Security and Detective Services and Iowa Taxes

Security and Detective Services Defined

Security Services Include, But Are Not Limited To:

Detective Service

Detective service is the service of investigation for the purpose of obtaining information regarding the following or similar matters:

Individual Income Tax

Individuals who receive income from performing security or detective services are required to report it on their federal and Iowa income tax returns.

Which Form Shows Income to be Reported?

Employees

Wages are shown on a W-2. The W-2 is given to the employee by the employer.

Independent contractors

Compensation is shown on a 1099. It is given to an independent contractor by the payer.

Payments received in cash are also reported as income, even if a 1099 or W-2 is not provided.

Should Income Tax be Withheld from Paychecks?

Employees

State and federal income tax is withheld from their wages according to federal and state guidelines.

Independent contractors

Independent contractors are not usually subject to withholding, and may, therefore, need to make individual estimated payments during the year to pay any tax due on income for services provided. For Iowa, individuals who expect to owe more than $200 in tax from income not subject to withholding should make quarterly estimated payments. Arrangements to make estimated payments online can be made through eFile & Pay.

Independent contractors who did not pay the appropriate income tax must amend past income tax returns. To amend Iowa income tax returns, use the IA1040X (pdf).

Sales Tax

Security services and detective services are subject to Iowa sales tax. Sales tax applies to the full amount charged to the customer for providing a security service or detective service. However, mileage and other travel expenses, as well as lodging and meal expenses, are not taxable if separately identified, separately billed, and reasonable in amount.

See Rule 701-26.69, Iowa Administrative Code

Employees

Security or detective services performed by an employee for an employer are not subject to sales tax.

Independent contractors

Independent contractors are required to obtain an Iowa sales tax permit, charge the tax to their customer, and remit the tax to the state.

An Iowa Business Tax Registration should be completed to apply for a permit.

Independent contractors who have not collected or paid sales tax must obtain a permit, file past quarterly returns, and remit the tax. The sales tax is still due, even though it was not collected from customers.

NOTE: Effective July 1, 2013, specifically excluded from the taxable service of security and detective services are private security and detective services furnished by a peace officer when the chief executive officer of the peace officer’s law enforcement agency knows and has approved of the services. This is the normal process for off-duty peace officer security and detective work, and this process allows the peace officer to wear a uniform issued by the peace officer’s law enforcement agency, make arrests and carry a weapon, even though the peace officer is hired for that specific service by a private entity rather than the law enforcement agency.

Questions?

Please e-mail the Department.

Federal Taxes

For forms and information on federal taxes, see the Internal Revenue Service Web site or call 1-800-829-1040.

12/31/13