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Q17.

If my business contracts with a service-provider on more than one occasion during a year, are the individual contracts

cumulative in reaching the $600 reporting threshold? Also, if I report a service-provider during the year and then enter into

another contract that again calls for at least $600 in compensation, must the service-provider be reported a second time?

A17.

The threshold for requiring reporting is $600 in a year on an aggregate basis. Therefore, you would only report once a year

for each service-provider, and there is no basis to require reporting each time a service-provider receives $600 in a year.

Q18.

My business doesn’t have employees. Do I have to register with the EDD solely for purposes of reporting my service-providers?

A18.

No. Service-recipients who are not registered with the EDD are not required to register and receive a California employer

payroll tax account number solely for purposes of reporting IC service-providers. Unregistered service-recipients complete

the DE 542 using their SSN or FEINs.

Q19.

For purposes of IC reporting, must the contract be in writing or would a verbal contract also qualify?

A19.

A contract may be either written or verbal.

Q20.

My business engages the services of a worker who is my acknowledged employee, and I reported this employee under the

New Employee Registry when first hired. This same worker also performs work for my business as a valid IC and receives a

federal Form 1099-MISC which reflects this compensation. Must I also report the worker for the IC compensation?

A20.

Yes.

Q21.

If my business engages workers whose services are exempt by statute from state payroll taxes, should I report the workers as

ICs to the EDD?

A21.

To answer this question, one must first determine if the workers are performing services for the business or government

entity as employees or independent contractors. If the workers are engaged as employees, their services would not be

reported as ICs. However, the business or government entity may be required to report the employees as part of the New

Employee Registry (under Section 1088.5 of the California Unemployment Insurance Code [CUIC]) if the requirements of

that section are met. When a service-recipient hires workers who are not employees and is required to provide the workers

with a Form 1099-MISC, the service-recipient is required to report the workers (service-providers) as ICs (under the

provisions of Section 1088.8 of the CUIC).

Q22.

Are churches or nonprofit organizations required to report ICs they engage for services?

A22.

Yes. Section 1.6041-1(b) of

Title

26, Code of Federal Regulations, defines the term “trade or business,” which includes

churches and nonprofit organizations. Therefore, reporting ICs is required.

Q23.

How can I get a copy of Section 1088.8 of the CUIC?

A23.

You can view the code section at Select “Unemployment Insurance

Code.” Select “Division 1. Unemployment and Disability Compensation (100-4751). The CUIC Table of Contents will

appear; the code sections are grouped in numerical order on the right side of the page. Scroll down to “1085-1098,”

select the link, and then scroll down to 1088.8.

You may also call our toll-free number 888-745-3886 to have the code section mailed or faxed to you.

The EDD is an equal opportunity employer/program. Auxiliary aids and services are available upon request to individuals with

disabilities. Requests for services, aids, and/or alternate formats need to be made by calling 888-745-3886 (voice), or TTY

800-547-9565.

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

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Instructions For Completing The Report Of Independent Contractor(S) - Employment Development Department Page 4

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