Much Ado About 1099s
While the rules around who exactly qualifies as a “subcontractor” might continue to shift (at least, they are if you have a few hundred million dollars to spend on a ballot proposition in California, *ahem* Uber and California Proposition 22), one thing remains constant:
THE DEADLINE FOR FILING 1099’S IS JANUARY 31ST
Do yourself and your hardworking subcontractors a favor and get a jump on collecting those W9 forms from them if you haven’t already, and then file those 1099s once you’ve made your last subcontractor payments for 2020.
For those who need this off of their plate entirely, Keepbooking offers convenient 1099 filing as well as W9 collection.
While we’re talking about subcontractors, it’s never a bad idea to take a fresh look at your people power and determine whether your subcontractors are ACTUALLY supposed to be employees. If you’ve misclassified employees as subcontractors according to the updated guidelines, you may be liable for wage withholdings, payroll taxes and possibly even penalties, so it’s definitely worth a second look.
Working from home isn’t just for subcontractors anymore: if they’re doing work that is a core part of your business, that subcontractor might actually be an employee.
Who still qualifies as a subcontractor?
Since January of this year, California’s rules around who can be classified as a subcontractor have gotten much more stringent in an effort to increase worker protections for those performing essential functions for businesses. You may have heard of the ABC test which determines whether a person can be considered a subcontractor (gig workers and a few other exceptions aside):
A. that the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact,
B. that the worker performs work that is outside the usual course of the hiring entity's business,
C. that the worker is customarily engaged in an independently established trade, occupation or business of the same nature as the work performed.
The implications for different industries vary widely, but if you’re not sure whether your business is doing things by the book, it’s worth taking a second look and possibly making a few changes to keep yourself in the clear.
Here’s an interesting bit of historical trivia to lighten the mood: the 1099 was first issued by the IRS in 1918 as part of the War Revenue Act. 1918 was ALSO when the Spanish Flu made its way around the world.
So…if you find yourself feeling a bit sorry for yourself for having to file 1099’s during a pandemic, just remind yourself that at least it’s not also during a world war.
