry. So that's basically what it is, me learning the business with this employer.

 

[wwgsrevo]

..............................................

 

[EugeneM]

If you are looking to learn then you are better off working directly for an established broker in your area. Find a MENTOR. Call the biggest most bad ass broker you can find and convince them your worth mentoring.

Have them train and show you the ropes not a captive carrier. You will only learn so much pushing apps for one carrier you will get a much more rounded education with an independent agent.

However: if they are offering you guaranteed income it might be worth doing for a period of time.

 

[surendra1998]

It may be a good deal for you.

 

[wfs]

So you are basically making $20,800 as a "base". Assuming it is a captive carrier with a 10% average commission, you would have to generate $208,000 in gross premium to break the agency even, not even including lapse/can. So that's $17,333 of monthly gross premium that you must generate to break even.

If you worked for me, I would not pay you any P&C commissions until you came close to even, say $15,000 of premium per month. Then in order to make additional commission, you would have to sell other products or more than $15K of P&C premium.

So, yes, I think it is a good deal for YOU. Not a great deal for the agent, UNLESS you sell at least $15K and service the clients as well. There is a value for servicing customers.

If all you do is sell, then this a good deal for you.

Do you have other products that you can sell? Life? Health? Annuities?

The 1099 thing should not be an issue if you manage it right AND if you can sell. With no experience (if it were me), I would hire you as a regular W2 employee so you could learn the business- sales, service, etc... Then once you were ready for full-time sales, I could see 1099-ing you. But not as a newby.

As a 1099, you should be deducting all of your business expenses, including vehicle loan payment (or mileage), gasoline (if not using the mileage write-off), etc... If you are only making $20K and you have some deductions, your tax liability should be low (Consult a tax professional).

Good luck.

 

[VolAgent]

I foresee problems.

If you are working in his office and receiving a salary, you are almost certainly not an independent contractor. Should the state or IRS find out, it will be a problem for this agent. I'm not sure if he just doesn't know better or thinks he'll get away with it.

Perhaps it is just me, but this is a huge warning flag. The agent may very well make numerous other business mistakes a long the way.

 

[wfs]

You can be 1099 and be paid by the hour or by other means. However, you must be careful when making a 1099 contractor have specific hours (e.g. treating them like an employee). If you tell them when to show up and when to leave, it's not the IRS that you are going to have an issue with, it's the state department of labor.

If they are treated like an employee, then it is "assumed" that they are an employee and therefore have the same rights as employees. (unemployment, workman comp, etc...). Of course, this is going to depend on the state laws and the circumstances, but you get the idea.

Microsoft got into some trouble years back with their external contractors. Contractors filed a lawsuit (I think it was for benefits or vacation pay or something like that). Anyway, Microsoft LOST. I am aware of this story, as I used to do consulting for a tech company. I had specific hours (like an employee) but the company that I did consulting for had to make sure that we were NOT treated like employees. For example, consultants were not allowed to attend "employee meetings". At one time, we all had one meeting, but something happened (probably a lawsuit) and they clearly drew the line in the sand. There were other activities and events that we were clearly excluded from, even though we had the same exact job function.

There needs to be a CLEAR difference between a contractor and an employee. I have only 1 1099 working for me - that person does NOT have office hours, but is encouraged to come to the office. She is not there 8 hours per day, but is usually there for a few hours every day.

As long as the agency complies with labor laws of the state, there is no issue. But someone new like you, in my opinion, should start out as a W2 employee.

 

[VolAgent]

You can be 1099 and be paid by the hour or by other means. However, you must be careful when making a 1099 contractor have specific hours (e.g. treating them like an employee). If you tell them when to show up and when to leave, it's not the IRS that you are going to have an issue with, it's the state department of labor.

If they are treated like an employee, then it is "assumed" that they are an employee and therefore have the same rights as employees. (unemployment, workman comp, etc...). Of course, this is going to depend on the state laws and the circumstances, but you get the idea.

Microsoft got into some trouble years back with their external contractors. Contractors filed a lawsuit (I think it was for benefits or vacation pay or something like that). Anyway, Microsoft LOST. I am aware of this story, as I used to do consulting for a tech company. I had specific hours (like an employee) but the company that I did consulting for had to make sure that we were NOT treated like employees. For example, consultants were not allowed to attend "employee meetings". At one time, we all had one meeting, but something happened (probably a lawsuit) and they clearly drew the line in the sand. There were other activities and events that we were clearly excluded from, even though we had the same exact job function.

There needs to be a CLEAR difference between a contractor and an employee. I have only 1 1099 working for me - that person does NOT have office hours, but is encouraged to come to the office. She is not there 8 hours per day, but is usually there for a few hours every day.

As long as the agency complies with labor laws of the state, there is no issue. But someone new like you, in my opinion, should start out as a W2 employee.

Don't kid yourself, the IRS cares about IC versus employee status too. It really changes the taxes. Generally the IRS doesn't care and doesn't know unless it comes to their attention. Which is usually the employee complained or the employer got audited. I recall a case from a few years ago, in Pennsylvania I believe. Everyone got stung. Some timeshare employees were wrong classified as IC and they complained. Well, IRS came in and said, yep you are employees. The IRS then went and disallowed all their schedule C deductions and sent them a tax bill along with one to the employer. I'm sure they were able to refill and claim unreimbursed employee expenses, but they would still end up owing some taxes in excess of what the were owed for having paid the self-employed tax.

Yes, you can be paid by the hour and be an IC. But if you are being paid a salary, told to come in and work set hours, in a set location and per the employer's specifications, it is going to be hard to convince anyone that person is not an employee.

 

[xrac]

When 1099s are declared to be employees it can be a mess.