Why did I get a request for tax return California

[Orresident]

I am still fighting the FTB. The problem is that they ignore whatever evidence you give them to support your claim and keep sending you a paper that says you have to file a return. I won't file anything until one of their lawyers actually goes over all of the information I've given them.  I'll keep mailing the same documents over and over again.  I am sure I will end up going to court (fun fact for everyone out there, they have their own court that rules in these matters. What could go wrong...?)

I wish I had better news for you or anyone having this problem but when the American Bar Association basically says don't mess with the FTB, they are not kidding.  They are a nightmare. 

[avNYC]

Hi - we just received the same letter from the CA FTB for income earned in CA. My wife earned some consulting $$ from a CA company and we never lived in CA. Now the form says we have to pay taxes on income as a non-resident on "income received for services performed which benefited a business of individual in CA, regardless where such services were performed." Is this legal? We paid full taxes to our state (NY) and now the want to tax us on not only the small amount my wife made but on our full AGI which includes my full NY salary...? Is this for real?

Can anyone please advise.

Thank you.

[TomD8]

@avNYC --

Yes, the notice you received is "for real."  In fact, it's been challenged in court, and the taxpayer lost.  A non-resident sole proprietor who provides services to a CA-based customer is subject to CA income tax on that income, even if the services are performed entirely outside CA.  See this reference for more detail:  

https://www.coblentzlaw.com/california-office-of-tax-appeals-gives-precedential-authority-to-bindley...

Another reference:  https://www.calcpa.org/news/2019/12/19/tax-net-widens

Your NY salary is not subject to CA tax.

You may take a credit on your NY tax return for the tax you pay to CA on the income that is taxed by both states, so you won't be double-taxed.  If you've already filed your NY return, you'll have to file an amended return in order to claim the credit.

[avNYC]

OK - thank you for your response.

[1099erGirl]

Would people on this thread mind sharing what kind of income level has tripped these letters? (And I mean ONLY of your potentially CA Sourced Amount they think you owe on. Not total income.)  I know they have a chart of "total income" earned elsewhere that trips the requirement so that's not what I'm asking.

But I'm curious if there's a trend showing when they bother to chase people... do they go after TINY 1099s. For example... they had sent me a letter for a more significant one was that was for a big job (about 25k.) But the following year I got $1000. I didn't get a letter about that one so far.  Those 2 tax years were 2017 and 2018. My letters came in 2019. But they only wrote to me about 2017. 

And this year, we will have made about $2500.  Someone in GA asked us to film at their house for a product. We had no idea the person paying us was from San Diego since our client was GA! But the product maker ended up writing the check. 

But we won't have any profit to show out of that $2500. We hired a guy to work on the job with us for $500, we had  equipment rental for $100, then got tired of renting and for the next shoot decided to buy our own system. ($ over 1700.) but the time we write those off, crew lunch, and mileage, the $2500 is going to = zero. 

So even if we file we'll have zero profit. Yet it will cost me at least $100 to "show them" we owe them nothing.

That's why I'm just curious if people here are willing to share if there's an amount that they seem to care about.

I understand why $25,000 was noticed.  And I'm not surprised that at least so far they've left me alone for my one 1099 that was only $1000 in 2018.  Just curious if I should spend the $100+ this year to show them I owe nothing.

I wish they had a threshold to say "Don't bother filing if you made less than $... amount of CA sourced income." and not just have an amount "If you make this from ALL sources" file.  

If every state follows their lead, I'd be filing in 5-8 states a year. 

[LisaD4444]

I am a sole proprietor, OR resident but conduct work in CA.  I filed state taxes for both OR and CA 540NR, using schedule S to take credit for taxes paid in OR.  CA denied saying I incorrectly calculated my CA Tax before Exemption Credits and that I owed CA money. I then paid CA, filed an amendment to my OR return expecting to receive a credit. Instead, OR denied amendment and said I need to appeal to CA pertaining to adjusted credit for taxes paid. So frustrated, pretty sure I don't need to pay double taxes?! Any input would be greatly appreciated!

[TomD8]

@LisaD4444 --

California and Oregon are reverse-credit states.  That mean that your non-resident state of CA will allow you to claim a credit for the taxes you pay to OR (on the income that is taxed by both states), but OR will not allow you a credit for the taxes you pay to CA.  ("Reverse-credit" because normally it's the taxpayer's resident state that grants the credit.)

For this to work in TurboTax, you must complete your OR tax return first, and then do your non-resident CA return.  This is the reverse of the usual sequence.

[avNYC]

Hi TomD8 - so If I download the turbo tax desktop software for 2017, can I add a CA non-resident form to satisfy the notice I got and amend my NY return?

Thanks,

Anthony

[TomD8]

@avNYC 

See this previous TT response:  How do I go about preparing my 2017 State Tax retu... (intuit.com)

[1099erGirl]

That's what I did. I downloaded the CA 2017 to my software to run the numbers. It would have meant redoing the other state though if I wanted the money back.

[avNYC]

Thanks Tom and 1099erGirl ... really appreciate quick response.

Hope we all fair well with this process :")

[Orresident]

I am still fighting this almost a year and a half after their initial letter (also an OR resident).  I was contacted for total income of over 100K in 2017. My taxable income was much, much lower and I paid state taxes in OR. 

The FTB has gotten way more aggressive but I have compiled valid reasons as to why I do not owe them taxes. I keep sending them tons of paperwork with evidence from their own tax code. They never look at anything and simply say i owe them money (these are their bullish tactics). I will possibly file with the OTA since the FTB just ignores all of my correspondence. 

My situation is  very complex and possibly only applicable to my job but I would encourage people to do the same and fight it if they have valid and logical arguments as to why they do not owe takes in CA. Just because you conduct business with a CA company does not automatically mean you owe them taxes. You need to know the CA tax code (not the FTB one, please don't make that mistake. Read the actual CA tax code or hire a lawyer to do it for you.)

To me the FTB is the same as the mafia. They get away with some very, very inexcusable things. I have talked to a handful of lawyers in CA that will not take a case against them because of just how awful they are. 

I will post here when I know more about my case but I will take it to the OTA and court if needed. 

[1099erGirl]

Thanks. I would love to hear more as you proceed. I sent in a bunch of information. Never heard back. Waited and waited. Finally put my  case # into their website and got the message that my case # was resolved.... they never told me why. I wasn't going to ask... Ultimately I didn't pay them anything, but I did have to pay the $100+ to add the software and file. So obnoxious.  And many countless hours gathering paperwork from 3+ years ago. They got a letter from the client's accountant too. I don't know what made them drop my case.  But it doesn't help me for future years to know how to proceed like now where I will have made $2500 in 2020 before deductions, and zero after, but they won't know that. I hate having to spend the money to show them. I don't want CA having all my tax info and finding reasons to tax us when I haven't lived there in over 5 years. 

[Orresident]

Wow. This is very interesting. Where in your account did they say the case was resolved? Was this online on the FTB portal? I am now curious if I can check this since I have not heard back in months. 

They are just horrible at any communication and I think they do it on purpose so you just pay them. As you said, the time wasted on this nonsense is ridiculous. I have spent quite literally weeks and weeks gathering evidence, documents, and writing responses. I wish we could sue them honestly. 

Thank you for your response. 

[txorpayer]

I wonder if there are going to be a lot more people in this position suddenly - as of this year, 1099's in CA are no longer shared with the state by the IRS, but are now requested by the FTB to be sent directly to the FTB by the payor.  So essentially every 1099 will become 1099ergirl's situation, where all the filings are sent directly to the FTB.