Georgia State, Undocumented Workers

[geekgirldany]

I need a little help understanding this law from anyone who is dealing with this or will have to. I have customer that has a 1099 subcontractor that does work only for him. He is undocumented. He does have a IRS ITIN. In every other way he is illegal. Georgia passed a law that took effect this year (one part last year). Below is a link to it. Main things that stand out for me is the over $600 no deduction allowed. But then below it says withholding tax must be deducted if a valid id is not presented.

So does this mean if the company withholds on the 1099 then the deduction can be taken? Or is it not allowed at all. I apologize for the long post. It took me awhile to find a website about the law.

http://gov.georgia.gov/00/press/detail/0,2668,78006749_90413728_91429030,00.html

Prohibit tax benefits

Specifies that undocumented employee compensation over $600 a year may not be used as an allowable business expense.

Allows Georgia Department of Revenue (DOR) to promulgate rules and regulations;

Applies only to those hired after January 1, 2008;

Provision is effective January 1, 2008.

Withholding Tax Requirement

Requires six percent state withholding tax for all nonresident aliens.

Requires six percent state withholding tax for 1099 employees who cannot provide a taxpayer ID number, who provide an incorrect taxpayer ID number or who provide a nonresident taxpayer ID number.

State requirement is similar to federal requirement;

Provision effective July 1, 2007.

[erchess]

I am not in Georgia and in my career I have done

only one or two Georgia Returns in my long career but I did read the press release to which you provided the link. It seems to me that according to the press release the provision concerning tax deductibility of payments to illegal alien contractors affects only those signed up in 2008. Depending on the size of the client's work force, his ability to get state contracts w8 be taken away at some point. However, in NC firms that compete for State Contracts normally have in house accounting and tax professionals or work with a large firm rather than someone like you or me who works alone. Finally, the way the thing is written could be taken to imply that Federal Tax Returns are affected by this law but of course they are not.

[veritas]

Way to go Georgia!

I could only hope Oregon would pass such a law.

It was only this year that our state quit giving drivers licenses to illegals. We have a 8 year renewal on our drivers license and people were flying in from all over the world to get an ODL. I have heard since the law passed you don't need to take a number at the DMV now.

[geekgirldany]

It is a good law. There was alot of people complaining about it when it passed. Some protests also. I've got a couple of customers that have this "problem". I don't think any would be going for state contracts but you never know.

I have a contact at the DOR. I'll give her a buzz and see if she knows anything about it. I think if I understand correctly... state withholding tax has to be deducted for 1099 contractors if they don't provide a valid taxpayer id number. A non valid id seems to include ITINs.