Answers to the most frequently asked questions (FAQ’s)
Below are questions we get asked the most by our clients in city government. To find the answer, simply click on the question:
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When do we have to file 1099s and W-2s? |
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What are the 2006 IRS limits for mileage reimbursement? |
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What are the rules for getting contract bids? |
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What is the difference between an employee and an independent contractor? |
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1. When do we have to file 1099s and W-2s?
You must give a 1099 to any independent contractor who provided $600 or more of services to your organization in the previous year. Similarly, you have to provide a W-2 to any person who was an employee in the last year. Both forms must be postmarked by January 31. Once those are done, you have to file "summary" forms (Form 1096 for independent contractors, Form W-3 for employees) with the IRS by February 28.
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2. What are the 2006 IRS limits for mileage reimbursement?
For 2006, the Internal Revenue Service raised mileage reimbursement rates to $0.445 per mile.
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3. What are the rules for getting contract bids?
In 2004, the Legislature enacted authority to use electronic reverse auctions for soliciting contract bids, as well as using electronic tools to sell surplus and obsolete supplies and equipment. For contracts over $50,000, you must solicit the public and used sealed bids. For contracts from $10,000 to $50,000, you may solicit sealed bids or use direct negotiation with two quotes obtained when possible. For contracts valued at $10,000 or less, you should solicit at least two quotes or you can use an open market source.
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4. What is the difference between an employee and an independent contractor?
Whether a person is an independent contractor or an employee generally depends on the amount of control exercised by the employer over the work being done. Dictating how a job is done or the actions of the worker may establish an employer-employee relationship.
Independent contractor
- Operates under a business name
- Has his or her own employees
- Maintains a separate business checking account
- Advertises his or her business' services
- Invoices your for work done
- Has more than one client
- Has their own tools and sets their own hours
- Keeps their own business records
Employee
- Performs duties dictated or controlled by others
- Is given training for work to be done
- Works for only one employer
For most small businesses, independent contractors should not be considered as substitutes for employees. Government agencies generally find that people in the work force are legally employed for tax purposes and the cost of being wrong, remitting unpaid payroll taxes, interest and penalties are very high.
(Information courtesy of http://www.sba.gov/)
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