Section 409.2576, Florida Statutes – State Directory of New Hires
Goes Into Effect on October 1, 2021
What does the payment of child support have to do with the operation of small service-based businesses?
While the two may seem unrelated, the regulation of child support payments creates additional obligations on all businesses, regardless of size or type. To explain, it comes down to tracking people. For many state governments, the enforcement of child support payments by a non-custodial parent means the less a state has to pay in aid to the custodial parent. So, of course states are motivated to enforce child support payments.
The easiest way they have found to track the employment of non-custodial parents is to require businesses to report new employees. When a business reports hiring a new employee, that new employee’s name and information are run through a database of child support obligations.
While none of this is new for reporting “employees” – those obligations have been around for decades – it is now being expanded to include reporting the use of independent contractors.
So now, starting on October 1, 2021, businesses are required to report the hiring of independent contractors, too.
A newly-adopted amendment to Section 409.2576, Florida Statutes, requires businesses to report ALL “new hires” to the Department of Revenue – this includes employees and independent contractors. The justification is for the same purpose – to track people who owe child support.
It’s a national trend to track hires from the business side for the purpose of enforcing child support payment obligations. In fact, Florida law says that all new hire reporting will be shared with the National Directory of New Hires so that states may share information with each other.
And … while the state of Florida is collecting this information, they are going to use it for other purposes such as cross-referencing information for applicants to the following programs:
- Any state funded program under Social Security;
- Reemployment assistance or unemployment compensation programs;
- Food assistance programs;
- Other state provided aid programs.
So what are the specific requirements you need to know?
- The law applies to all “employers” and “service recipients” = This means all traditional employers (businesses who have employees) AND someone in a business of their own who pays someone else for services rendered. Yes, it’s a broad application, and it’s going to include you if you’re in business.
- You have to report all new hires and rehires of “employees” = This is an old requirement that has been around for many years.
- You have to report all new “individuals who are not employees but are provided payment for services rendered” = This means independent contractors. This is the new part of the law, but it only applies if you pay more than $600 to the individual in a calendar year.
- When you report, you must include the name, address, SSN/ITIN, date of hire, and date of birth.
- There’s a form you use to report the new hires to the Florida Department of Revenue. You can do it on this form by paper and mail it in, or you can sign up to do it electronically on the DOR’s website.
- For employees, you must file the report within 20 days of the hire date.
- For independent contractors, you must file the report within 20 days of the earlier of: (1) the date of first payment, or (2) the date of the Independent Contractor Agreement. **Keep in mind that other government agencies require a written contract with independent contractors.
One of the biggest questions I foresee about this new reporting requirement for independent contractors is “Who exactly is an independent contractor?”
Some independent contractors are sole proprietors, while others operate through their own LLC or corporation. The language of the amendment to Section 409.2576(1) states an “individual who is not an employee..” so by its plain words would mean that it applies to a sole proprietor, who is an “individual” and NOT an LLC or corporation. Of course, that interpretation could change as the state implements this new process, so we’ll keep an eye on it.
Ultimately, this is a necessary step you will need to add to your onboarding process for (1) employees and (2) “individual” independent contractors who are paid more than$600/year. While you’re looking at the classification of your workers, be sure to correctly assess whether they fall into the “employee” category or the “independent contractor” category. As we’ve discussed in separate blog posts, that classification is extremely important to get right.