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California Legislative Proposal Calls for Property Owners to Withhold 3% of Payments to Contractors

By
Property Manager with HomePointe Property Management, CRMC 00691121

Legislative Proposal Calls for Property Owners to Withhold 3% of Payments to Contractors - Your Letters Needed The California Apartment Association in conjunction with a coalition of over 700 businesses and interest groups are working together to stop a legislative budget proposal that would require businesses to withhold 3 percent of payments owed to independent contractors.

Property owners and management companies would be required to implement the withholding to all independent contractors and self-employed individuals (small and large alike). Examples of operations that will see money withheld from payments to them include: builders, painters, plumbers, gardeners, janitors, real estate agents, insurance agents, computer programmers, accountants, automotive mechanics, and security guards.

In a year when the Governor and legislative leaders have indicated that "jobs, jobs, jobs" is a top priority, independent contractor withholding will hurt rather than help California jobs. The coalition’s opposition to independent contractor withholding is based on the following:

* Independent contractors already have a greater tax burden than employees;

* Withholding will wrongly force small businesses to loan money to the state, interest-free;

* Withholding could generate little if any new revenue for the state; and

* Withholding targets the wrong group of taxpayers - taxpayers who are already compliant.

These taxpayers already are providing the state information it can use to target independent contractors who aren't paying income taxes they owe. The proposal may be taken up as early as next Wednesday.

Posted by

Robert A. Machado, CPM, MPM

HomePointe Property Management

Sacramento, Yolo, El Dorado, and Placer Counties

We manage residential and commercial property.

916-429-1205 x 105

rmachado@HomePointe.com

John Pusa
Glendale, CA

Robert - Thanks for sharing a very informative and helpful blog.

John

Feb 12, 2010 04:49 PM
David Saks
Memphis, TN
Broker / Industry Analyst

Sounds like a discount initiative for your property owners and the implementation of a legislative directive which would encourage business among contractors because of the 3% witholding. Wishful thinking.

Feb 12, 2010 08:45 PM
Elizabeth Weintraub Sacramento Broker
Elizabeth Anne Weintraub, Broker - Sacramento, CA
Put 40 years of experience to work for you

They tried to do this to real estate agents but didn't get very far. The California Association of REALTORs lobby stepped in and put a stop to that nonsense.

Feb 13, 2010 02:17 AM
Michelle Francis
Tim Francis Realty LLC - Atlanta, GA
Realtor, Buckhead Atlanta Homes for Sale & Lease

Robert, 

The government drives me nuts!  Great of you to share.  I really hope it doesn't go through. 

All the best, Michelle

Feb 13, 2010 01:05 PM
Nick T Pappas
Assoc. Broker ABR, CRS, SFR, e-Pro, @Homes Realty Group, Broker/Providence Property Mgmnt, LLC Huntsville AL - Huntsville, AL
Madison & Huntsville Alabama Real Estate Resource

Robert, at the risk of sounding "not in the know" I guess I'm a little confused about the purpose for the withholding.  Is it to insure that the work done by contractors is completed or completed to the satisfaction of the buyer?  If that's the case, it sounds like a good plan to me.  Is it a form of tax like they tried to implement on Agents commissions?  What am I missing here? 

Feb 14, 2010 08:51 AM
Robert Machado
HomePointe Property Management, CRMC - Sacramento, CA
CPM MPM - Property Manager and Property Management

Nick,  This withholding is a prepayment of possible income taxes owed to the state of California by the independent contractor.  The State of California is broke and wants to do two things.  First, make sure that eveyone is paying their taxes.  Second, they want to hold a bunch of money and use the float until taxes are actually due.

Many argue, me included, that the state tax authority has the information from the 1099's that are filed by payers of the money at the end of each year.  Plus, this policy will cause a lot of paperwork and expense to the businesses that must take the money from what they would normally pay the contactor and send it to the state.  We are doing their work!

Feb 14, 2010 03:50 PM
Nick T Pappas
Assoc. Broker ABR, CRS, SFR, e-Pro, @Homes Realty Group, Broker/Providence Property Mgmnt, LLC Huntsville AL - Huntsville, AL
Madison & Huntsville Alabama Real Estate Resource

Robert, I'm with you now and thank you for clearing that up for me.  It sounds like you are right on with your assessment.  

My response is:  I think Arnie needs to take a break from politics and go back to acting..."in the movies"!!!

Feb 15, 2010 07:49 AM
Jeremy Butts
Real Estate Entrepreneur - Louisville, KY
Investor

Don't you know that the government is always acting in our best interest and they are smarter than you, me, or any other privately-run operation?

Feb 18, 2010 02:50 AM