Filing Requirements for Independent Contractors

Any independent contractor or vendor who is not incorporated (or treated as a corporation for tax purposes) and who is paid $600 or more for services in a calendar year must be issued a IRS Form 1099 NEC by January 31. Any independent contractor or vendor who was paid less than $600 for services and requests a 1099 NEC be issued must be provided one.

Exceptions include:

  • Payments of $600 or more to a lawyer/attorney must be reported, regardless of whether the lawyer/firm employed is incorporated.
  • Payments made via a credit card or financial payment processor (such as PayPal) do not require a 1099 NEC as the payment processor will issue a 1099K.
  • Payments to other tax-exempt organizations do not require a 1099 NEC.

PTAs should request a Form W-9 (Request for Taxpayer Identification Number) from any contractor or vendor they expect to pay $600 or more for services in a calendar year. The W-9 will indicate if the contractor/vendor is incorporated (or treated as an incorporation for tax purposes) and therefore if a 1099 NEC may be required. PTAs do not need to request a W-9 from vendors providing goods or merchandise.

PTA must report individuals who are independent contractors to the California EDD on Form DE 542, Report of Independent Contractor(s), within 20 days of making payments of, or entering into a contract for $600, or more within any calendar year.

The EDD may assess a penalty for each failure to comply with the required time frames. A penalty per instance may also be assessed for failure to report independent contractor information. To obtain Form DE 542 visit EDD website at www.edd.ca.gov.

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