Red Alert!
Stop Proposed Tax Withholding Change!
The Legislature will shortly be considering a budget proposal that, among other things, would require a 3% withholding on all payments to independent contractors. We are opposed to this measure, along with the California Association of Realtors.
Action Item
Please call BOTH your legislators RIGHT NOW to OPPOSE this provision!!
Call your Assembly Member at (916) 319-2053.
Call your Senator at (916) 651-4028.
Talking Points
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There is no evidence that independent contractors are failing to pay their income tax obligations. The proposed withholding requirement is merely intended to accelerate income tax payments so that the state can make money from the interest (the “float”) that’s earned while the funds are in its possession.
- The proposal fails to recognize the significant administrative burden that would be placed on individuals who are now required to file 1099MISC information reports with the Franchise Tax Board. Under the proposal these individuals would now need to also calculate the required withholding amount and remit that amount to the state.
- There will be significant administrative costs to the Franchise Tax Board that will be faced with making refunds to those independent contractors whose withholding amount remitted to the state exceeds their income tax obligation.
- The withholding proposal fails to address the systemic problems associated with formulation of the state budget and is nothing more that the “smoke and mirrors” with which state government has attempted to meet its budget obligations in recent years.