Employee or independent contractor

An appeals court ruled Monday, March 13, 2023 stating that Proposition 22 is mostly constitutional. This reverses a lower court ruling in 2021 that the ballot measure was unconstitutional. More information regarding taxpayer impact will be available soon.

If you are classified as an independent contractor at the federal level but classified as an employee for California, you may have received different types of income reporting forms for federal and California purposes.

For California purposes, drivers for app-based transportation and delivery companies (e.g., Lyft, Uber, DoorDash, Instacart, and Postmates) are classified as independent contractors if specified conditions are met. Visit Secretary of State’s Proposition 22 for more information.

You may need to make the following adjustments on your Schedule CA (540) or Schedule CA (540NR) to your California return, depending on whether you are a resident, nonresident or part-year resident, as explained in the following tables.

Resident

Income

If you receive different types of income reporting forms for the same income	And on your federal return	Then on your California return
For California, a W-2 and for federal: 1099-MISC 1099-K 1099-NEC No form received for federal	You reported the amount as gross income of a business on the federal Schedule C (Form 1040), Part I, line 7.	Schedule CA (540), you will report the amount as wages on Part I, Section A, line 1a, Column C.
	You reported the amount as business income on federal Schedule 1 (Form 1040), Part I, line 3.	Schedule CA (540), you will report this same amount on Part I, Section B, line 3, Column A and Column B.

Deductions

If taken for federal	Report federal amount on the California Schedule CA (540)	Adjust on California Schedule CA (540)
Self-employed health insurance	Report the amount of the self-employed health insurance deduction on Part I, Section C, line 17, Column A.	This deduction is not allowed and should be reported in Part I, Section C, line 17, Column B. For the medical and dental expenses deduction, refer to Schedule CA (540), Part II, line 1 through line 4 instructions.
Self-employment tax	Report the amount of the self-employment tax deduction on Part I, Section C, line 15, Column A.	This deduction is not allowed and should be reported in Part I, Section C, line 15, Column B.
Unreimbursed employee expenses	N/A	Refer to Instructions for Schedule CA (540) and FTB Publication 1001.

Nonresident or part-year resident

Income

If you receive different types of income reporting forms for the same income	And on your federal return	Then on your California return
For California, a W-2 and for federal: 1099-MISC 1099-K 1099-NEC No form received for federal	You reported the amount as gross income of a business on the federal Schedule C (Form 1040), Part I, line 7.	Schedule CA (540NR), you will report the amount as wages on Part II, Section A, line 1a, Column C.
	You reported the amount as business income on federal Schedule 1 (Form 1040), Part I, line 3.	Schedule CA (540NR), you will report this same amount on Part II, Section B, line 3, Column A and Column B.

Deductions

If taken for federal	Report federal amount on the California Schedule CA (540NR)	Adjust on California Schedule CA (540NR)
Self-employed health insurance	Report the amount of the self-employed health insurance deduction on Part II, Section C, line 17, Column A.	This deduction is not allowed and should be reported in Part II, Section C, line 17, Column B. For the medical and dental expenses deduction, refer to Schedule CA (540NR), Part III, line 1 through line 4 instructions.
Self-employment tax	Report the amount of the self-employment tax deduction on Part II, Section C, line 15, Column A.	This deduction is not allowed and should be reported in Part II, Section C, line 15, Column B.
Unreimbursed employee expenses	N/A	Refer to Instructions for Schedule CA (540NR) and FTB Publication 1001.

For more information on classification of employees and independent contractors, visit: