February 2001

California Reporting Requirements For Independent Contractors

Effective January 1, 2001, any business that is required to file a federal Form 1099-MISC for services received from an independent contractor is required to report specific information about itself and the independent contractor to the Employment Development Department ("EDD"). According to the EDD, this information will be used to locate parents who are delinquent in their child support obligations.

What Information Must You Report?

You, the reporting agent and service-recipient, must report the following three items:

1. Your:

• Business name, address and telephone number;
• Federal Employer Identification Number;
• California employer account number; and
• Social security number

2. The Independent Contractor's (Service-Provider's):

• First name, middle initial, and last name
• Social security number
• Address; and

3. Whether it’s an Ongoing Contract (check box if applicable) OR the start date of contract, amount of contract (including cents) and the contract expiration date.

When Must You Report?
You are not required to report independent contractors that are corporations, general partnerships, limited liability partnerships, and limited liability companies. You are required to report only if you hire an independent contractor AND:

1. You are required to file a 1099-MISC form for the services performed by that independent contractor, AND



2. You pay the independent contractor $600 or more or enter into a contract for $600 or more, AND



3. The independent contractor is an individual or sole proprietorship.

If all three of the above statements apply, you must report the independent contractor to EDD within twenty (20) days of EITHER making payments totaling $600 or more OR entering into a contract for $600 or more with an independent contractor in any calendar year, whichever is earlier.

How to Report.

Fill Out the Report of Independent Contractors form (FORM DE 542) and mail or fax it to

Employment Development Department
PO Box 997350 MIC 99
Sacramento CA 95899-7350
Fax: (916) 255-3211

To obtain forms and/or information, call the EDD at: (916) 657-0529 or visit: http://www.edd.ca.gov/taxrep/de542.pdf.

If you have any questions or would like further information, please e-mail us at legalcorner@aol.com or call: 818-849-5206.

• How To Determine If A Worker Is An Independent Contractor or Employee?
• California Employers and Employees Can Ask the IRS to Decide If The Worker Is An Independent Contractor or Employee

© 2001 Melissa C. Marsh. All Rights Reserved.