California State Senate Bill 542 requires businesses to report certain information to the Employment Development Department (EDD) on independent contractors. Form DE 542 must be filed within twenty 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.
Form 542 must be filed every year for each independent contractor. Failure to comply within the required time frame may result in a penalty of $24 per contractor. Form DE 542 can be mailed to the EDD or completed online at https://eddservices.edd.ca.gov.
Additionally, Form 1099-MISC must be filed for each person to whom you have paid during the year:
- at least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest;
- at least $600 in rents, services (including parts and materials), prizes and awards, other income payments, medical and health care payments, crop insurance proceeds, cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish, or, generally, the cash paid from a notional principal contract to an individual, partnership, or estate;any fishing boat proceeds,
- gross proceeds of $600, or more paid to an attorney during the year, or
- withheld any federal income tax under the backup withholding rules regardless of the amount of the payment.
The due date for Form 1099-MISC varies depending on the type of payment you are reporting, but may be due as early as January 31st for the year just ended.
Please contact our office at (858) 558-9200 if you have any questions regarding independent contractors, or need help filing required forms.