From: Doug Powell Sent: Wednesday, September 03, 2014 3:40 AM To: [email protected] ; [email protected] Subject: Re: [PSES] Caution to those who live outside of California and got there on business!!! (Don't)
Just for clarification, may I get concise answers to each of these questions?1) If a non-resident consultant travels to CA to do on-site work for a client company and this consultant is paid by the company at a later time at an hourly rate, which party is responsible for paying income taxes in CA? Note that there are three ways to get paid. First is the normal W-2 employee, the second is the 1099-MISC employee, and the third is cash (we won’t discuss that one). If you are a W2 employee, Federal and State income tax, along with Social Security and Medicare will be withheld. If you are a 1099-MISC employee (Self Employed, etc.), the PAYER should withhold 7% backup withholding IF they are required to withhold backup withholding and remit to the IRS. (See Form 587 Instructions). Most likely, you will receive a Form 1099-MISC from who ever paid you. When you do your Federal Income Tax return, you would normally file your state tax return also. However, income derived form “out of state” such as CA, you would file a CA Non-resident return to include the income sourced in CA. This income would be subtracted from the income reported in your state (assuming you have to pay a state income tax). If the funds were withheld by the Payer, then you probably will already have some funds prepaid, otherwise you may have to pay some CA income tax. Note also that backup withholding begins at above $1500. 2) If a non-resident consultant does remote work for a client based in CA, is there then no concern for CA taxes for the consultant? This should not be a concern. Let’s assume that a CA firm sends you a product to test in your lab outside of CA. This would be income derived in your state and NOT CA. The same would be if you are simply telecommuting and not located in CA. 3) If such taxes are paid in CA, by one party or the other, is it true that this income should not be taxed in other states? Yes. See above 4) If this has been in effect for several years, is it possible these client companies have paid this tax all along without the knowledge of the consultant? Probably not. You would normally receive a statement (1099-MISC) indicating funds paid to you and any funds withheld. 5) How is this monitored or enforced and can it be retroactive? Like most taxes, it is part of an Honorary system. However, sometimes a paper trail exists such as a W2 or Form 1099. The Franchise Tax Board (FTB) then may contact you for back taxes (typically up to 3 years). When a paper train does not exist, you may want to talk to your tax advisor. 6) Is this also true of other locations in the USA? Some state may, or may not, have and backup withholding requirements, but those that do have state income tax with have provisions for Non-Resident income taxes. If I understand correctly, this would seem to run afoul of most consulting agreements. Nearly always, there is a section on taxes, stating the client company is not responsible. Not really. In any case, you are responsible for paying the applicable taxes. Whether the Payer withholds the taxes is irrelevant. I hope this clears up some the this confusing issue. Generally, I would not expect this to be of great concern. More information can be found at www.ftb.ca.gov and search for backup withholding. John Thanks, - doug Douglas Powell http://www.linkedin.com/in/dougp01 From: John Shinn Sent: Wednesday, September 3, 2014 12:07 AM To: [email protected] Reply To: John Shinn Subject: Re: [PSES] Caution to those who live outside of California and got there on business!!! (Don't) This issue has been in effect since Jan. 1, 2010. See: https://www.ftb.ca.gov/forms/2013/13_587.pdf or: https://www.ftb.ca.gov/forms/2014/14_587.pdf If you are a consultant (i.e. – Self Employed), the company you performed the services for is required to send you a Form 1099-MISC if your income exceeds $600. CA requires them to to withhold 7% (certain exceptions apply). This basically means that CA wants their share of the state taxes from income sourced in CA. I can understand your frustration with the situation. It is not all that uncommon. See my other comments later. FYI, in addition to my own Engineering & Management consulting, I am also a Registered Tax Professional with both the IRS and CA. I hope that sheds some light on the situation. Regards, John Shinn, Ph.D., P.E. -----Original Message----- From: Ken Javor Sent: Tuesday, September 02, 2014 7:27 PM To: [email protected] Subject: Re: [PSES] Caution to those who live outside of California and got there on business!!! (Don't) Unless you're in show business. There's no business like show business - it's subsidized by the taxes everyone else pays. Ken Javor Phone: (256) 650-5261 > From: "Nyffenegger, Dave" <[email protected]> > Reply-To: "Nyffenegger, Dave" <[email protected]> > Date: Wed, 3 Sep 2014 00:21:20 +0000 > To: <[email protected]> > Conversation: [PSES] Caution to those who live outside of California and got > there on business!!! (Don't) > Subject: Re: [PSES] Caution to those who live outside of California and got > there on business!!! (Don't) > > So if my employer who is not CA based but does have other direct employees in > CA, sends me to CA for a few days to work, they have to take out the CA income > tax too? No. Withholding is not required if payees (YOUR COMPANY) are residents or have a permanent place of business in California. That would be the case as sited above. > > Seems like CA has put up a big closed for business sign. > -Dave > > -----Original Message----- > From: Ken Javor [mailto:[email protected]] > Sent: Tuesday, September 02, 2014 6:16 PM > To: [email protected] > Subject: Re: [PSES] Caution to those who live outside of California and got > there on business!!! (Don't) > > Doug, > > Thank you so much for pointing this out. I have many CA customers, but > luckily to date it has all been remote. > > Rest assured that in the future it will stay that way! > > Ken Javor > Phone: (256) 650-5261 > > >> From: Doug Smith <[email protected]> >> Organization: D. C. Smith Consultants >> Reply-To: <[email protected]> >> Date: Tue, 2 Sep 2014 14:37:05 -0700 >> To: <[email protected]> >> Subject: [PSES] Caution to those who live outside of California and >> got there on business!!! (Don't) >> >> Hi All, >> >> Just a note to those of you, especially consultants, but potentially >> anyone who visits California, even for a day, on business. What is happening is that they want to have whoever pays you (if they are located in CA) and your payment is CA sourced withhold a percentage of your CA sourced income. This means you would pay CA tax on income earned in CA. However, you would have to file a non-resident return in CA and a regular return in your home state. But, the income earned in CA should not be taxed in your home state, and any income earned in your home state would not be taxed in CA. >> >> CA has new rules that require companies there (they don't all know >> about it yet but will be in trouble after the first of the year if >> they don't) to withhold CA income tax from payments made to people >> from out of state if any of the work was done in CA. >> >> You need to fill out a tax form for every job/trip! It is "California >> Form 587, Nonresident Withholding Allocation Worksheet." In my case >> the client ignored the form and sent the maximum 7% of the gross >> proceeds in to CA. >> >> The company for whom you do work is required to deduct 7% from the >> gross payment to you, no allowance for expenses or, at least for the >> last job I did, the fact the job required 3 days in NV and two in CA. >> They took out 7% and sent it to the CA state government. >> >> The accounting for this is going to be tricky as you have to keep >> track and justify how much of the work was in CA and how much >> elsewhere. In the end, CA may extract up to 10% of your payment, 13% >> if you are really well off. I suspect the accounting and submitting >> tax forms will cost as much as the tax, or more. >> >> So starting now I am dividing my fee by 0.93 to cover the tax and >> probably need to at least double that to cover my time and the >> accountants time to keep track of all of this. I am thinking along the >> lines of $500/day additional to CA companies until I get a better idea >> of what this is going to cost. >> >> Although we don't have an income tax in NV they get it in other ways, >> such as $2000/year from me for a special rental car tax meant to hit >> tourists, as well as other taxes. I you come in from Massachusetts, >> for instance, you will be required to pay MA and CA income taxes! That >> plus Federal will be over 50% for most engineers (CA is 10% at $44,000 >> per year). >> >> I am interested to find out if I am the first person to run into this. >> If you go into CA for work purposes you will be hit for this. I plan >> to ask the CA tax people which precinct they are going to allow me to vote >> in. >> >> Doug >> >> -- >> University of Oxford Tutor >> Department for Continuing Education >> Oxford, Oxfordshire, United Kingdom >> -------------------------------------------------------------- >> ___ _ Doug Smith >> \ / ) P.O. Box 60941 >> ========= Boulder City, NV 89006-0941 >> _ / \ / \ _ TEL/FAX: 702-570-6108/570-6013 >> / /\ \ ] / /\ \ Mobile: 408-858-4528 >> | q-----( ) | o | Email: [email protected] >> \ _ / ] \ _ / Web: http://www.dsmith.org >> -------------------------------------------------------------- >> >> - >> ---------------------------------------------------------------- >> This message is from the IEEE Product Safety Engineering Society >> emc-pstc discussion list. To post a message to the list, send your >> e-mail to <[email protected]> >> >> All emc-pstc postings are archived and searchable on the web at: >> http://www.ieee-pses.org/emc-pstc.html >> >> Attachments are not permitted but the IEEE PSES Online Communities >> site at http://product-compliance.oc.ieee.org/ can be used for >> graphics (in well-used formats), large files, etc. >> >> Website: http://www.ieee-pses.org/ >> Instructions: http://www.ieee-pses.org/list.html (including how to >> unsubscribe) >> List rules: http://www.ieee-pses.org/listrules.html >> >> For help, send mail to the list administrators: >> Scott Douglas <[email protected]> Mike Cantwell >> <[email protected]> >> >> For policy questions, send mail to: >> Jim Bacher: <[email protected]> >> David Heald: <[email protected]> > > - > ---------------------------------------------------------------- > This message is from the IEEE Product Safety Engineering Society emc-pstc > discussion list. To post a message to the list, send your e-mail to > <[email protected]> > > All emc-pstc postings are archived and searchable on the web at: > http://www.ieee-pses.org/emc-pstc.html > > Attachments are not permitted but the IEEE PSES Online Communities site at > http://product-compliance.oc.ieee.org/ can be used for graphics (in well-used > formats), large files, etc. > > Website: http://www.ieee-pses.org/ > Instructions: http://www.ieee-pses.org/list.html (including how to > unsubscribe) List rules: http://www.ieee-pses.org/listrules.html > > For help, send mail to the list administrators: > Scott Douglas <[email protected]> > Mike Cantwell <[email protected]> > > For policy questions, send mail to: > Jim Bacher: <[email protected]> > David Heald: <[email protected]> > > - > ---------------------------------------------------------------- > This message is from the IEEE Product Safety Engineering Society emc-pstc > discussion list. To post a message to the list, send your e-mail to > <[email protected]> > > All emc-pstc postings are archived and searchable on the web at: > http://www.ieee-pses.org/emc-pstc.html > > Attachments are not permitted but the IEEE PSES Online Communities site at > http://product-compliance.oc.ieee.org/ can be used for graphics (in well-used > formats), large files, etc. > > Website: http://www.ieee-pses.org/ > Instructions: http://www.ieee-pses.org/list.html (including how to > unsubscribe) > List rules: http://www.ieee-pses.org/listrules.html > > For help, send mail to the list administrators: > Scott Douglas <[email protected]> > Mike Cantwell <[email protected]> > > For policy questions, send mail to: > Jim Bacher: <[email protected]> > David Heald: <[email protected]> - ---------------------------------------------------------------- This message is from the IEEE Product Safety Engineering Society emc-pstc discussion list. To post a message to the list, send your e-mail to <[email protected]> All emc-pstc postings are archived and searchable on the web at: http://www.ieee-pses.org/emc-pstc.html Attachments are not permitted but the IEEE PSES Online Communities site at http://product-compliance.oc.ieee.org/ can be used for graphics (in well-used formats), large files, etc. Website: http://www.ieee-pses.org/ Instructions: http://www.ieee-pses.org/list.html (including how to unsubscribe) List rules: http://www.ieee-pses.org/listrules.html For help, send mail to the list administrators: Scott Douglas <[email protected]> Mike Cantwell <[email protected]> For policy questions, send mail to: Jim Bacher: <[email protected]> David Heald: <[email protected]> - ---------------------------------------------------------------- This message is from the IEEE Product Safety Engineering Society emc-pstc discussion list. To post a message to the list, send your e-mail to <[email protected]> All emc-pstc postings are archived and searchable on the web at: http://www.ieee-pses.org/emc-pstc.html Attachments are not permitted but the IEEE PSES Online Communities site at http://product-compliance.oc.ieee.org/ can be used for graphics (in well-used formats), large files, etc. Website: http://www.ieee-pses.org/ Instructions: http://www.ieee-pses.org/list.html (including how to unsubscribe) List rules: http://www.ieee-pses.org/listrules.html For help, send mail to the list administrators: Scott Douglas <[email protected]> Mike Cantwell <[email protected]> For policy questions, send mail to: Jim Bacher <[email protected]> David Heald <[email protected]> - ---------------------------------------------------------------- This message is from the IEEE Product Safety Engineering Society emc-pstc discussion list. To post a message to the list, send your e-mail to <[email protected]> All emc-pstc postings are archived and searchable on the web at: http://www.ieee-pses.org/emc-pstc.html Attachments are not permitted but the IEEE PSES Online Communities site at http://product-compliance.oc.ieee.org/ can be used for graphics (in well-used formats), large files, etc. Website: http://www.ieee-pses.org/ Instructions: http://www.ieee-pses.org/list.html (including how to unsubscribe) List rules: http://www.ieee-pses.org/listrules.html For help, send mail to the list administrators: Scott Douglas <[email protected]> Mike Cantwell <[email protected]> For policy questions, send mail to: Jim Bacher: <[email protected]> David Heald: <[email protected]>
