May Bookkeeping Tip
Proper Handling of Independent Contractors
Business owners must have accurate, signed independent contractor agreements and signed W-9 Forms on file from the beginning of the company relationship with that individual, LLC, partnership or attorney. As a general rule, all individuals and companies who are NOT incorporated must be issued 1099 forms by your company by January 31 of the following year, if your company paid them more than $600 in the calendar year. Copies must be filed with the IRS by February 28 or March 31 if filed electronically.
Improper recording of transactions for independent contractors in the accounting system, such as identifying contractors as employees or vice versa, can have severe negative consequences and costs to the business owner. If you are uncertain whether someone providing services for your company is an employee or an independent contractor, refer to the IRS guidelines or ask your accounting or tax professional for assistance in making this determination.