California · AB5 / the ABC Test
AB5 in your books — W-2 and 1099, separated and defensible.
California’s AB5 reclassifies many contractors as employees under the ABC test. A Certified 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.
Certified QuickBooks ProAdvisor team · Independent · not Intuit · Educational, not legal advice
TechBrot is an independent bookkeeping and Certified QuickBooks ProAdvisor firm — not a law firm, CPA, or the EDD. We keep your California books so W-2 wages and 1099 contractor pay are separated cleanly and the misclassification exposure under AB5’s ABC test is visible and quantified for your advisors. 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 that. The full California AB5 summary is below.
Reviewed by the Certified QuickBooks ProAdvisor team at TechBrot Inc., an independent firm — not affiliated with Intuit Inc. AB5 / ABC-test references reflect California law current as of the review date. Educational only; not legal or tax advice.
The short version.
TechBrot helps California businesses get AB5 worker classification right in the books. California’s AB5 codified the ABC test: 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 (Prong B, where most fail), and an independently established trade. Misclassification penalties run roughly $5,000–$25,000 per violation plus back payroll taxes, and the EDD runs the audits. A Certified QuickBooks ProAdvisor keeps your books so W-2 wages and 1099 contractor pay are separated cleanly, the payroll-tax exposure is quantified, and records are EDD-ready for your advisors. We keep the books; we do not make the legal classification determination, give legal advice, or represent you before the EDD — that is your CPA, EA, or employment attorney. Educational only; not legal or tax advice. Independent firm — not affiliated with Intuit Inc.
California AB5 worker classification, in five questions.
What is AB5 and the ABC test?
California’s AB5 codified the ABC test for worker classification: a worker is presumed an employee unless the business proves all three prongs — (A) freedom from control, (B) work outside the company’s usual course of business, and (C) an independently established trade. Prong B is where most companies fail. This page is educational; the legal determination is your CPA’s or attorney’s.
What does TechBrot do about AB5?
We keep the books so W-2 wages and 1099 contractor pay are separated cleanly and the misclassification exposure is visible and quantified for your advisors. We do not make the legal classification call, give legal advice, or represent you in an EDD audit — your CPA, EA, or employment attorney does.
What happens if a contractor should have been an employee?
Exposure includes back payroll taxes (federal and California), penalties of roughly $5,000–$25,000 per violation, interest, and potential wage-and-hour claims. We surface it in the books so you and your advisors can act before an EDD audit, but the resolution is handled by your licensed professional.
Who audits worker classification in California?
The EDD (Employment Development Department). Hiring even one California employee creates EDD registration obligations. We keep clean, EDD-ready records; the audit itself and any dispute are handled by your CPA or employment counsel.
Do you decide whether my workers are contractors or employees?
No. That legal determination is your CPA’s or employment attorney’s. We make sure the books record whatever the correct classification is, cleanly, and surface the exposure where it isn’t.
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
Payroll and vendor setup so employee wages and contractor pay never blur — the foundation of a defensible position.
QuickBooks accountant →Exposure surfaced & quantified
Where contractors do core work, the potential payroll-tax exposure is quantified in the books for your CPA and counsel — not hidden.
California overview →EDD-ready records
Clean, documented worker and payment records assembled so your advisors can respond to an EDD inquiry quickly.
State tax notice help →Payroll setup on reclassification
If you and your advisors reclassify a worker to W-2, we set up California payroll (SDI, PIT, EDD) correctly.
Payroll →1099 reporting kept clean
Accurate 1099 tracking and year-end reporting for genuine contractors, coordinated with your CPA.
1099 vs W-2 →A clean handoff to advisors
A documented worker-classification picture your CPA and employment attorney can make the legal call from.
Financial statements →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.
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)
Four steps from messy to handled.
Free books review
A Certified ProAdvisor reviews how workers are recorded in your books — at no cost.
Written fixed-fee scope
A written scope and fixed fee within 3 business days for cleaning up the W-2/1099 records.
Separate & surface
We separate the pay cleanly and quantify the exposure for your CPA and employment counsel.
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, not legal or tax advice.
California AB5 questions.
What is California’s AB5 and the ABC test?
What does TechBrot actually do about AB5?
Do you decide whether my workers are contractors or employees?
What’s the exposure if a contractor should have been an employee?
Who audits worker classification in California?
If we reclassify a contractor to an employee, can you set up payroll?
Is this page legal advice?
Do you serve my California city or county?
Reviewed by the TechBrot Certified ProAdvisor team.
Reviewed and maintained by the accounting team at TechBrot Inc., an independent Certified QuickBooks ProAdvisor and bookkeeping firm serving California businesses remotely across all 58 counties. AB5 / ABC-test references reflect California law current as of the date below and are reviewed periodically against the California Department of Industrial Relations and the EDD. This page is educational; it is not legal or tax advice. TechBrot keeps the books so worker pay is recorded correctly and the exposure is visible; the legal classification determination, EDD audits, and any dispute are handled by your CPA, EA, or employment attorney. We do not make classification determinations or represent clients before the EDD.
Reviewer
TechBrot Certified ProAdvisor team · 40+ years combined operational accounting experience
Standards
Verified vs the CA DIR & EDD · Educational only; not legal or tax advice · No classification-determination or representation claims (out of scope) · No fabricated data
Independence
Independent Certified QuickBooks ProAdvisor firm · Not affiliated with Intuit Inc.
California businesses start here
Worried about your contractor mix under AB5?
Book a free discovery call. We’ll review how workers are recorded in your books, surface the exposure, and hand you and your advisors clean figures — written fixed-fee scope within 3 business days. We don’t make the legal call or represent you; your CPA or counsel does.