Reporting Payments to Independent Contractors: Form 1099-MISC

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Reporting Payments to Independent Contractors: Form 1099-MISC

If you hire an independent contractor to do work for your business, you may have to report to the IRS your payments to him by filing Form 1099-MISC (Miscellaneous Income) if the following four conditions are met:
1. The payee is not your employee;
2. The payment was for services in the course of your trade or business (including nonprofit organizations);
3. The payment is made to an individual, partnership, estate, or in some cases, a corporation; and
4. You made payments to the payee of at least $600 during the calendar year.

In order to comply with the first requirement, it is advisable (and in many industries – required) to ask your contract attorney to draft the Independent Contractor Agreement, the Independent Contractor Certification, and the appropriate Independent Contractor Statement. The Independent Contractor should read and sign all three of these documents before he commences his services to your business.

Non-employee compensation paid to nonresident aliens should be reported on Form 1042-S, (Foreign Persons’ U.S. Source Income Subject to Withholding) where some withholding may be required., Form 1042 (Annual Withholding Tax Return for U.S. Source Income of Foreign Persons) must be filed if Form 1042-S is required.

Filing This Year’s Tax Return: Name Change as a Result of Divorce or Marriage

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If you changed your last name last year as a result of getting married or divorced, you need to make sure that the name on your tax return matches the name registered with the Social Security Administration (the “SSA”). This is because the new name which you adopted as a result of marriage (or an old name to which you reverted after your divorce) is usually not reflected on your social security card. Therefore, your new name is not likely to match your old social security number (the “SSN”).

Informing the SSA about the name change is relatively easy. All you have to do is file Form SS-5, Application for a Social Security Card, at your local SSA office. The form can be found on the SSA’s website. You can also obtain the form by calling 800-772-1213 or at the local SSA offices.

It usually takes about two weeks to have the change verified.

Fee Agreement Arrangements with Contract Lawyers in Minneapolis: 5 Most Important Issues

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In this article, I will discuss five most important issues that you need to know before you sign a fee agreement with contract lawyers in Minneapolis.

1. How is the lawyer’s fee paid? There are three main models of payment that lawyers use: hourly fee, contingency fee, and flat fee. The hourly fee is the most common form of contract lawyer compensation and it is fairly simple – the contract attorney is paid only based on the time he spends on the case. If you’re paying your contract lawyer by the hour, the agreement should set out the hourly rates of the contract attorney and anyone else in this attorney’s office who might work on the case. The contingency fee, where the contract attorney takes a percentage of the amount the client wins at the end of the case, is almost never used by contract attorneys in Minneapolis. In the unlikely case that this latter type of fee arrangement is used, the most important issue to understand is whether the contract lawyer deducts the costs and expenses from the amount won before or after you pay the lawyer’s percentage. Obviously, you will pay more in attorney fees if your contract lawyer deducts the litigation costs based on the latter scenario (i.e. after you pay the lawyer’s fee). Finally, in a flat fee arrangement, you pay an agreed-upon amount of money for a project. For example, you pay $3,500 to your contract attorney to create a standard independent contractor agreement. While a flat fee arrangement is possible in a small project, it is generally disliked by contract lawyers in Minneapolis because it often lacks the necessary flexibility to account for the client’s individual legal situation. Usually, some sort of an additional payment arrangement is built into such fee agreements to make sure that the balance between the client’s legal needs and the contract attorney’s fees is maintained.

Remember, usually, you will have to pay out-of-pocket expenses (e.g. long-distance calls, mailing costs, photocopying fees, lodging, etc.) and litigation costs (such as court filing fees) in addition to your contract lawyer’s fees.

2. Does the agreement include the amount of the retainer? Most contract lawyers in Minneapolis require their client to pay a retainer. Retainer can mean two different fee arrangements. First, retainer may be the amount of money a client pays to guarantee the lawyer’s commitment to the case. Under this arrangement, the retainer is not a form of an advance payment for future work, but a non-refundable deposit to secure the lawyer’s availability. Second, a retainer is simply the amount of money a contract attorney asks his client to pay in advance. In this scenario, the lawyer usually deposits the retainer in a client trust account and withdraws money from it for the work completed according to the fee agreement. The fee agreement should specify the amount of the retainer and when the lawyer can withdraw money form the client trust account (usually, on a monthly basis).

3. How often will you be billed? Most contract attorneys in Minneapolis bill their clients on a monthly basis. Sometimes, however, when the project is small, the fee agreement will specify that you will be billed upon completion of the case. In a flat-fee scenario, it is likely that the client will be obligated to pay either a half or even the whole amount immediately as a retainer. It is wise for a client to insist in paying some part of the fee upon completion of the case to retain a degree of control over the case completion.

4. What is the scope of the contract attorney’s representation? Most contract lawyers in Minneapolis will insist on defining their obligations in the contract. The most important issue here is to state what the contract attorney is hired for without defining it either too narrowly or too broadly. Usually, a fee agreement should specify that a new contract should be signed if you decide to hire this contract lawyer to handle other legal matters.

If you are hiring a large or a mid-size law firm, beware that the partners in a law firm often delegate some or all of their obligations to their associates or even their staff. While the partners retain full responsibility for the case, there is a danger that important parts of it may be delegated to far less experienced associates. Besides the potential quality issues, there is also a concern that you would be paying a large hourly fee for a first-year associate’s work. It is important to insist that the fee agreement specifies what, if any, type of work is being delegated to the associates, the corresponding billing rate of each associate involved, and who carries the responsibility for the whole case.

5. Who controls what decisions? Whether this information should be included in the fee agreement really depends on the case and on an attorney. Generally, contract attorneys in Minneapolis let the client to make the important decisions that affect the outcome of the case (such as: acceptance or rejection of a settlement offer, commencement of a lawsuit, financial and personal contractual issues, et cetera). All of the decisions with respect to the legal issues (such as: where to file a lawsuit, what motions should be filed, what should be in the contract, negotiation tactics, etc.) are usually taken by the contract lawyers. If there are any changes to this arrangement (for example, you want your lawyer to make certain decisions with the respect to the outcome of the case), you should insist that these modifications be reflected in the contract.

Generally, before you sign the fee agreement, contract lawyers in Minneapolis will discuss with you many more topics than what is covered in this article. The five issues explained here, however, are crucial to your understanding of how the business relationship with your contract attorney will work. Before you sign the fee agreement with your lawyer, you should ask at least these five questions and make sure that the answers are complete and to your satisfaction.

Tax Lawyers in Minneapolis: Three Most Important Questions You Should Ask

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When you are about to hire a tax lawyer to help you with a tax issue, there are three fundamental questions that you need to ask him.

1. What percentage of the practice is devoted to the tax law? The purpose of this question is two-fold. First, you will figure out whether this tax lawyer likes handling cases in your area of law. If a Minneapolis attorney devotes more than 20% of his practice to tax law, you know that he likes this area of law and will be enthusiastic about your case. This means that, in addition to his general due diligence obligations, this tax lawyer will have a professional interest in your case. Second, generally, a tax lawyer who devotes 20% or more of his practice to tax law is likely to have good experience in this area.

2. How will I be billed? Generally, Minneapolis tax lawyers will bill you on an hourly basis, particularly in a tax litigation setting. They will provide you with a general estimate of your future expenses, which, understandably, will vary with the progress of the case. In a tax preparation or sometimes even in a simple tax planning case, a tax attorney may also offer a flat fee option. Where there are complex tax planning issues involved, however, most Minneapolis tax lawyers are likely to charge on an hourly basis. Similarly, Minneapolis international tax lawyers tend to rely on the hourly fee arrangements.

The more important issue with regard to this question is the manner in which you will be billed. Here, the practice varies among tax lawyers in Minneapolis. Some tax attorneys may require you to supply a large retainer which is later deposited in a client’s trust account; if the retainer is later depleted, your lawyer may ask you to replenish it. Other tax lawyers will require a smaller retainer and will then bill you on a monthly basis. If the latter option is proposed by your tax lawyer, you should ask for a sufficient time period (usually 10-14 days) to pay your bill. A mix of these options is also available. You will find that Minneapolis tax lawyers, especially solo practitioners, are rather flexible in their choice of the payment mode, but, once the fee agreement is signed, they will be firm in insisting that you comply with the terms of the agreement.

3. Will the tax lawyer devote his personal attention to your case? This question is very important, especially in the context of mid-size and large law firms, because in those firms the partner with whom you signed the agreement will generally delegate some of his responsibilities to his associates, who are generally less experienced in the area than the partner. In this case, you should insist that the tax attorney with whom you signed the agreement devotes his personal attention to your case and delegates only marginal matters to his associates. Generally, tax lawyers in Minneapolis who operate as solo practitioners or in small firms do not have similar problems.

The other important issue involved in this question is whether your tax attorney is generally responsive to your calls and keeps you up-to-date with respect to the progress of your case. Most tax lawyers in Minneapolis are very busy people; yet, you must insist that you would be able to communicate with them. In my practice, I devote a great deal of energy and time to make sure that my clients do not feel neglected and have the latest information about their case. For example, my firm has a rule of returning most calls within two hours after the client calls. I also make sure that the communication details are discussed during the first meeting. Usually, in additional to bi-weekly phone updates, I also send out a monthly written update, which generally includes a brief summary of events and copies of all relevant documents and materials, including communications with the other party.

In conclusion, by asking these three questions to tax attorneys in Minneapolis, you will make sure that the tax lawyer you are choosing is congruent to your interests and character.

Business Lawyers in Minneapolis: Three Most Important Questions You Should Ask

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When you are about to hire a business lawyer to help you with a business issue, there are three fundamental questions that you need to ask him.

1. What percentage of the practice is devoted to the business law? The purpose of this question is two-fold. First, you will figure out whether this business lawyer likes handling cases in your area of law. If a Minneapolis attorney devotes more than 20% of his practice to business law, you know that he likes this area of law and will be enthusiastic about your case. This means that, in addition to his general due diligence obligations, this business lawyer will have a professional interest in your case. Second, generally, a business lawyer who devotes 20% or more of his practice to business law is likely to have good experience in this area.

2. How will I be billed? Generally, Minneapolis business lawyers will bill you on an hourly basis, particularly in a business litigation setting. They will provide you with a general estimate of your future expenses, which, understandably, will vary with the progress of the case. In corporate organization or corporate governance cases, a business attorney may also offer a flat fee option. Flat fees may also be used for some corporate document drafting or certain legal services supplemental to your business issues. For example, a business attorney in Minneapolis might charge a flat fee for a board memorandum or review of your current business lease agreement.

The more important issue with regard to this question is the manner in which you will be billed. Here, the practice varies among business lawyers in Minneapolis. Some business attorneys may require you to supply a large retainer which is later deposited in a client’s trust account; if the retainer is depleted, your lawyer may ask you to replenish it later. Other business lawyers will require a smaller retainer and will then bill you on a monthly basis. If the latter option is proposed by your business lawyer, you should ask for a sufficient time period (usually 10-14 days) to pay your bill. A mix of these options is also available. You will find that Minneapolis business lawyers, especially solo practitioners, are rather flexible in their choice of the payment mode, but, once the fee agreement is signed, they tend to be firm in insisting that you comply with the terms of the agreement.

3. Will the business lawyer devote his personal attention to your case? This question is very important, especially in the context of mid-size and large law firms, because in those firms the partner with whom you signed the agreement will generally delegate some of his responsibilities to his associates, who are generally less experienced in the area than the partner. In this case, you should insist that the business attorney with whom you signed the agreement devotes his personal attention to your case and delegates only marginal matters to his associates. Generally, business lawyers in Minneapolis who operate as solo practitioners or in small firms do not have similar problems.

The other important issue involved in this question is whether your business attorney is generally responsive to your calls and keeps you up-to-date with respect to the progress of your case. Most business lawyers in Minneapolis are very busy people; yet, you must insist that you would be able to communicate with them. In my practice, I devote a great deal of energy and time to make sure that my clients do not feel neglected and have the latest information about their case. For example, my firm has a rule of returning most calls within two hours after the client calls. I also make sure that the communication details are discussed during the first meeting. Usually, in additional to bi-weekly phone updates, I also send out a monthly written update, which generally includes a brief summary of events and copies of all relevant documents and materials, including communications with the other party.

In conclusion, by asking these three questions to business attorneys in Minneapolis, you will make sure that the business lawyer you are choosing is congruent to your interests and character.