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Reporting Obligations and Independent Contractors
All businesses and government entities who hire independent contractors must file reports with the EDD. This independent contractor reporting program is designed to locate parents who are delinquent in their child support obligations. The report must be made on the Independent Contractors Report - DE 542.

Specific information must be reported within 20 days of entering into a contract for, or making payments of $600 in any calendar year to an independent contractor. EDD matches the reports against child support records to locate parents who are delinquent in payments. When hiring an independent contractor, the law requires a report from anyone who is:
  • Doing business in California
  • Deriving trade or business income from sources within California
  • Otherwise subject to California law

Businesses operating outside California are subject to this law. For example, an independent contractor who works in California for a business based in Texas must be reported to California’s EDD. Hiring entities subject to the law include:
  • Individuals
  • Corporations
  • Associations
  • Partnerships
  • Agents of any of the above
  • California or any of its political subdivisions
  • Charter cities
  • Any political body that is not a subdivision or agency of the state

Hiring entities who have no employees and, therefore, are not registered with EDD, are not required to register and receive a California employer account number solely for purposes of reporting independent contractor service providers. Unregistered hiring entities will complete the required report using a Social Security number or Federal Employer Identification Number (FEIN).
Both Contractor and Employee:  You may have a worker who is classified as an employee who also performs work as an independent contractor. For example, a sales clerk (employee) might own a small janitorial firm that is hired to clean the store each evening (independent contractor). Report the individual under both the New Employee Registry program, New Employees Report - Form DE 34 and under the Independent Contractor Reporting program, Independent Contractors Report - DE 542.
Forms for Independent Contractor Reporting: Independent Contractors Report - DE 542 is also available online from the EDD. Mail or fax the completed report to:
Employment Development Department
Document Management Group, MIC 96
P.O. Box 997350
Sacramento, CA 95899-7350
Fax: (916) 255-3211

When hiring a large number of independent contractors, you can send the information via magnetic media. For more information, contact the EDD’s Magnetic Media Unit at (916) 651-6945.

Independent Contractor Report Filing Deadlines: Send the Independent Contractors Report - DE 542 to the EDD within 20 days of entering into a contract for $600 or more in any calendar year with an independent contractor or within 20 days of making payments totaling $600 in any calendar year to an independent contractor, whichever is earlier. The contract can be written or verbal. If you are unable to determine when total payments issued equal or exceed $600, estimate the dollar amount of the contract and check the box on the Independent Contractors Report - DE 542 that indicates ongoing.  If you hire an independent contractor on more than one occasion during a year, report the independent contractor at whatever point the $600 threshold is met, even if it is not during the first period of work. After you make the report for a calendar year, you need not file further reports that year if the same independent contractor receives another $600.

Independent Contractor Reporting Penalties: There is a penalty of $24 for each instance of late filing or failure to file the independent contractors report, unless there is good cause. If a conspiracy exists between the hiring entity and the independent contractor to conceal the report or to supply a false or incomplete report, the penalty increases to$490.
Independent Contractor Report Content: The independent contractor reporting requirements apply if an independent contractor is hired and:
  • 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. If the cost of parts and materials is included in the contract or payments, this cost must be included in determining if the independent contractor has been paid $600 or more.
  • The independent contractor is an individual or sole proprietorship.

If all three of the above statements apply, you must report the independent contractor to the EDD. No reporting is required for independent contractors that are corporations, general partnerships, limited liability partnerships or limited liability organizations.

If you are a California business or government entity, you must report all independent contractors who meet the minimum dollar requirements regardless of where they live or work. For example, a California business hires an independent contractor who lives and works in New York. You must report this independent contractor to the EDD. If the independent contractor works in California, you must report to the EDD even if you are based in another state. A business based in New York must report to the EDD if it hires an independent contractor who lives and works in California. The EDD requires a report of all of the following:
  • The hiring entity’s:
FEIN
  • The independent contractor’s:
  1. First name, middle initial and last name
  2. SSN
  3. Address
  4. The start date of contract
  5. The contract expiration date (unless it is an ongoing contract)

Independent contractors may have FEINs and business names, making it difficult to determine if they are sole proprietors whom you must report. Reporting a FEIN does not meet the legal requirement of reporting the independent contractor’s SSN. By statute, you must obtain and report the first name, last name and SSN of any independent contractors that are sole proprietors. The IRS’s Form W-9 requires sole proprietors to list their first and last names. If you still don’t know the SSN after reviewing the Form W-9, you can ask the independent contractor for the SSN. If the independent contractor does not provide it, fill in the SSN box on the Independent Contractors Report - DE 542 with zeroes (000000000). Form W-9 is available on the IRS website.