Results 1 to 14 of 14

Thread: CA taxes - paying on $ made elsewhere?

  1. #1
    AudreyLeigh
    Guest

    Default CA taxes - paying on $ made elsewhere?

    I know theres something about having to pay CA taxes even if business is located in another state if you do business in CA... or something odd like that.

    I have a business license in Nevada for dancing and dance in NV.

    I do modeling work in CA and danced a couple days in CA but dont model or dance with my business license.

    What does this mean to me (in laymans talk)? Do I have to pay CA state taxes on all my income or just the income I made in CA? ... because I am not working under a busiess license here?

    Kinda confused...

    AL

  2. #2
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: CA taxes - paying on $ made elsewhere?

    I could use some help from those more knowledgeable than myself on this one, but this is how my accountant explained things to me ...

    Based on a supreme court decision, if you operate a business that is based in California ... any business including independent contractors ... you are liable for state income tax on both the income earned in California plus income earned anywhere else in the world by rthat same business. There is some ambiguity in regard to businesses that are NOT located in California but doing business in California being subject to the same California state income tax on earnings outside California, but there is NO ambiguity if the business itself is California based. Even so, my accountant directed me to NEVER do modeling or dancing in the state of California again, because it potentially opens the door for the Cal FTB to attempt taxing income I earned in other states.

    In your own case, since you are a California resident, there is no ambiguity that your California based independent contractor business is responsible for paying California state income tax on income earned in Nevada or any other state or any other country. Of course the California tax is subject to exclusion if prior taxes have been paid, but since Nevada does not have a state income tax that doesn't help you any.

    I do know that a friend of mine that lives in California formed a Delaware C corporation ... and books all of her non-California income to that Delaware C corporation in order to avoid the California state income tax directly applying to her out-of state earnings. However the California state income tax still applies to the 'dividends' her Delaware C corporation 'pays' her. She also told me that her accountant recommended registering in Delaware rather than Nevada because there is a lot of scrutiny right now by the Cal FTB in relation to Nevada 'border-jumping'.

  3. #3
    AudreyLeigh
    Guest

    Default Re: CA taxes - paying on $ made elsewhere?

    So Im taking that as I should pay CA taxes on the modeling/dancing done in CA only - and not on dancing done in NV (with NV license?) And I only have to do Fed taxes for NV because theres no state tax? (i forgot about that!)

  4. #4
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: CA taxes - paying on $ made elsewhere?

    ^^^ nope, wrong, if you file only one California state tax return and that tax return includes all of your independent contractor business income, then you also owe California state income tax on your Nevada income (in the absence of a Nevada state income tax to deduct against the California state income tax).

    Now if you lived in Nevada instead of California, it would be arguable that your Nevada income was not subject to California state income tax even though you did earn some modeling income in the state of California. I say arguable since the supreme court decision upholding California's state taxing authority didn't specifically address sole proprietor non-incorporated businesses. However, if you ask the Cal FTB they'll tell you that if your business is based outside of California, but if you earned one dollar's worth of income within California, then California state income tax is due on ALL other income from all other states and countries. This was the reason that my accountant directed me to NEVER work in California again !

    Obviously the origin of this global taxing authority on the part of the state of California is the desire to tax the shit out of Hollywood movie actors, high-tech companies etc. Unfortunately, it snags a lot of other people with far smaller incomes. It is also providing strong motivation for many businesses to avoid California altogether, since the likely amount of California earnings has to be huge in order to offset the California state tax burden which would apply to ALL of their income from other states and countries the minute they do one dollar's worth of business within California !

  5. #5
    AudreyLeigh
    Guest

    Default Re: CA taxes - paying on $ made elsewhere?

    Ugh, lame. So I have to pay CA taxes on ALL my monies. That sucks but is good to know... thanks Mel.

    You have a smart accountant

  6. #6
    God/dess Deogol's Avatar
    Joined
    Dec 2003
    Posts
    5,493
    Thanks
    120
    Thanked 50 Times in 35 Posts

    Default Re: CA taxes - paying on $ made elsewhere?

    I am scooting around the web under a google for multi-state tax California and a lot of these CPA types say it is apportioned to the amount made in California for foreign corporations/individuals (aka, non-resident California.)

    If your corp/person is a resident of California - then you pay for monies earned in all states you operate in.

    So if you are not a resident of California, you only pay taxes on that portion earned in California.

    California being bankrupt though, may try some tricks about how much of that money is earned in their state though.

  7. #7
    AudreyLeigh
    Guest

    Default Re: CA taxes - paying on $ made elsewhere?

    Quote Originally Posted by Deogol View Post

    If your corp/person is a resident of California - then you pay for monies earned in all states you operate in.
    K. Im a California resident that works in Nevada.
    NV has no tax so Ill claim NV income (along with CA income) on my CA state tax return.

    So, another question - if I work in a state that DOES have state tax and live in CA does that mean I have to pay state taxes twice? (Im the other state AND CA?)

  8. #8
    Featured Member dangerousdiva's Avatar
    Joined
    Dec 2002
    Location
    Saint to Sin
    Posts
    1,268
    Thanks
    31
    Thanked 63 Times in 36 Posts

    Default Re: CA taxes - paying on $ made elsewhere?

    You pay state income tax to the state you reside in, according to my accountant. All my income is earned in Nevada but I'm a resident of another state so I pay state income tax to the state my residence is in.

    It's confusing but I researched it as much as I could because I wanted to benefit from Nevada's no income tax too.

    It's not where you earn it but where you live.

    However, I found a way to get a Nevada address and considered using this to get around paying state income tax, but then I couldn't deduct my travel expenses so it was practically a wash anyways.

    Plus I was worried about how it would hold up in an audit so I let it go.

  9. #9
    AudreyLeigh
    Guest

    Default Re: CA taxes - paying on $ made elsewhere?

    So those who live in NV and travel along with dancing there dont have to pay state tax? Lucky them!

  10. #10
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: CA taxes - paying on $ made elsewhere?

    ^^^ that's the reason that thousands of Californians are moving to locations like Reno ... just across the Nevada state line !


    On the other matter, if you reside in California and earn money in a different state that DOES have its own income tax, you can 'credit' the tax payments made to the other state against your California tax liability. If for example you're talking about a state with perhaps a 3% income tax versus California's 7% income tax, for every $1000 you earned in that other state you would owe the other state $30 and California $40 on the money earned in the other state. In the case of Nevada it's $0 to Nevada and $70 to California. In the case of New York it would be $70 to NY and $0 to California, since NY and CA have essentially the same (ridiculously high) state income tax rates.

  11. #11
    AudreyLeigh
    Guest

    Default Re: CA taxes - paying on $ made elsewhere?

    If Reno wasnt the crappiest little down on earth Id move there for the tax rate.

    Thats on homes too huh?! Ah damn...

  12. #12
    God/dess Zofia's Avatar
    Joined
    Apr 2002
    Location
    Durham, North Carolina
    Posts
    2,417
    Thanks
    2,964
    Thanked 2,370 Times in 934 Posts

    Default Re: CA taxes - paying on $ made elsewhere?

    Quote Originally Posted by Deogol View Post
    I am scooting around the web under a google for multi-state tax California and a lot of these CPA types say it is apportioned to the amount made in California for foreign corporations/individuals (aka, non-resident California.)
    ...
    So if you are not a resident of California, you only pay taxes on that portion earned in California....
    If you are going to rely on that, you better get the CPA to sign your Cali tax return and give you a letter saying he will save and hold you harmless from all California penalties, interest and jeopardy assesments. Because you are going to get a Cali jeopardy assesment along with a huge penalty. Keep in mind that IRS Circular 230 which has the force of law for California too says that you cannot rely on general statements from websites or even written advice from a CPA that is not specific to your situation to avoid penalties. Get a Cali CPA and ask her or him specifically if you can apportion and if she or he says yes, get them to put it to you in a Circular 230 letter. Bet they won't because that's not the law.

    HTH
    Z

    Disclosure under IRS Circular 230: To insure compliance with recently released Internal Revenue Rules, this communication was not written or intended to be relied on to avoid federal tax related penalties or for promoting, marketing or recommending to any party any tax related matters addressed herein.

  13. #13
    God/dess Deogol's Avatar
    Joined
    Dec 2003
    Posts
    5,493
    Thanks
    120
    Thanked 50 Times in 35 Posts

    Default Re: CA taxes - paying on $ made elsewhere?

    Oh good lord the ignorance on this forum sometimes:



    I did not live in California. Do I have to file a return?

    You are required to file a Nonresident or Part-Year Resident Income Tax Return (Long of Short Form 540NR) with California if you have income from California sources, such as, rental income, income from the sale of property, or partnership income in 2007 and you are:

    * Single with a total income from all sources of $13,713 or more
    * Married with joint income from all sources of $27,426 or more.


    The forms and instructions regarding non-residents.



    Line 12 Specifically states California wages and non-other.

    More here:



    in particular for non-residents



    If you are a resident, the forms definitely read as them helping themselves to all of your income.

  14. #14
    God/dess Zofia's Avatar
    Joined
    Apr 2002
    Location
    Durham, North Carolina
    Posts
    2,417
    Thanks
    2,964
    Thanked 2,370 Times in 934 Posts

    Default Re: CA taxes - paying on $ made elsewhere?

    Quote Originally Posted by Deogol View Post
    Oh good lord the ignorance on this forum sometimes:...
    Read carefully, "Generally if a California resident cannot subtract income,... then a part year resident, or non-resident cannot subtract the income." That is the nature of California's global tax.

Similar Threads

  1. Paying Taxes
    By DestyDoll in forum Dollar Den
    Replies: 3
    Last Post: 12-06-2006, 09:13 PM
  2. Paying Taxes?
    By [email protected] in forum Dollar Den
    Replies: 9
    Last Post: 01-16-2006, 07:44 PM
  3. Paying Taxes?
    By [email protected] in forum Private Party Dancing
    Replies: 10
    Last Post: 01-16-2006, 07:44 PM
  4. Paying taxes vs. not paying taxes
    By icechic in forum Dollar Den
    Replies: 28
    Last Post: 05-07-2005, 07:44 PM
  5. Paying taxes on money not made?!?
    By Theresa in forum Dollar Den
    Replies: 4
    Last Post: 11-10-2003, 10:40 AM

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •