California Train Wreck

[Edsel]

Client of mine has a multi-state payroll and processes through ADP service bureau.
Somehow one of their employees (an Alabama resident) had California SUTA/SDI withheld from his check through an administrative error in 2007 and 2008.

For those years, the employee had a W-2 with AL wages and AL taxes withheld. Also shows a combined amount for CA SUTA/SDI in the informational box 14.

Ahnold's state has now contacted the employer, saying this guy hasn't filed a California income tax return (Duh!..) They have tracked him down and have already calculated a SIT liability of over $1000, including penalty and interest of course.

We are responding by asking for a refund. Can anyone respond to my request by posting the SUTA base and rates for 2007 and 2008? Also the SDI base and rates for 2007 and 2008?

[Koss]

California Return

I don't have the base rates handy, but I can probably find them...

That guy probably won't get a refund, and he'll probably have to pay the tax.

Having California tax withheld from his pay, even in error, is sufficient to give him a nexus in California, and that will trigger a tax liability. Basically, once you have California tax withheld, you have to file a California return, and if you have to file a California return, then you must have some nexus in California. I know it's circular logic, but most of California government operates on this type of logic...



Last year an appellate court in California held that a New York LLC with no business activity and no presence in California had a California tax liability, because on the federal partnership return, there was a deduction for meals and entertainment, which included the purchase of California wines at a New York restaurant.

The court found that this transaction did not involve interstate commerce, precisely because the partnership did not travel to California to purchase the wine...

BMK


This post is a parody.

[S T]

California Payroll

In California - the employer pays the SUTA - not the Employee - so there should have been no deduction from the Employee Wages.

The Calif SDI rates are as follows for employees - this amount is deducted from the Employee check.

2007- 0.6 percent - taxable wage limit is $ 83,389 - maximum withholding $ 500.33

2008 - 0.8 percent - taxable wage limit is $86,698 - maximum withholding $ 693.58



Sandy

[Edsel]

Sandy T

Sandy, thanks so much.

We'll try to get the money back. I've been told not to hold my breath.

[S T]

California

If you are treying to obtain the SDI funds from California, you need to do that at the Employer level.

The Employer needs to file the amended payroll tax return to obtain the SDI and SUTA (SUI) refunds from Employment Dev Dept (EDD)

The Employee needs to contact the Employer for the refunds of SDI NOT EDD.
Franchise Tax Board (Calif State Income Tax) will not care that the Employer withheld the SDI payroll taxes incorrectly - FTB is a different Agency than the payroll agency of EDD. From FTB you will only be able to obtain the California State Wittholding (SIT) amount.

Sandy

[joanmcq]

Also, you will have to notify the FTB of the error and probably send copies of the amended forms, letters from the employer, etc to show the employee was not in CA. CA data mines extensively to find people it thinks should be filing. I'm curious how much revenue they actually get, since we generally only hear of the egregious examples like this one.