CA Payroll

[JG EA]

Does anyone know if CA would require withholding if work is done in their state? TP thinks he has a way around it but wants to know if it is legal. He fully intends to pay all CA taxes due, but always gets refunds and is worried about the potential IOU's. (CA has put a 10% additional withholding on now and yet will not be able to pay refunds right away.

I would guess that every state would required withholding on work done in that state, but just wanted to run this by someone in CA.

[S T]

Not sure

JG you didnt' state if your taxpayer was an employee or on estimated tax payments - so I will just address as an employee - I am still processing California payroll - and as we all know any employee can still file the DE-4 as "exempt" or with a "high" exemption # not an employer problem - it is an employee/taxpayer problem at the end of the year when the California tax is due.

I would not ever advise to have any employee not pay something through withholding, but they could certainly claim "high exemptions - which minimizes the withholding so that they owe a very small amount, or receive a small refund and then sometimes would owe the State or Federal for that matter.

I have changed most of my California clients to have less withheld, so the refunds are smaller due to the IOU issue with California in 2009. The 10% is only an accelarated withholding - but let us not forget, there was also a decrease in Dependent credits for dependents (which was huge - about $210 reduction per dependent) plus California had a .25% tax (1/4% tax increase)

I would probably advise your client to pay in something to California - otherwise the penalties for underpayment might end up "shocking" them.

I have seen with all agencies in California Government to be very aggressive in the last 9 months, they are totally revenue raising and doing it any way that they think they can - I am in corespondence with the payroll section, sales tax, and tax revenue depts at least once a week on erroneous notices. And remember that I am a very "small" sector that is represented.

JG you can email me if you have more questions or need California Withholding Calculations.

Sandy

[JG EA]

Thanks so much. The problem with this client - he claims the highest he can in exemptions but they still withhold thousands more than he needs to have withheld. (Yes, employee.)
Thanks for the offer - but I did reseach the whole thing last year in CA, and if I remember correctly he's over the charts and the withholding is high as I said. But I agree about having withholding as you said..
The penalty is something I can mention to him.
The company said they could do a state of origin withholding, but I think they didn't know what they were talking about. I think they meant for 1099R's. Thanks again.