The beginning of the year is a great time to "get your ducks in a row" and make sure everything is set up as it should be.
Biden's administration has passed quite a few new laws regarding businesses since he took office. Some of them of them are affecting churches and nonprofits too.
One of them that has me really concerned is the IC (Independent Contractor) classification "change".
Those of you not operating an organization in California may not know about their 2020 employee classification law that replaced the traditional classification test with the ABC Test. It has made it very tough to classify a worker as an IC in CA.
The Biden administration expressed their desire to "pattern" the federal standard for classifying ICs closer to CA's ABC test. So earlier in 2021, the U.S. Department of Labor stopped Trump administration rules that made it easier to classify workers as ICs and started classifying ICs under the ABC test.
Now the ABC Test is not only used by the U.S. Department of Labor, but also by most of the states in the US.
So how will this affect you? Well, unless your musician, custodian, or nursery worker owns their own business and does a similar "job" for other business and organizations you should be paying them as employees.
You are probably saying that is what organizations should have been doing all along and you would be right. I have been harping on this for years too ... but I also knew that many small churches and nonprofits could not afford to hire a payroll company to pay their workers (with today's laws I strongly recommend churches and nonprofits use a payroll or bookkeeping firms that know how to handle
their particular payroll OR at the very least ...use a payroll software like Gusto.)....so they just gave them "love offerings".
AND I've been telling you for years that those "love offerings" for doing a service for an organization is "taxable" for the recipient and you as a church/nonprofit administrator must issue them 1099-NECs for "offerings" that equal $600 or more for the calendar year.
See where I'm going with this?
By reporting their love offerings on a 1099-NEC ... you are classifying them as ICs ... AND misclassifying workers is a crime that can result in serious financial penalties and, in some cases, jail time.
Read more on those penalties AND the difference between the ABC test and "common law" and which one each state is using by clicking the "read more" link below...
(link to Combo Package in the middle of each page)
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