CSLB Law & Business ExamEmployment RequirementsMedium
A contractor enters into a written agreement with an independent contractor on May 1 to perform work for a total fee of $2,000. Under California EDD reporting rules, by when must the contractor file the Report of Independent Contractor(s) (Form DE 542)?
- ANo filing is required because the amount is under $10,000
- BWithin 20 days of May 1, the date the contract was entered into
- CWithin 20 days of the date the work is fully completed
- DBy January 31 of the following calendar year
Show answer & explanationAnswer & explanation
Correct answer: B. Within 20 days of May 1, the date the contract was entered into
California requires businesses to report independent contractors to the EDD on Form DE 542 within 20 days of either making payments totaling $600 or more, or entering into a contract for $600 or more, whichever occurs first. Since the contract itself totals $2,000, the reporting deadline runs from the contract date.
Why the other options are wrong
- A. The $2,000 contract exceeds the $600 reporting threshold, so filing is required.
- C. Waiting until completion could delay reporting beyond the required 20-day window.
- D. The January 31 deadline applies to Form 1099 tax filings, not the DE 542 report.
DE 542 Independent Contractor Reporting
California businesses must report independent contractors paid $600 or more to the EDD within 20 days of payment or contract execution, whichever is earlier.
- Threshold is $600 or more
- 20-day filing deadline from earlier of contract or payment
- Used to help enforce child support and tax compliance
- Filed with the Employment Development Department
Memory trick: Sign the deal, start the 20-day clock.