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California Requirements for Independent Contractors

Posted by attorney Henry Lively

In California, any business that pays an independent contractor is required to report the existence of a contract by completing EDD Form DE 542, "Report of Independent Contractors", either when a contract is established or when $600 is paid or is expected to be paid to the worker. The workers must be reported each year within 20 days of either making payments to them totaling $600 or more or entering into a contract with them for at least that amount.

If the business provides a tax identification number rather than a Social Security number, there is no way to report the independent contractor. Therefore, only individual taxpayers with a Social Security number need to be reported.

The penalty for failure to timely report the contractor is $24 for each failure. A penalty of $490 may also appy if the failure is the result of a conspiracy between the service recipient and the service provider.

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