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FREQUENTLY ASKED QUESTIONS AND ANSWERS ABOUT THE

CALIFORNIA INDEPENDENT CONTRACTOR REPORTING LAW

(Section 1088.8 of the

California Unemployment Insurance

Code)

Q1.

Who has to report?

A1.

Any business or government entity (defined as a “service-recipient”) that is required to file a federal Miscellaneous Income,

Form 1099-MISC, for services performed by an independent contractor (defined as a “service-provider”) must report.

Q2.

Who is a service-recipient?

A2.

A service-recipient is any business or government entity that is required to file a federal Form 1099-MISC for services

performed by an independent contractor (IC). A service-recipient means any individual, person, corporation, association, or

partnership, or agent thereof, doing business in this state, deriving trade or business income from sources within this state, or

in any manner in the course of trade or business subject to the laws of this state. A service-recipient also includes the State of

California or any political subdivision thereof, including the Regents of the University of California, any charter city, or any

political body not a subdivision or agency of the state, and any person, employee, department, or agent.

Q3.

Who is a service-provider?

A3.

A service-provider is defined as an IC. An IC is any individual or sole proprietor who is not an employee of the service-

recipient for California purposes and who receives compensation or executes a contract for services performed in or outside

California.

Q4.

What information do I report?

A4.

You are required to provide the following information.

Business or government entity’s (service-recipient):

Independent contractor’s (service-provider):

• Federal employer identification number (FEIN) or

• First name, middle initial, and last name

Social Security number (SSN)

• Social Security number (SSN)

• California employer payroll tax account number

• Address

(if applicable)

• Start date of contract (if no contract, the date payments

• Business name, address, and phone number

equal $600 or more)

• Amount of contract, including cents (if applicable)

• Contract expiration date (if applicable)

• Ongoing contract (check box if applicable)

Q5.

When do I have to report?

A5.

As of January 1, 2001, you must report information to the Employment Development Department (EDD) within 20 days of

either making payments totaling $600 or more or entering into a contract for $600 or more with an IC in any calendar year,

whichever is earlier. Report each IC once each year.

Q6.

What do I do if it is difficult to determine when the contract will equal or exceed $600 or if there is no set contract amount?

A6.

If you are unable to determine when total payments made equal or exceed $600, you may estimate the dollar amount of the

contract and check the box on the Report of Independent Contractor(s),

542, that indicates “ongoing.” If there is no set

contract amount, you may report when the aggregate payments in a calendar year equal or exceed $600 and check the

“ongoing” box.

Q7.

If the cost of parts and materials is included in the contract or payments, is this cost included in determining if the $600

threshold has been met?

A7.

Yes. If either the contract amount or amount paid includes the cost of parts or materials, that cost is to be included in

determining whether the service-provider has been paid $600 or more.

Q8.

How do I report?

A8.

You are encouraged to report online using of the options available with the EDD e-Services for Business. Visit the website at

to choose the option that is best for you. You can also fax your completed DE 542 to

916-319-4410 or mail it to:

Employment Development Department

PO Box 997350, MIC 96

Sacramento, CA 95899-7350

DE 542FAQ Rev. 6 (9-16) (INTERNET)

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Instructions For Completing The Report Of Independent Contractor(S) - Employment Development Department Page 2

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