California Independent Contractor Reporting FAQs
Find answers to frequently asked questions about California independent contractor reporting.
The information you provide is used to assist state and county agencies to locate parents who are delinquent in their child support obligations.
Any business or government entity that is required to file a federal Form 1099-MISC for services performed by an independent contractor must report.
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.
A service-recipient can be any individual, person, corporation, association, or partnership, or agent, doing business in California, deriving trade or business income from sources within this state, or in any course of trade or business subject to California law.
A service-recipient also includes the State of California or any political subdivision, 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.
A service-provider is defined as an independent contractor. An independent contractor is any individual who is not an employee of the service-recipient and receives compensation for work conducted in California or executes a contract for services performed in or outside California.
You will be asked for the following information as it pertains to you, the service-recipient:
- Federal employer identification number (FEIN)
- California employer payroll tax account number (if applicable)
- Business or government entity name, address, and phone number
- Social Security number (SSN) (if no FEIN or California employer payroll tax account number)
As a service-provider (Independent Contractor), you are required to provide the following information:
- First name, middle initial, and last name
- Social Security number
- Start date of contract (if no contract, date payments equal $600 or more)
- Full and accurate amount of contract (for example: $4,816.32)
- Contract expiration date (if applicable)
- Ongoing contract terms
You must report information to us within 20 days of either:
- Making payments totaling $600 or more to an independent contractor in any calendar year.
- Entering into a contract for $600 or more with an independent contractor in any calendar year, whichever is earlier.
You must report each independent contractor once each year.
As a service-recipient you can report by submitting:
Online with e-Services for Business
- Report of Independent Contractor(s)(DE 542).
- For information on reporting independent contractors online, refer to our e-Services for Business FAQs or the Electronic Filing Guide for the Independent Contractor Reporting Program (DE 542M) (PDF).
- Paper report of independent contractors by mail or fax. You can complete the DE 542 or create your own form with all the required information. You can get the DE 542 by:
- Downloading a fill-in DE 542.
- Ordering the form to be mailed to you through our Online Forms and Publications .
- Call the Taxpayer Assistance Center at 1-888-745-3886 to get the DE 542.
- Visit your nearest Employment Tax Office.
Mail your paper DE 542 form to:
Employment Development Department
PO Box 997350, MIC 96
Sacramento, CA 95899-7350
You can print and fax an alternate form using these Print Specifications.
Fax your paper DE 542 form to: 1-916-319-4410
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?
If you are unable to determine when total payments made equal or exceed $600, you can estimate the dollar amount of the contract. You must check the box on the Report of Independent Contractor(s) (DE 542) that indicates Ongoing. If there is no set contract amount, you can report when the total payments in a calendar year equal or exceed $600 and check the Ongoing box.
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?
Yes. If either the contract amount or amount paid includes the cost of parts or materials, that cost must be included in determining whether the service-provider has been paid $600 or more.
A penalty of $24 is issued for each late report, unless the failure is due to good cause.
Note: If there was 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.
Do I report independent contractors who work in another state or if my business is not in California?
Under California law, service-recipients must report service-providers. You must report independent contractors whose services are performed for any of your business operations headquartered or for business and trade within California.
If your business is headquartered in California and your California office hires an independent contractor (IC) who lives and works out-of-state. You must report this IC to us because this IC performs services for your California business operation.
Your business is headquartered in another state and has a branch office in California that uses ICs. Those ICs contracted through the California branch office must be reported.
Your business is headquartered in another state and does not have any branch offices in California. Your business registered with a California state agency to have independent sales agents (ICs) sell your products in California. You must report these ICs to us since they perform services for a business operation deriving income from California and subject to some California laws.
Yes. According to the U.S. Department of Health and Human Services, the following require some sort of independent contractor reporting:
- New Hampshire
- New Jersey
- The territory of Guam
No. There are no shared agreements between the states for this purpose.
Do we report a corporation, general partnership, or limited liability company as a service-provider?
No. You are only required to report service-providers who are individuals working as independent contractors (IC) and are sole proprietors.
My service-provider is a sole proprietor and has a federal employer identification number (FEIN) and business name. Can I report their FEIN instead of their Social Security number (SSN)?
By law, you are required to get the following information from your service-providers who are sole proprietors:
- First name
- Last name
Make sure your service-providers complete the current Form W-9.
If my business contracts with a service-provider more than once in a year and meets or exceeds the reporting requirement of $600 in a year, do I have to report each contract separately?
No. The reporting requirement is when you contract, and your service-provider receives $600 or more in the year. You only report once a year for each service-provider to meet this requirement.
My business doesn’t have employees. Do I have to register with you only for the purpose of reporting my service-providers?
No. Service-recipients who are not registered with us are not required to register and receive a California employer payroll tax account number only for the purpose of reporting independent contractor service-providers. Unregistered service-recipients complete the Report of Independent Contractor(s) (DE 542) using their Social Security or federal employer identification numbers.
Does a verbal agreement with a service-provider also qualify as a contract to include in our independent contractor reporting?
Yes, a contract can be written or verbal. As long as the contract and recipient receives $600 in a year you must include the IC in your independent contractor reporting.
My business uses 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 independent contractor and receives a federal Form 1099-NEC or 1099-MISC which reflects this compensation. Do I need to also report the worker for the independent contractor compensation?
Yes, you must report the worker as an independent contractor.
If my business uses workers whose services are by law not considered employees, should I report the workers as independent contractors to you?
If the workers are engaged as employees, their services would not be reported as independent contractors. 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) 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-NEC or 1099-MISC, the service-recipient is required to report the workers (service-providers) as independent contractors (under the provisions of Section 1088.8 of the California Unemployment Insurance Code).
Are churches or nonprofit organizations required to report independent contractors they engage for services?
Yes, reporting independent contractors is required.
Refer to: Section 1.6041-1(b), Title 26 of the Code of Federal Regulations. The term "trade or business" includes churches and nonprofit organizations.
Refer to California Legislative Information to find the Unemployment Insurance Code (UIC).
The California UIC 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.
e-Services for Business
- Check Required Filings and Due Dates
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- Get EDD email notices
- Get Forms and Publications
If you have questions, Contact Payroll Taxes. You can also contact the Taxpayer Assistance Center at 1-888-745-3886 or visit your local Employment Tax Office.