A 2018 New Requirement Self-Employed People Need To Know About

by Michael on August 16, 2018

in Business Agent,Consultant

You could not be blamed for thinking that if you are self-employed with no employees you have no requirements to report to the California Employment Department.

And this was true up until this year. [Larger employees had to do what I am outlining beginning in 2017]. However, a new law in 2018 requires that if you have to issue a Federal 1099 to a sub-contractor, you have to report to the EDD. This is apparently something implemented to cut down on welfare fraud and to enforce child support.

So, if you have a contract with someone and the amount will go over $600 in a calendar year, you must report this arrangement to the EDD. This is the same rule that applies to have to give them the 1099 form at the end of the year. The difference is that with the State, you must do this upon reaching $600 in payments.

This can be done with a paper form DE-542 or it may be reported electronically at www.edd.ca.gov. (Select the Payroll Taxes Tab, and select e-Services for Business and then the e-Services for Business Login).

Although kind of a pain to deal with, my recommendation is to do this at the inception of any contract, verbal or written, to avoid any future problems. Don’t wait until you pay someone $600. Just do it as part of doing a contract. This will minimize the pain of having to do this.

If you use an accountant, be sure and discuss this with him/her.

And whatever you do, keep good records showing you have done this.

Any questions feel free to give me a call.



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