Independent Contractor Reporting

Background

California State Senate Bill 542 was passed during the 1999-2000 legislative session and signed into law effective January 1, 2001. This law requires businesses and government entities (defined as a "service-recipient") to report specified information to the Employment Development Department (EDD) on independent contractors (defined as a "service-provider").

You are required to report independent contractor information if you hire an independent contractor and the following statements all apply:

You are required to file a Form 1099-MISC for the services performed by the independent contractor.
You pay the independent contractor $600 or more or enter into a contract for $600 or more.
The independent contractor is an individual or sole proprietorship.

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

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Reporting Requirements

You must report independent contractor information to the EDD within 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. Businesses that transmit electronically are required to submit 2 monthly reports that are not less than 12 days and not more than 16 days apart. No report should be submitted if there are no new independent contractors to report.

You are required to provide the following information:

Service-Recipient (Business or Government Entity):

Federal employer identification number (FEIN)
California employer payroll tax account number (if applicable)
Social Security number (SSN)
Service-recipient name/business name, address, and phone number

Service-Provider (Independent Contractor):

First name, middle initial, and last name
Social Security number
Address
Start date of contract (if no contract, date payments equal $600 or more)
Amount of contract including cents (if applicable)
Contract expiration date (if applicable)
Ongoing contract (check box if applicable)

How to Report

Use e-Services for Business to submit a Report of Independent Contractor(s) (DE 542) online. e-Services for Business is your fast, easy, and secure way to file, pay, and manage your employer payroll tax account(s) online. With e-Services for Business you can:

File returns/reports.
Make payments.
File a Report of Independent Contractor(s) (DE 542).
File a Report of New Employee(s) (DE 34).
And more!

Or submit a paper report of independent contractors by mail or fax. You may complete the DE 542 or create your own form with all the required information. You can obtain a DE 542 using the following options:

Download a fill-in DE 542 from the EDD website.
Order through the Online Forms and Publications page.
Print your data directly from your computer to the DE 542 by following the Print Specifications.
Call the Taxpayer Assistance Center at 1-888-745-3886 to obtain a form.
Create your own form with all of the required information.
Visit your nearest Employment Tax Office.

Mail or fax your paper DE 542 to:

Mail:
Employment Development Department
P.O. Box 997350, MIC 96
Sacramento, CA 95899-7350

Fax: 916-319-4410

For additional information:

Visit FAQs - e-Services for Business.
Review the Electronic Filing Guide for the Independent Contractor Reporting Program (DE 542M).

Penalties

A service-recipient may be charged a penalty of $24 for each failure to report within the required time frames, unless the failure is due to good cause. If the failure to report is an intentional agreement between the service-recipient and service-provider to not supply the required information or to supply a false or incomplete report, a penalty of $490 may be charged.

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