Tuesday, July 28th, 2009Governor Schwarzenegger signed a package of 27 bills today (July 28, 2009) instituting a new California State Budget. C.A.R. scored a big victory for REALTORS® across the state; the signed version did not include an additional withholding for independent contractors.
During budget negotiations, a proposal surfaced that would require 3% withholding from independent contractors. If this proposal passed, when an agent closed a transaction, they are typically paid by their broker, 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 amount withheld by the broker. When the agent filed their state income tax return the following April, they would 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 would have allowed California to earn interest on your money.
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