Certified Payroll – Employees, 1099 Workers & Subcontractors
Certified Payroll reporting requirements for employees, 1099 workers and subcontractors causes confusion for many contractors working on prevailing wage/government funded construction projects. This question was submitted by a reader.
I’m very confused about certified payroll reporting requirements. My workers are 1099’d so what do I put in the hours and withholding part? What if I hired a subcontractor for the completion of the job? Any help would be appreciated. Thank you ~~ Diane
The certified payroll report that your company submits to a general contractor, project owner, or contract administrator should contain information about your W-2 employees, the ones that work directly for you, are paid via payroll checks issued by your company and who you provide a W-2 for wages earned at the end of the year.
When you enter into a formal contract for a portion of the prevailing wage/government funded construction project with a subcontractor, the subcontractor will submit a certified payroll report from his company to yours, listing their employees, the work classifications they fell under, hours worked on the project, wages, taxes, deductions, etc. You will then make a copy of the report for your records and include his report with yours. It is quite likely, that at the end of the year you would issue the subcontractor a 1099 at the end of the year (consult your tax preparer about these requirements).
If you hire worker’s from a construction staffing agency to perform work on the jobsite, the staffing agency in essence becomes a subcontractor and many of them are equipped to provide you with a certified payroll report, which you would make a copy of for your records and submit the staffing agencies report along with your own report.
As for 1099 workers, make sure that you are correctly classifying these workers – or you could be in trouble with the IRS and your local State Department of Labor.
The IRS defines an independent contractor as:
People such as doctors, dentists, veterinarians, lawyers, accountants, contractors, subcontractors, public stenographers, or auctioneers who are in an independent trade, business, or profession in which they offer their services to the general public are generally independent contractors. However, whether these people are independent contractors or employees depends on the facts in each case. The general rule is that an individual is an independent contractor if the payer (your company) has the right to control or direct only the result of the work and not what will be done and how it will be done.
The worker is not an independent contractor if they perform services that can be controlled by an employer (what will be done and how it will be done).
For more information about Independent Contractor (Self-Employed) or Employee, visit the IRS website.
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