What is a 1099 form?

A 1099 form is a tax form specifically distributed to independent contractors. Correct distribution of 1099 forms keeps you in compliance with EDD’s strict classification guidelines. Independent contractor’s 1099 status differs from W-2 workers. Since the 2020 passage of AB-5, the Gig worker bill, the criteria for correct contractors and worker classification changed.  The new ABCs of worker classification are as follows:

2020 tax returns require that any independent contractor or freelancer who earns over $600 receive a 1099-NEC. For more information on the different types of 1099 forms, read here.

What Happens if I File my 1099 forms Late?

Filing late 1099 documentation leads to fines and penalties:

Late submissions result in hefty fines that can be avoided by submitting the 1099 on time. Updated tax forms ask taxpayers to answer these two questions:

It’s imperative to answer these questions correctly and accurately to avoid the fines and penalties associated with dishonest answers.

Another consequence of filing and submitting late 1099 forms is opening you and your business up to a potential Employment Development Department (EDD) audit.  The California EDD ensures businesses correctly classify their workers to protect those workers who want to be W-2s but are incorrectly classified as 1099s and therefore do not have the benefit of PTO, taxes paid on their behalf and many other W-2 protections.  EDD additionally preserves employee records, and collects payroll taxes. Late submissions of 1099 filings are one of the triggers for EDD audits. 

Stay up to date with your employee classification in time for tax season. The team at got1099 provides 1099 contractor verification reports to ensure that you have the information necessary to make the correct classification decision for your 1099 contract workers.