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AB 5 requires the application of the ?ABC test? to determine if workers in California are employees or independent contractors for purposes of the Labor Code, the Unemployment Insurance Code, and the Industrial Welfare Commission (IWC) wage orders.

1099s for California Independent Contractors If you're a freelancer or independent contractor earning $600 or more during a tax year from business or contract work, you will receive a 1099-NEC tax form. The business or individual that hired you must send the California 1099 form to the IRS and send a copy to you.

Wages and other payments to employees are reported on Form W-2, while payments to independent contractors are reported on a Form 1099. Each business must classify its workers as either employees or independent contractors to file the appropriate form.

In California, the ABC test is one of the tests courts use to determine whether a worker or a vendor is actually an employee vs an independent contractor. Employees have a right to legal protections under state and federal employment law, such as overtime pay, the minimum wage, and other employee benefits.

Independent contractors report their income on Schedule C (Form 1040), Profit or Loss from Business (Sole Proprietorship).

Under Labor Code section 226.8, which prohibits the willful misclassification of individuals as independent contractors, there are civil penalties of between $5,000 and $25,000 per violation. Willful misclassification is defined as voluntarily and knowingly misclassifying an employee as an independent contractor.