Employment Law Alert: new Form I-9 and Form 1099-NEC
The new Form I-9 must be used starting May 1, 2020:
U.S. Citizenship and Immigration Services (USCIS) has updated Form I-9, used to verify eligibility to work in the United States. The latest version is found here: https://www.uscis.gov/i-9. Please note that, although the USCIS site references using this new version effective January 31, 2020, the prior version is acceptable through April 30, 2020. Effective May 1, 2020, the new version must be used when an employer completes the verification process for a new employee (and for reverification when necessary).
Updated instructions also may be found at the above link. Although the substantive changes to the form and instructions are not extensive, two items from the new instructions are worth noting:
The instructions now specifically provide that, even though an authorized representative may act on the employer’s behalf to complete Section 2 of the form, the employer is liable for any violation in connection with the form and the verification process. The message: choose your authorized representative wisely.
Also regarding Section 2 of the form, if the employee produces a document or documents satisfying List A, the employer should not write “n/a” or anything else in the List B or C sections.
Penalties for failure to complete, or violations in completing, Form I-9 can be steep – up to $2,292 per employee with respect to whom the violation has occurred.
Form 1099-NEC – the remix:
The IRS recently revived Form 1099-NEC (Nonemployee Compensation), last seen in 1982. As of tax year 2020, payments of $600 or more to independent contractors must be reported on Form 1099-NEC, as opposed to Form 1099-MISC as has been the case for the past few decades. Businesses should consult with their tax professionals regarding the use of the form, but we address it here in the context of continuing to warn employers about misclassifying employees as independent contractors.
The ostensible explanation for bringing back Form 1099-NEC is to resolve a filing date discrepancy. Since 2015, a Form 1099-MISC concerning nonemployee compensation had to be filed by January 31, while a Form 1099-MISC concerning certain other types of payments had to be filed by February 28. Reintroducing Form 1099-NEC takes nonemployee compensation out of Form 1099-MISC entirely. However, if you believe that the preceding was the only motivation for the change, we have a bridge, and we’d love to sell it to you. The reintroduction of Form 1099-NEC means that there now is a form dedicated solely to tracking payments to purported independent contractors, an issue over which the Federal and State governments have been rabid over the past decade, for a simple reason: money. Identifying employees who were misclassified as independent contractors permits the government to pursue unremitted payroll taxes, and to assess those taxes going forward. If your business relies on independent contractor services, we strongly recommend confirming their proper classification with legal counsel.
