A new law, part of sweeping legislation aimed at "deadbeat" parents, requires businesses to report specific information regarding independent contractors to the state’s Employment Development Dept.
The law was effective Jan. 1 and applies to any business or government entity (defined as a "service recipient") required to file a federal Form 1099-MISC for services performed by an independent contractor. An independent contractor is defined as an individual who is not an employee of the business or government entity and who receives compensation or executes a contract for services performed for that business or government entity in or outside of California. Many trucking companies that use independent contractor truck owner-operators will be affected.
California-based businesses must report all independent contractors, regardless of where they live or work. Businesses based outside the state must report all independent contractors "deriving trade or business income from sources within the state." According to Warren Hoemann, of the California Trucking Assn., that includes owner-operators contracted and paid out of California terminals, but not carriers or owner-operators who simply run through the state.
Reports aren't required for service providers that are businesses themselves, such as corporations, general partnerships or limited liability companies. In general, said EDD, reports are only required for service providers who are individuals working as independent contractors, i.e. independent contractors who are sole proprietors.
Required information includes the contractor’s name, social security number, address, start date of contract, amount of contract, and contract expiration date.
Reports are due within 20 days of making payments totaling $600 or more, or within 20 days of entering into a contract for $600 or more, whichever is earlier. The penalty for failure to comply within the required time is $24 per day. Additional information, including reporting forms, can be obtained on the Internet at www.edd.ca.gov or by calling (916) 657-0529