Did you know? California Independent Contractor Reporting Requirements Differ from the Federal Requirements!

The State of California has enhanced reporting requirements for independent contractor reporting as compared to the Federal requirements and many companies are not aware of this. The most significant differences are the reporting deadlines and the need to report based on contracts, not just actual payments made. This article summarizes the essential information you need to know in order to comply with the state’s reporting requirements.

California’s Independent Contractor Reporting Requirements

California has specific requirements for reporting independent contractors to the Employment Development Department (EDD). These requirements are designed to help locate parents who are delinquent in their child support obligations. Here are the key points you need to know:

Who Needs to Report?

Businesses and government entities, defined as “service-recipients,” are required to report specific information about independent contractors, defined as “service-providers,” if the following conditions are met:

1. You are required to file a federal Nonemployee Compensation (Form 1099-NEC) or a Miscellaneous Information (Form 1099-MISC) for the services performed by the independent contractor.
2. You pay the independent contractor $600 or more or enter into a contract for $600 or more.
3. The independent contractor is an individual/sole proprietor or single-member LLC¹.

What Information Needs to Be Reported?

You must report the following information to the EDD:

• 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)

• Start date of contract (if no contract, date payments equal $600 or more)

• Amount of contract, including cents (if applicable)¹.

When to Report?

You must report independent contractor information to the EDD within 20 days of the scenario which occurs first:

• Making payments totaling $600 or more

• Entering into a contract for $600 or more, with an independent contractor in any calendar year¹.

How to Report?

You can report independent contractor information to the EDD using one of the following methods:

• Online reporting through the EDD’s Electronic Filing Guide for the Independent Contractor Reporting Program

• Submitting a paper Report of Independent Contractor(s) (DE 542) by printing your data directly from your computer to the DE 542 or creating your own form with all the required information¹.

Penalties for Non-Compliance

Failure to report within the required time frames may result in penalties:

• A penalty of $24 for each failure to report, unless the failure is due to good cause.

• A penalty of $490 if the failure to report is intentional or if the report is falsified¹.

Additional Information

For more information on reporting independent contractors online, refer to the EDD’s Electronic Filing Guide for the Independent Contractor Reporting Program. You can also contact the Taxpayer Assistance Center at 1-888-745-3886 for further assistance¹.

By understanding and complying with these reporting requirements, businesses can avoid penalties and contribute to the state’s efforts in locating parents who are delinquent in their child support obligations.

¹ “Independent Contractor Reporting – Employment Development Department”, State of California Employment Development Department, https://edd.ca.gov/en/Payroll_Taxes/Independent_Contractor_Reporting.

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