Humboldt Association Of Realtors

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HAR Member Article

By now you have received two "Red Alert" messages from CAR asking that you contact both Assemblyman Wes Chesbro and Senator Pat Wiggins to let them know you oppose the independent contractor 3 % withholding proposal and to remove it from the next version of the state budget.

Please respond a.s.a.p. to these CAR requests. The process is quick and easy...a simple phone call...the phone #'s and your pin # (NAR #) is on the emails you received..... or you can contact the HAR office for more information . Your action is appreciated.

C.A.R. OPPOSES Proposal to Force Over Withholding on Independent Contractors

Please Call Your Assembly Member Today!

C.A.R. is opposing a proposal to force those making payments to independent contractors to withhold 3%. This provision was included in a budget gap proposal approved earlier this week by a Budget Conference committee in the California legislature. C.A.R. opposes this FORCED OVER WITHHOLDING because it unfairly singles out independent contractors to shoulder the burden of the state's budget troubles and because it fails to address systematic problems in California's budgeting process.

When an agent closes a transaction, they are typically paid their commission by their broker. Now, the broker would need to withhold 3% of the commission and pay it to the Franchise Tax Board (FTB). Agents would still pay their normal quarterly estimated income tax payments to the FTB in addition to the withholding. When the agent files their state income tax return the following April, they will deduct the withholdings along with the quarterly estimated tax payments from their tax liability and, in theory, receive a refund for the 3% that was withheld. This allows California to earn interest on your money!

Call Assembly Member Wesley Chesbro

At 1-800-672-3135 and

Enter your PIN number -- XXXXXXXXX

Tell him or her that you OPPOSE the independent contractor withholding proposal and to please work to keep it out of the next version of the state budget.

Please note: if you live in an area represented by Democratic legislators in both the Assembly and the state Senate, you will receive TWO Red Alerts. Please respond to BOTH of them to contact both your Assemby Member and your State Senator.

Sunday night and Monday morning of this week the Assembly and the Senate approved one version of this proposal in one of the many pieces of legislation comprising the budget. However, Governor Schwarzenegger is planning to veto both sets of bills. The Legislature will need to send him new versions of the budget in order to end the stalemate.

Our goal is make sure the next version of the state budget DOES NOT INCLUDE THE INEDEPENDENT CONTRACTOR WITHHOLDING PROPOSAL.

While it is understood that the state is facing a substantial budget gap, increasing withholding on payments to independent contractors should NOT be one of the ways that the budget gap is addressed. Among the arguments against this proposal:

There is no evidence that independent contractors are failing to pay their income tax obligations. The proposed withholding requirement is merely intended to accelerate income tax payments so that the state can make money from the "float" that's earned while the funds are in its possession.

It creates significant administrative burdens for individuals that are now required to file 1099MISC information reports with the Franchise Tax Board. Under the proposal these individuals would now need to also calculate the required withholding amount and remit that amount to the state.

There will be significant administrative costs to the Franchise Tax Board that will be faced with making refunds to those independent contractors whose withholding amount remitted to the state exceeds their income tax obligation.

Please contact DeAnn Kerr at deannk@car.org or Christopher Carlisle at christopherc@car.org. If your PIN number doesn't work, please contact C.A.R. at 916-492-5200.