AB5 in your books — W-2 and 1099, separated and defensible.
California’s AB5 reclassifies many contractors as employees under the ABC test. A QuickBooks ProAdvisor keeps your books so W-2 wages and 1099 contractor pay are separated cleanly and the misclassification exposure is visible — before the EDD sees it. We do the books; the legal classification, EDD audits, and disputes are your CPA’s and employment counsel’s. Fixed-fee, all 58 counties.
If your file needs our paid diagnostic first, its fee is credited in full against the cleanup. Either way, you get a fixed fee in writing before any work starts.
California rule: under the ABC test, a worker is considered an employee unless the hiring entity proves all three conditions: freedom from its control and direction, work outside the usual course of its business, and an independently established trade; the books keep W-2 wages and 1099 contractor pay in separate accounts. Source: California Department of Industrial Relations.
AB5 bookkeeping for California businesses: TechBrot keeps W-2 wages and 1099 contractor pay in separate accounts, so the exposure under the ABC test (penalties of roughly $5,000–$25,000 per violation, plus back payroll taxes) is visible to your advisors. The classification decision and any EDD audit stay with your CPA, EA or employment attorney.
They took something that felt overwhelming to me as a first-year business owner and made it simple.
What stood out the most was TechBrot Inc’s attention to detail.
Three things that make AB5 high-stakes.
AB5 codified the ABC test — these three are why misclassification is one of California’s costliest mistakes.
Where most companies fail
Under the ABC test a worker is an employee unless the business proves all three prongs. Prong B — work outside the company’s usual course of business — traps companies whose contractors do core work: a developer at a software company, a writer at an agency, a driver at a delivery company.Penalties per violation
Misclassification penalties run roughly $5,000–$25,000 per violation, plus back payroll taxes (federal and California), interest, and potential wage-and-hour exposure. The books are where that exposure first becomes visible.Who runs the audits
California’s Employment Development Department runs worker-classification audits, and hiring even one California employee creates immediate EDD registration obligations. We keep the records clean; the EDD audit and any dispute are handled by your CPA or employment counsel.Books that make the AB5 position clear.
We don’t make the legal call — we make sure the books reflect it correctly and the exposure is never hidden.
W-2 / 1099 separated cleanly
Exposure surfaced & quantified
EDD-ready records
Payroll setup on reclassification
1099 reporting kept clean
A clean handoff to advisors
What we do — and what we don’t.
What TechBrot does
- Separate W-2 wages from 1099 contractor pay cleanly in the books
- Surface and quantify the misclassification exposure for your advisors
- Assemble clean, EDD-ready worker and payment records
- Set up California payroll (SDI/PIT/EDD) if a worker is reclassified
- Keep accurate 1099 tracking and year-end reporting
- Hand your CPA and counsel a documented classification picture
What your CPA does
- Make the legal worker-classification determination
- Give legal or tax advice on AB5
- Represent you in an EDD worker-classification audit
- Resolve or negotiate a classification dispute (your CPA / employment attorney)
- Step 1
Free books review
A QuickBooks ProAdvisor reviews how workers are recorded in your books — at no cost. - Step 2
Written fixed-fee scope
A written scope and fixed fee within 3 business days for cleaning up the W-2/1099 records. - Step 3
Separate & surface
We separate the pay cleanly and quantify the exposure for your CPA and employment counsel. - Step 4
Hand off & maintain
Your advisors make the legal call; we keep the books reflecting it correctly going forward.
Automation handles the data entry. We handle the judgment.
AB5 is a legal question with an accounting shadow: the law decides whether a worker is an employee, but the books are where the exposure hides — or becomes visible. Our job is to make sure it’s visible, quantified, and recorded correctly, so your CPA and employment counsel can make the call with real numbers.
We don’t make that legal determination or represent you before the EDD — that’s your licensed professional. We keep the books defensible behind them. This page is educational.
Around California.
California QuickBooks ProAdvisor & bookkeeping
The state page: services, industries, cities and the California tax terms in one place.Also in California
California cities
Not sure where your file stands? Start with the free QuickBooks file review · how California compares: state-by-state tax quirks.
California AB5 questions.
What is California’s AB5 and the ABC test?
AB5 codified the ABC test for worker classification in California: a worker is presumed an employee unless the business proves all three prongs — freedom from control, work outside the company’s usual course of business, and an independently established trade. Prong B is where most companies fail, because a contractor doing core work is almost always reclassified as an employee. This page is educational and is not legal or tax advice.
What does TechBrot actually do about AB5?
We keep your books so W-2 wages and 1099 contractor pay are separated cleanly, and so the misclassification exposure is visible and quantified for your advisors. We are a bookkeeping and advisory firm — we do not make the legal classification determination, give legal advice, or represent you in an EDD audit. Your CPA, EA, or employment attorney does all of that; we keep the books defensible behind them.
Do you decide whether my workers are contractors or employees?
No — that is a legal determination for your CPA or employment attorney, applying the ABC test to your facts. What we do is make sure the books record whatever the correct classification is, cleanly, and surface the exposure where workers may be misclassified, so the people who make the call have accurate figures.
What’s the exposure if a contractor should have been an employee?
It can include back payroll taxes (federal and California), penalties of roughly $5,000–$25,000 per violation, interest, and potential wage-and-hour claims. The exact exposure is a legal and tax question for your advisors; we quantify what the books can show so it isn’t a surprise in an EDD audit.
Who audits worker classification in California?
The EDD (Employment Development Department) runs worker-classification audits, and hiring even one California employee creates immediate EDD registration obligations. We keep clean, EDD-ready records; the audit itself and any dispute are handled by your CPA or employment counsel — we do not represent clients before the EDD.
If we reclassify a contractor to an employee, can you set up payroll?
Yes — once you and your advisors make that call, we set up California payroll correctly in QuickBooks: State Disability Insurance (SDI), Personal Income Tax (PIT) withholding, and EDD reporting, coordinated with your payroll provider. We handle the bookkeeping side of the reclassification; the legal decision stays with your advisors.
Is this page legal advice?
No. This page is educational only and is not legal or tax advice. AB5 and the ABC test are legal questions; for your specific situation, work with a CPA, EA, or employment attorney. TechBrot keeps the books so their analysis rests on accurate, well-documented figures.
Do you serve my California city or county?
All 58 California counties, delivered remotely on QuickBooks. AB5 applies statewide, so the analysis is the same wherever you are; your location never changes the service or the ProAdvisor on your file.
Checked against the California Department of Industrial Relations and the EDD.