It depends. Did you receive a Form W-2? a Form 1099-NEC? Have you been operating a Schedule C business? The California return screen that displays this question is asking you whether you need to show your California income as wages even though it was classified as business income on the Federal return. If you showed your income on Schedule C and you were not treated as a W-2 employee in California, then you don't have to make any entries on this screen.
Because of some changes in California law, this has been a controversial issue for several years. 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.
However, on July 25, 2024, the California Supreme Court upheld the constitutionality of Proposition 22. As such, 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 or see this Franchise Tax Board webpage for more information.
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