Question of the Week: Did You Know You Are Required to Report Independent Contractors You’ve Engaged to the Government Within 20 Days?
That’s correct! In California, for example, the payer must report the independent contractor to EDD within 20 days of paying or for contracting for $600 or more in personal services. Since you must report the IC just for anticipating paying him/her $600 or more, it is possible the report is due before the first payment is even made to the IC.
The information is posted to a national data base as part of a national program designed to locate parents who are delinquent in their child support obligations.
Who is affected?
The IC reporting requirements apply to any business, or government entity, that hires consultants, contractors, or other IC’s requiring a 1099-MISC. The independent contractor must be an individual or sole proprietorship-not a corporation. If you have contracted with a corporation this requirement does not apply to the relationship.
The information that needs to be reported
The EDD form “Report of Independent Contractor(s) DE 542″ requires you to report the following information about your contractors:
- First name, middle initial and last name
- Social security number
- Address
- Start date of contract (if no contract, date payments equal $600 or more)
- Total amount of contract, including cents (if applicable)
- Contract expiration date or inform EDD it is an ongoing contract
The penalty if you do not.
The law provides for a maximum penalty of $490 for each contractor not properly reported.
Have an expert take care of these requirements.
This is one of many legal requirements concerning the contingent workforce and IC compliance world. It is also another reason to employ an expert to help you when engaging a consultant, or an IC, for your special projects.
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