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Q9.

How do I obtain the DE 542 forms and/or whom do I contact if I have questions?

A9.

For assistance or to order forms, please call 916-657-0529, Monday through Friday, from 8 a.m. to 5 p.m., Pacific Time (PT).

You may also call our toll-free number 888-745-3886, visit your local Employment Tax Customer Service Office, order forms

online at , or download them at

Q10.

What is the purpose of the IC reporting law?

A10.

The information you provide to EDD will increase child support collection by helping to locate parents who are delinquent in

their child support obligations.

Q11.

What type of penalty is charged if the report is late?

A11.

The EDD may assess a penalty of $24 for each failure to comply within the required time frames. Also, a penalty of $490 may

be assessed for the failure to report IC information if the failure is the result of conspiracy between the service-recipient and

service-provider.

Q12.

Do I report ICs who work in another state? If my business is not in California, do I report the ICs?

A12.

Under California law, “service-recipients” must report “service-providers.” By definition, a service provider is an IC who provides

services (rather than goods) to a business or government entity; a service-recipient must meet one of these three criteria:

1. Does business in California.

2. Derives trade or business income from sources within California.

3. In any manner in the course of a trade or business is subject to the laws of California.

If your business/government entity meets one or more of the three service-recipient criteria, you must report ICs whose

services are performed for any of your business operations that also meet at least one of the three criteria.

Example #1

Your business is headquartered in California and, therefore, meets one of the service-recipient criteria. Your California office

hires an IC who lives and works in New York. You must report this IC to the EDD since the IC performs services for your

California business operation.

Example #2

Your business is headquartered in California and, therefore, meets one of the service-recipient criteria. You also have a

business operation in Massachusetts. The Massachusetts location hires a Massachusetts-based IC to perform janitorial services

in Massachusetts. You do not have to report this IC to the EDD since the IC performs services for a business operation that

does not meet any of the service-recipient criteria.

Example #3

Your business is headquartered in North Dakota and has a branch office in California that uses ICs. Those ICs should be

reported since the California office meets the service-recipient criteria. However, if the North Dakota office hires an IC to

perform services for the North Dakota location, those services would not be reported because the IC performs services for an

office that does not meet any of the service-recipient criteria.

Example #4

Your business is headquartered in Indiana and does not have any branch offices in California. Your business is registered with

a California State agency to have independent sales agents (ICs) sell your products in California. You must report these ICs to

the EDD since they perform services for a business operation deriving income from California and subject to some California

laws, thereby, meeting two of the service-recipient criteria.

Q13.

Do any other states require IC reporting?

A13.

Yes. According to the U.S. Department of Health and Human Services, Alabama, Connecticut, Iowa, Maine, Massachusetts,

Minnesota, Nebraska, New Hampshire, New Jersey, Ohio, and the territory of Guam require some sort of IC reporting.

Q14.

Can other states report their ICs to California and vice versa?

A14.

No. There are no reciprocal agreements between the states for this purpose.

Q15.

If my business contracts with a service-provider that is a corporation, general partnership, or limited liability company, must

this service-provider be reported?

A15.

No. The legislative requirements only call for the reporting of service-providers who are individuals working as ICs.

In general, ICs who are sole proprietors are to be reported to the EDD.

Q16.

My service-providers have FEINs and business names. How do I determine if they are sole proprietors? Can I report their

FEINs instead of their SSNs?

A16.

By statute, you are required to obtain the first name, last name, and SSN of any service-providers that are sole proprietors.

The federal Request for Taxpayer Identification Number and Certification, Form W-9, requires sole proprietors to list their first

and last names. You may want your service-providers to complete new Forms W-9. If the SSN is still not known after

reviewing the Form W-9, ask the service-provider for the SSN.

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

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Instructions For Completing The Report Of Independent Contractor(S) - Employment Development Department Page 3

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