Kelly Bullis: Why you may owe tax for working a few minutes in California
Have you ever had one of those types of neighbors who just keep trying extra hard to make your life miserable? You know the kind who gets upset if you walk on their grass or maybe want you to reimburse them for part of their water bill because a small part of their sprinklers is watering your grass?
Well, coming off the big party celebrating Nevada’s Sesquicentennial, I thought it might be helpful to give you a simple “rule” to go by when you find yourself being asked by your employer to work on the wrong side of the border (in California instead of Nevada). It might occur if you repair computers for some sort of “nerd squad” located in Carson City, but dispatched to a home on the California side of South Lake Tahoe. It might occur if you work for a home improvement box store and have to help deliver some appliances to a home just inside the California border off Highway 88 south of Gardnerville. Or insert your own circumstance, but you can see in the normal course of working for an employer who’ss located in Nevada, you could occasionally end up in California while “on the clock.”
Here’s what that pesky neighbor (California) says. If you ever work in California, even for just a few minutes (cumulative of 90 or more), you might have to file a California Non-Resident Income Tax Return and pay tax (on all your income, not just the California portion, pro-rated by the percentage that is California’s share). Oh, joy in Mudville! Are you kidding me? Nope!
Let’s go through an example. Using our single gal who is on that Carson City “nerd squad.” Let’s say she was occasionally dispatched to some homes located in California (a total of eight times). She was at each house for 60 minutes. It gets worse; she was “on the clock” while driving to and from the customer’s houses. (Let’s assume 15 minutes from the California border to each home for a total of four hours driving while employed in California in the year.) She’s paid $18 an hour. Assuming she works full-time, no overtime, her annual total gross wages would be $37,440. Her California wages would be $216 (12 x $18). Her pro-rated California tax would be $5.
Now she would have to go through all the trouble of preparing that California Non-Resident Income Tax Return (maybe pay somebody $25 to prepare it for her?) just to give that pesky neighbor their tiny share of tax on her working a total of 480 minutes in their “Golden State.” If she doesn’t, the “statute of limitations” which normally runs for three years from the filing of a tax return never starts running, leaving California the opportunity to look her up 10 years later for not paying her $5, now owing much more for non-filing, non-payment, late-payment of tax, etc.
(They might audit the nerd squad’s mother corporation, discover the unreported wages for multiple years, get all the contact information, then send out nasty tax bills to all affected employees. Yes! That “pesky neighbor” to our west has been known to do that, too.)
Moral of the story, try to get your employer to dispatch somebody else when the customer is in California, or at least ask to be paid more to compensate for all the trouble and extra costs.
Did you hear? “You usually don’t get what you don’t ask for.”
Kelly Bullis is a Certified Public Accountant in Carson City. Contact him at 775-882-4459. He’s on the web at BullisAndCo.com and on Facebook.