468 N. Camden Drive, Suite 200
Beverly Hills, California 90210
Tel: 310-996-8800 / Fax: 310-838-6443
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468 N. Camden Drive, Suite 200 Beverly Hills, California 90210 Tel: 310-996-8800 / Fax: 310-838-6443
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New Reporting Requirement for Independent ContractorsEffective January 1, 2001, California has a new law that requires businesses (like yours) and government entities to report on independent contractors to the Employment Development Department (EDD). The reporting requirements are somewhat complex and burdensome, to say the least. However, it is extremely important that you take the time now to understand the impact of this new law to your business, I have summarized the highlights of this new law below for your reference. Who must be reported to the EDD? The law defines an independent contractor as an individual who is not all employee of the business or government entity for California purposes and who receives compensation or executes a contract for services performed for that business or government either in or out of California. For example, I would be considered an independent contractor to your business and thus you would be subject to the new reporting requirements on payments made to me as defined below. Please note that under this new law a partnership, corporation or other form of legal entity would not fall under the definition of independent contractor and thus would not need to be reported on Form DE 542. Although there does not appear to be a penalty associated with reporting all independent contractors on Form DE 542, you might wish to consult with your legal advisor before electing this approach.
What information must be reported to the EDD ? The Form DE 542 will require the following information on the independent contractor: ¨
Name
¨ Address
¨ Social security number ¨ Start date of contract or date payments equal $600 or more ¨ Amount of contract ¨ Contract expiration date
When must the information be reported? As of January 1, 2001, you must report information to EDD within twenty (20) days of either (1) making payments totaling $600 or more; or (2) entering into a contract for $600 or more with an independent contractor in any calendar year; whichever is earlier. What happens if I fail to report the independent contractor as required? The EDD may assess a penalty of twenty-four dollars ($24) for each failure to comply with the required timeframes. In addition, if there is conspiracy between the business and the independent contractor not to provide the required reporting, the penalty is $490. Where do l go for assistance and additional information? At your request, I am available to assist you in complying with this new reporting requirement for independent contracts. Please call me to coordinate this additional service. You can also contact the EDD Hotline at (916) 657-0529 or refer to the EDD Web Site at http://www.edd.ca.gov for the new reporting form, fact sheet, brochure and a list of the frequently asked questions.
Please contact our office at any time if you have any questions on how the specific provisions of the new regulations affects you, your family, your investments, or your business.
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