Posted by Shoshana Roller on 7/6/09 10:06pm
Msg #294832

Possible 3% Independent Contractor Tax in CA?

I just read about this in an email I got tonight. If you are in CA please contact your state legislators and Ahnold (your governor) and tell them your feelings about this. I guarantee that if this passes in CA, other states will attempt it too!

Reply by Shoshana Roller on 7/6/09 11:24pm
Msg #294836

Here is the content the email I received:


If You Are Paid As An Independent Contractor - 1099 - This Applies To You

Even if you do not live in California - you still should write the letters -

If it passes in CA. it's coming to your state!


We urgently need your help! We are asking you to take action on this today!

The California Budget Conference Committee has recently approved a 3% independent contractor withholding provision, which could affect your business. If this proposal becomes law, Companies will be required to withhold 3% of your 1099 earned income (checks) and remit this amount to the state. We are voicing our strong opposition to this proposal because, if enacted, it will decrease the size of your checks and create substantial administrative burdens and expenses for (Companies) which will need to be recovered either through increased product prices or decreases in expenses such as commissions. Throughout history, across the country, direct sellers as well as other independent contractors have been exempt from withholding taxes because many of their expenses are deductable. This legislation sets a dangerous precedent that other states and even the Federal Government could follow.

If you share our concerns, please voice your opposition to this proposal ASAP by contacting the Governor, your Senator and your Assembly Member and let them know how you feel. A sample letter appears below for your convenience, but your communication will be most effective if you use your own words. Contact information for the Governor and each member of the California Legislature appears below.

Please take a moment to make your voice heard in Sacramento! If you are going to send a letter to your representatives, please do it today because the vote could be as soon as tomorrow!

Sincerely,

Your Name

address and phone not required
********************************************

SAMPLE LETTER:

Dear [ ]:

Withholding on independent contractors, like me, would place a large burden on my family. Unfortunately, once again, the Legislature is considering an independent contractor withholding proposal.

[Tell your personal story in your own words] [I have been an Independent Contractor for more than [Insert the number of years you have been working with your company] years. My family depends on my income.]

I am not opposed to paying my share of taxes, but it makes no sense to me to send the state my money and then have the State send it back to me when I file my tax returns. I need every dollar I make to run my business. I have to pay my business expenses from the commissions I earn. While I of course support the need to pay taxes, withholding up front on taxes I may never really owe will cause severe cash flow problems for me. My business is already difficult enough. If you burden us with more administration and paper work it only serves to make the business more difficult and less attractive and therefore it will be more difficult to grow my business. In the end, the State will not end up with any more money.


Please do not sign any budget resolution that contains independent contractor withholding. It would hurt my family and my business as well as tens of thousands of others with the tax status of Independent Contractor.

Sincerely,

***********************************************

The following is the Governor’s contact information:

Governor Arnold Schwarzenegger
State Capitol Building
Sacramento, CA 95814
Phone: 916-445-2841
Fax: 916-558-3160 (new number)

To email the Governor, please visit http://gov.ca.gov/interact

Members of the California Legislature:

Senator Phone (District is
last 2 digits) Email Address
Aanestad, Sam (916) 651-4004 [e-mail address] State Capitol Sacramento, CA 94248
Alquist, Elaine (916) 651-4013 [e-mail address] State Capitol Sacramento, CA 94248
Ashburn, Roy (916) 651-4018 [e-mail address] State Capitol Sacramento, CA 94248
Benoit, John J. (916) 651-4037 [e-mail address] State Capitol Sacramento, CA 94248
Calderon, Ron (916) 651-4030 [e-mail address] State Capitol Sacramento, CA 94248
Cedillo, Gilbert (916) 651-4022 State Capitol Sacramento, CA 94248
Cogdill, Dave (916) 651-4014 [e-mail address] State Capitol Sacramento, CA 94248
Corbett, Ellen (916) 651-4010 [e-mail address] State Capitol Sacramento, CA 94248
Correa, Lou (916) 651-4034 [e-mail address] State Capitol Sacramento, CA 94248
Cox, Dave (916) 651-4001 [e-mail address] State Capitol Sacramento, CA 94248
Denham, Jeff (916) 651-4012 [e-mail address] State Capitol Sacramento, CA 94248
DeSaulnier, Mark (916) 651-4007 [e-mail address] State Capitol Sacramento, CA 94248
Ducheny, Denise Moreno (916) 651-4040 [e-mail address] State Capitol Sacramento, CA 94248
Dutton, Robert D. (Bob) (916) 651-4031 [e-mail address] State Capitol Sacramento, CA 94248
Florez, Dean (916) 651-4016 [e-mail address] State Capitol Sacramento, CA 94248
Hancock, Loni (916) 651-4009 [e-mail address] State Capitol Sacramento, CA 94248
Harman, Tom (916) 651-4035 [e-mail address] State Capitol Sacramento, CA 94248
Hollingsworth, Dennis (916) 651-4036 [e-mail address] State Capitol Sacramento, CA 94248
Huff, Bob (916) 651-4029 [e-mail address] State Capitol Sacramento, CA 94248
Kehoe, Christine (916) 651-4039 [e-mail address] State Capitol Sacramento, CA 94248
Leno, Mark (916) 651-4003 [e-mail address] State Capitol Sacramento, CA 94248
Liu, Carol (916) 651-4021 [e-mail address] State Capitol Sacramento, CA 94248
Lowenthal, Alan S.. (916) 651-4027 [e-mail address] State Capitol Sacramento, CA 94248
Maldonado, Abel (916) 651-4015 [e-mail address] State Capitol Sacramento, CA 94248
Negrete McLeod, Gloria (916) 651-4032 [e-mail address] State Capitol Sacramento, CA 94248
Oropeza, Jenny (916) 651-4028 [e-mail address] State Capitol Sacramento, CA 94248
Padilla, Alex (916) 651-4020


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Reply by rengel/CA on 7/6/09 11:24pm
Msg #294837

First off, they cannot tax me more than they tax anyone else. Second, they cannot add a tax without the citizens voting on it.

I'm tired of all of the scare tactic emails that are going around. I would like to see verifiable fact that this is on the table.

My .02

Reply by Shoshana Roller on 7/6/09 11:36pm
Msg #294839

Since we posted at the same time, you may have missed my second post which included the text of the email I received. You could confirm this by contacting your state legislator. Although I was a CA resident for almost 23 years, I know very little about what the legislators can and cannot do. This post was informational only.

Reply by Shoshana Roller on 7/6/09 11:43pm
Msg #294840

Apparently, this has been on the table since 2004.

See link below:

http://www.ftb.ca.gov/aboutftb/ICW_0105.pdf

Reply by JanetK_CA on 7/7/09 3:44am
Msg #294842

I posted about this a while back because I was also notified about it from a company that has lobbyists working against this. I was since told that it passed the legislature but was vetoed by Gov. Ahhnold (thank goodness!)

This is more than a scare tactic. As Marian said below, the state is desperately searching for cash flow to keep the doors open. BTW, this isn't presented as a new tax, but an attempt to collect in advance more of what they claim we would owe the the state anyway. They have already requested that we pay 60% of estimated taxes for the first two quarters of the year, rather than half.

Thanks, Shoshanna! This could be an administrative nightmare. Can you imagine signing services withholding from us, then never getting around to sending it to the state? They will have no idea how much other clients have withheld, nor how much we have already paid in estimated taxes. I think this would have a tremendously stifling affect on new and growing businesses plus small operators like ourselves.

With something like this, it isn't the content of the letters so much and the quantity. A staffer will probably scan them enough to find out what position the writer has taken, but they know that each letter received represents a certain number of other people who feel the same way.

Reply by Shoshana Roller on 7/7/09 8:24am
Msg #294850

Exactly, Janet.

Also, none of the rest of us from other states are immune to this. If it passes in CA, other states will try it too. The adminsitrative costs will make companies want to pay us even less! And what about the rest of us who work in other states, but are hired by CA companies? I am sure they will find some way to withhold from us too!

Reply by MW/VA on 7/7/09 8:30am
Msg #294851

Re: Exactly, Janet.

IMO it has to be scare tactics. I can't see companies taking on the task of withholding taxes from independent contractors. It would be a logistics nightmare. Everyone, including the IRS, is trying to figure a way to tighten up on reporting income for IC's.

Reply by Shoshana Roller on 7/7/09 8:38am
Msg #294852

Re: Exactly, Janet.

Where there's a will, there's a way. You know, the Jews in Germany considered themselves Germans first and Jews second. Look how that turned out. What Hitler accomplished was also a logistics nightmare!

Reply by JanetK_CA on 7/7/09 4:35pm
Msg #294908

To what end?

What would they expect "scare tactics" to accomplish? IMO this is strictly about trying to generate operating capital for immediate use.

Reply by A S Johnson on 7/7/09 9:16am
Msg #294857

Re: Exactly, Janet.

See pg 10, "Nonresident Independent Contractor Withholding Program" in a post above.
We would ALL be suject to supporting CA.

Reply by A S Johnson on 7/7/09 9:20am
Msg #294858

Re: Exactly, Janet.

See post "Apparently, this has been on the table since 2004" to reference pg 10.

Reply by Shoshana Roller on 7/7/09 12:43pm
Msg #294877

Re: Exactly, Janet.

Thanks, I didn't read that far. I wonder how many of us actually pay a non-resident income tax for CA?

Reply by Marian_in_CA on 7/6/09 11:46pm
Msg #294841

Not really...

It was a proposal to raise revenue and working capital for the State, which is dead flat broke.

Here's the thing, our stupid state government can't figure anything out and this state budget nightmare is becoming an annual event.

In order to pass any of the Committee's recommendations, it requires a 2/3 majority vote of the State Senate. Even then the Governor has veto power. It's a gigantic rope pull.

As of now, all of the recommendations were rejected on July 4th, that's why the state is issuing IOUs now. That doesn't mean they aren't going to try again, of course.

Reply by MW/VA on 7/7/09 8:11am
Msg #294848

Talk about insanity. I saw in the news the other day that CA has a proposal to pay up to $4,000 to get junk/polluting cars off the road. Total insanity, IMO. They keep coming up with new ways to spend money they don't have!! The rest of the nation is shaking it's head. Sorry-this should probably be in "Just Politics".

Reply by Marian_in_CA on 7/7/09 9:13am
Msg #294856

It's incredibly stupid!

The best approach to get these cars off the road is what they do in Utah -- big time safety inspections. It would boost business revenue in the state and even some state revenue as well.

In Utah, all cars have to have this inspection before they can renew, which includes checking the tires, safety belts, lights, working windows, etc. They're dead serious about it and you will fail if something doesn't work right.

I used to think it was a racket of some kind, but now that I'm out of college and back in CA... I really wish CA had a similar program. I even wrote to some of my reps about it, but none responded. Some of these cars have no business being on the road, even if they manage to pass a smog inspection.

Reply by MW/VA on 7/7/09 9:50am
Msg #294861

Some eastern states (not VA, unfortunately) have 2 inspections--one of them emissions. If the vehicle doesn't pass it doesn't get registration renewal--end of story. I can just picture some people who drive junkers that aren't worth $50 making out on a deal that will give them up to $4,000. I think the people of CA need to take a stand.

Reply by Glenn Strickler on 7/7/09 12:11pm
Msg #294873

There are many changes that the Governator and the

Franchise Tax Board can do without any vote of anyone. Right now, they are going through the statutes just to see what they can get away with. And you can bet if they find something that they can change with an executive order or a signature of a bureaucrat, it will happen.

A mandatory withholding (and that's what this is, not an extra tax) on 1099's is one of those. And since it is not a tax increase, it would not need a 2/3 vote to get it passed. The legislature can also reduce tax credits without a 2/3 vote. That one has already been to the California Supreme Court.

I noticed that the California buy-back program was mentioned as if it were a new thing. It has been in effect since 1994. Surprise, surprise. On top of that, there is the federal cash for clunkers program that was just passed as a cost of $1 billion.

If anyone here is really concerned, rather than say "they can't do that", please become engaged in the process. If people don't keep engaged, then they will wake up one day and say "How did that happen?"
There are many issues that are discussed here as if they are new, but they have been in effect for a very long time .. decades in some cases. It's just that no one pays attention until it affects them in a negative manner. I don't comment as it would be considered political, but sometimes, I just can't handle it. Getting old, I guess.

Sorry for posting this here and not on politics. However it is something that needed to be said. I have posted on these subjects on the politics board, but very few read that side. I will, however, withdraw and try not to break the rules again.

Reply by davidK/CA on 7/7/09 12:48pm
Msg #294878

Auto inspections...long time ago in Chicago

Annual auto inspections were required in Chicago in at least the 1950's. The process was (1) drive vehicle into the inspection bay, (2) place $5.00 bill on seat and exit vehicle, (3) receive inspection decal for windshield from inspector who never touched or entered vehicle except to retrieve the money on the seat, (4) re-enter vehicle and drive off. Total "inspection" time - maybe one minute. "Next car, please".

The good old days. Of course it was Chicago.

Reply by rengel/CA on 7/7/09 5:52pm
Msg #294920

Now that I have read up on this...

I see that it is a change to having the company that contracts with me to withhold 3% of my payment for my taxes. NOT a new tax the way some people have been trying to make it out to be.

This is not something I see as very doable, it would be a complete nightmare for the signing services, title companies, etc. And I think it would end up costing more money than it takes in. And, we get enough 1099's at the end of the year, now would we get a ton of forms stating how much tax was taken out and that they actually paid the FTB that tax?

And what if the company takes taxes out of my check, but doesn't pay that to the FTB? Am I still responsible for that?

It just looks like a total circle jerk to me.

My .02

Reply by Shoshana Roller on 7/7/09 7:53pm
Msg #294931

CA Businesses know not to screw around with the FTB

Or if they don't know, they will learn fast! The CA 1099's could be easily redesigned to show how much was collected. Right now the FTB is losing out on a ton of non-resident taxes. In my opinion, if the company takes out the 3% and doesn't pay it to the FTB, that's their problem.

Reply by JanetK_CA on 7/8/09 11:54pm
Msg #295084

Re: CA Businesses know not to screw around with the FTB

That may be true, but I'm sure I'm not alone in that a good chunk of my business comes from out of state companies.