Independent Contractor Compliance Blog - by Collabrus™

The American Recovery and Reinvestment Act of 2009 (also known as HR 1) is almost 1100 pages long and filled with provisions that spend money for almost any topic you can imagine.

This is the second in a series of articles to explore how this law affects you and your business.

Good News! The three percent (3%) withholding on government contractors is repealed!

Until this bill was made into law, there was a dark storm cloud on the horizon for all independent contractors (1099’s) and for the client company’s that used their services. It was already a law, effective after December 31, 2010, that required withholding at a three percent rate on IC’s payments providing property or services to federal, state, and local governments. Numerous government entities and taxpayers have raised concerns about the application of this provision. This bill responds to those concerns by repealing the withholding requirement on ICs.

Even if you do not perform work for any government agency this is important.

The consensus among the World of Tax Experts was private contractors would have followed with the same requirement within a few years. The IRS, and agencies, have been lobbying for several years to get an IC withholding bill passed. This bill was the foot in the door for all ICs, but it has been repealed as part of the American Recovery and Reinvestment Act of 2009. So if you were planning to gear up your accounting department for this requirement in 2011, you can stand down. It won’t be happening for now.

Thank you!