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New law changes
There have been some changes to laws with the NC Department of Revenue that will affect you as a business owner. 1099 Workers who have an ITIN number and are paid at least $1500.00 during the year, you must withhold 4% for State Withholding.
What is an ITIN Number
It is an Individual Taxpayer Identification Number, given to people who are not eligible to obtain a Social Security Number. ITIN’s start with the number 9, if they do not have an ITIN they can apply for an ITIN using form W-7.
Who does this affect
1099 workers who do not possess a social security number (H2A Labor).
What must be done
If they have an ITIN number and earn over $1500.00 in the course of the year you must withhold 4% of their earnings. Example: if they make $5000.00 for 2011 you must take a total of $200.00 to pay to the NCDOR so their net take home pay would be $4800.00. You have 45 days from the last payment made to the contractor to make your payment to the NCDOR.
Attached you will find copies of a W-7 in English and Spanish. You will also find a copy of the rule from the NCDOR in English and Spanish to give to these workers.
Even though there is a $1500.00 exemption, our office is recommending that you withhold 4% from day 1 to cover you as a company from being liable to pay the money. Example: if you pay them on Tuesday and the amount due the worker is $1500.00, and the worker decides not to come back to work, you will still owe the 4% even though you did not deduct it from their check. We strongly suggest taking the 4% on all of these workers so that you do not get caught having to pay out additional monies.
If you have any questions please feel free to contact our office.