Effective October 1st, All Florida Businesses Must Report New Independent Contractors

October 8, 2021

Effective October 1st, 2021, all Florida businesses and certain other entities of all sizes must report nearly all new independent contractors expected to earn $600 or more during the calendar year.

Prior to the new law, it was optional for companies with more than 250 employees to report new independent contractors to the Directory of New Hires. The new legislation makes it mandatory, and expands the reporting requirement to companies of all sizes, regardless of the number of employees.

Overview

The requirement is the result of Florida Senate Bill 1532 that Governor DeSantis signed into law last June. The law expands the mandatory new hire reporting requirements under Fla. Stat. § 409.2576 to include companies of all sizes, regardless of the number of employees.

The same law also requires all these companies and other contractor service recipients to report independent contractors expected to earn $600 or more during the year to the Directory of New Hires.

The reason for the law is to improve child support collection by eliminating the ‘independent contractor loophole.’ Policymakers were concerned that some workers were evading paying child support by working with smaller employers, or working as independent contractors, thereby circumventing the reporting requirement. They could thus avoid having child support payments docked from their paychecks.

Who Must Report New Independent Contractors to the Florida Department of Revenue?

The reporting requirement isn’t limited to formally licensed or registered businesses. The language in the law is expansive. The mandated reporting requirement also extends to service recipients, defined as “a person engaged in a trade or business who pays an individual for services rendered in the course of such trade or business.”

Thus, the reporting requirement potentially affects not just established employers, but also sole proprietorships, independent landlords, AirBnB and other short-term rental operators, and other small businesses.

What is the Reporting Deadline?

Florida businesses and service recipients expecting to pay independent contractor $600 or more during the calendar year must report the new contractor within 20 days after their first reportable payment to the independent contractor, or the date in which they entered the contract — whichever is earlier.

The term “reportable payment” refers to any payment that requires an information return under IRC 452, Section 6041A(a).

If you make the report electronically, you can make the report via two separate monthly transmissions, if needed. But you cannot make these reports less than 12 days nor more than 16 days apart.

How Do I Report New Contractors to the Directory of New Hires?

The reporting process is mostly the same as it is for statutory employees. You can use this online reporting tool. If you have not yet registered for an account with the Florida Department of Revenue’s Child Support Services for Employers, you can do so here.

What Information Must I Report?

Businesses and service recipients must report the following information:

  • Name
  • Address
  • Social Security Number
  • Date of Birth (if known)
  • The name, address, and taxpayer ID number of the employer or service recipient
  • The date the individual first performed services for payment

Are There Any Exceptions?

The reporting mandate does not apply to employees or contractors employed by federal or state agencies that perform intelligence or counterintelligence functions. This is because legislators recognized that reporting these individuals could establish a paper trail that could compromise their identity, their mission, and their safety.

What Should I Do Now?

If you have employees or relationships with independent contractors and you pay any of these contractors more than $600 per year, here’s what you should do:

  • Look carefully at existing employees and independent contractor relationships to determine if you have exceeded or will exceed the $600 reporting requirement during the calendar year.
  • Make any necessary changes to your company onboarding policies and manuals to reflect the new requirements.
  • If you use a payroll service, accounting service, or employee leasing service, verify with your service provider that they are following the new reporting requirement.

About AbitOs
AbitOs specializes in the unique accounting needs of high net-worth individuals, entrepreneurs, and business owners with international lifestyles as well as for entities doing business in LATAM and across the globe. Tax and human resources compliance requirements can be quite complex, both on the state and federal level. If you would like to benefit from our expertise in these areas or if you have further questions on this Alert, do not hesitate to contact us.