Does the independent contractor reporting law apply to payees that are incorporated?
A. No. Corporate payees are exempt. In September of 1999 a new law (California Senate Bill 542, Burton) was enacted. The new law states that a business or government entity required to file a federal Form 1099-MISC for services received MAY have to report specific independent contractor information to the California Employment Development Department (EDD). The new law was effective January 1, 2001. This new reporting law only calls for the reporting of payees who are individuals working as independent contractors. Individual independent contractors doing business in the sole proprietorship form are to be reported to the EDD. Payers are required to report independent contractors on EDD Form DE 542, Report of Independent Contractors. However, if the independent contractor (payee) is a corporation, a DE 542 is not required. According to section 1088.8(b)(2) of the California Unemployment Insurance Code, “Service-provider” means an individual who is not an employee of the service-recipient
