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I've never run into a case where the client cared how I reported my taxes. How would they even know? Did they give you a reason for this?
by c17r 6y ago
I've never run into a case where the client cared how I reported my taxes. How would they even know? Did they give you a reason for this?
- Stratoscope 6y agoThanks for asking. They were a California company, and this state has gotten very strict on such things, doing their best to shut down the ability for people to work as independent contractors. It really sucks, but you can't fight city hall. The idea was that the LLC/S Corp would give my client some protection against anyone claiming that the client would owe employment taxes on what they paid me. So I had to be my own corporation paying myself through a payroll service, to make sure the state and the feds would get their cut. Put more simply: "Nice business you've got there. Be a shame if something happened to it."
- arrosenberg 6y agoI think that was more about the client having a hang up than the state or AB5. You either pay payroll taxes as an S-Corp, or you pay self-employment taxes if you take pass-through taxation. Regardless of which taxation method you selected, the company would still be on the hook if you later complain to the Department of Labor that you were misclassified.
- gamblor956 6y agoYou clearly misunderstood something because that's not a CA law and that isn't how a consultant or contractor would prove their legal entitys existence to a client.
- ende 6y agoMy guess is that they were trying to shield themselves from the possibility of reclassification via IRS audit.
- gamblor956 6y agoNone of what he said would have shielded his hiring company from the possibility of reclassification in an IRS audit, though it appears he was claiming it was a California FTB issue. That's not how CA contractor classification law works, nor how the law has ever worked in the past.