Here are the answers to some of the most Frequently Asked Questions our firm receives.
Q. When do W2's and 1099's need to be distributed?
A. W2's and 1099's need to be distributed to all employees/payees before January 31 and filed with the IRS by February 28 each year.
Q. Who must report to the EDD?
A. The law defines an independent contractor as an individual who is not an employee of the business or government entity for California purposes and who receives compensation or executes a contract for services performed for that business or government either in or out of California. Please note, that under this new law, a partnership, corporation, or other form of legal entity would not fall under the definition of independent contractor and thus would not need to be reported on Form DE 542
Q. What information must be reported to the EDD?
A. The Form DE 542 will require the following information on the independent contractor: Name, social security number, address, start date of the contract, amount of contract, and contract expiration.
Q. When must the information be reported to the EDD?
A. Independent contractor information must be reported to EDD within twenty (20) days of either (1) making payments totaling $600 or more; or (2) entering into a contract of $600 or more with an independent contractor in any calendar year; whichever is earlier.
Q. What happens if I fail to report the independent contractor as required?
A. The EDD may asses a penalty of twenty - four dollars ($24) for each failure to comply with the required timeframes. In addition, if there is any conspiracy between the business and the independent contractor not to provide the required reporting, the penalty is $490.
Q. Who should file 1099's?
A. Generally, 1099's need to be filed for non-corporate entities whom you paid over $600 during 2000. You need to consider payments to all outside consultants, doctors, accountants and landlords. A change made in 1999, all payments made in to attorneys need to be 1099 regardless of amount paid or form of organization (i.e. includes sole-proprietorships, partnerships, LLC's and corporations).
Q. Where can I go for assistance and additional information?
A. At your request, I am available to assist you in complying with this new reporting requirement for independent contracts. Your second option is to contact the EDD hotline at (916) 657-0529 or refer to the EDD website at http://www.edd.ca.gov for the reporting form, fact sheet, brochure and a list of the frequently asked questions.