I am the owner, sole share holder and sole employee of a technology consulting company. The company a personal services corporation and a C Corporation. We are based in New York, though we have clients in many states and a couple of foreign countries.
While the company charges a fixed hourly rate for my services, I do not have a fixed hourly salary. I get paid by the "whatever is left after overhead and expenses" principle. At the end of each year my company income is typically less than $300, and we pay the minimum New York State Income Tax of $75.
I have a client in California. The client is a law firm, but my expenses are being paid by a large insurance company. This year the insurance company has started to withhold funds from our checks that they say are for California Income Tax Withholding. (I say that "they say" because there is no indication on the check stubs to account for the missing funds,and I think this, all by itself is very unusual.)
Almost all of the money represented by these covers services provided while I was in New York and expenses, but I did spend three days working in California in March.
So, here are the issues. If the insurance company persists in this behavior, I will have to file a California Non-Resident Corporate Income Tax return to recover the amounts withheld, since the income of my company will be most certainly be below the taxable minimum.
I will most likely have to also file a California Non-resident Income Tax Return and then claim a credit for those payments on my New York Resident Income Tax Return.
The big issue is how I figure out my California Source Income. First, I don't know exactly how many hours I was in California. I have good records for the three days, but what about the two flights on the day before and the day after my three-day visit? How do I know when I crossed the California border when we were 30,000 feet in the air? Or, do I just use hours billed between landing in CA to takeoff? (Yes, I bill for travel time, which would add a few hours between the airport and the hotel.)
Even after I figure out the billable hours in California, how do I get a rate? I suppose I could take my total annual gross income from the company and divide that by the number of hours billed during the year to get an average personal income hourly rate per year. Does that make sense? (However, I'm a cash basis business, so some of my 2016 income was for work done in 2015 and paid in 2016, while some of my
2016 hours will not be paid until 2017.)I also remember reading that there was an income floor below which no California Non-Resident Income Tax was due. I seem to remember that as was about $30K, but can no longer find that.
Thanks in advance for any advice.