Filing Income as an independent contractor vs "employee" as per the state of California

[GVHoff]

Hi there! Hoping for some clarity here.  I am filing taxes as a delivery driver for companies such as Uber, Instacart, Amazon, etc.  All of my income is coming from 1099-NEC forms.  When I completed my federal tax return for this year on turbotax and then shifted over to complete the state side for California, I didn't see my income listed anywhere, but instead was taken to a page about things California "does differently".  It was showing the income I reported on federal, labled as federal and then was asking to enter an "adjustment number" for California, with a note that says CA considers independent contractors as employees.  I entered the same number as my income on federal, and then read in the notes I then needed to go in and put the same number as a business loss??  Anyway, I did what I thought it said I should do and still cannot see it showing any income for me, and I am not showing a refund at all.  I always get a refund because I don't make enough and the credits enable a refund, but it just says $0 still.  I can't even see where to put mileage or anything.   

My questions are...  Is this whole process new for CA?

(I did not have to do anything like this last year with my 1099s and I received a refund as well)

Is there any other reason I wouldn't be getting a refund?

Also,  can I get some clarity on how I should be entering my income for CA?  I am worried I am messing it up. Thanks so much! 

[BillM223]

It seems to me that delivery people like you are still contractors, even in California,

Back in 2019, California AB 5 caused the CA Attorney General to rule that delivery drivers were employees, but subsequent to that, Proposition 22 in 2020 redefined that and said that many (not all) such drivers were in fact still contractors.

In 2024, the California Supreme Court upheld Proposition 22, ending the issue unless someone wanted to spend the money to appeal it through the federal system.

You wrote "with a note that says CA considers independent contractors as employees.  " Could you do a screen shot of this (with any personally identifiable information redacted)?

Thanks!

[GVHoff]

This is the screen it takes me to... the CA adjustment is what I entered but can be changed.  I am so confused.  Also, to note, we qualified for mileage deduction on the federal side and that is not included in the bottom number on the federal side.  Thank you so much for your help!

[BillM223]

I could not find that screen, but that's what happens when you have dynamic screens.

Listen, I think the most important thing on your screen shot is "IF you are classified as an employee for California purposes...". Based on the recent CA Supreme Court decision, it seems pretty clear that you are not so classified, especially if you are driving for multiple companies.

Based on the descriptions on the screen shot, I would leave those CA boxes blank and try to continue and see if you can get past this.

[GVHoff]

I agree. I think that makes the most sense.  Here's what happens if I put zero in those slots.

If I leave the adjustments blank or not, it shows $0 for all income?  (If I click on the wages section, that is when the prior screenshot appears with the adjustment/employee thing.)

The screenshot below is the screen before and I clicked on income and adjustments to get to the above screenshot.  I am just so confused because I am not finding anywhere it is listing my income as a taxable amount or any eligibility for tax credits., which is why I am guessing the refund sits at $0.  I swear this was so much less complicated last year. 😫

Thank you again for all your help!

[MonikaK1]

The zeros you see on the California adjustments screen appear to indicate that you didn't make any California adjustments, which would be correct if your income and expenses are going to be treated the same on your California return as they are on your Federal return (Schedule C business, not employee).

You appear to be using a Desktop / Download version of TurboTax, so you can go to Forms Mode by selecting Forms at the top blue bar, and looking at the list of forms on the left side, choose those you would like to check over to make sure your income and expenses are picked up on both returns. A good form to look at for California returns, in addition to your Form 540, is Schedule CA, which summarizes the differences between your Federal and State returns.

See also this tax tips article for car sharing drivers.

@GVHoff