In an effort to drastically simplify existing tax obligations, and as previously reported on by Worldwide ERC when the bill was first introduced, California has now become the first state to let employers file group income taxes for their foreign workers who have been frequently unable to obtain federal taxpayer ID numbers.
With the passing of the bill (A.B. 2660) into law, California has eliminated the requirement that foreign employees (international business travelers and short-term expatriates) file their own state income tax returns given that they don’t qualify for social security numbers and are often unable to get federal tax ID numbers. Employers will now have the voluntary option to file a composite return on behalf of their international business travelers to California.
Anyone traveling to California for work is subject to income tax and there is a company obligation to report and withhold that tax. According to Lorraine Cohen of Deloitte, before this law was passed, it was really challenging for payroll to properly withhold and remit taxes for international employees working in California. She explained that employers couldn’t do it themselves for employees who were non-U.S. business travelers who didn't qualify for a Social Security number. That left it to the employee to get a tax ID number and pay the taxes on a California return themselves. This painful process was costly and frequently incurred fees for late filings and late tax payments.
The bill passed unanimously, and the law will be in effect from Jan. 1, 2021, through Dec. 31, 2025.
Before this law was passed, it was extremely burdensome to properly withhold and remit taxes via payroll for international employees who worked in California. Employers couldn’t do it themselves for employees that are non-US business travelers who don’t qualify for a Social Security number.