A new California law allows employers to file group state income tax returns for their foreign workers who have not obtained a federal Social Security Number (SSN) or Taxpayer Identification Number (ITIN).
Assembly Bill 2660, which was approved by Governor Gavin Newsom (D) on September 18, eliminates the requirement that certain nonresident alien individuals need a federal SSN or a federal ITIN to file a California individual tax return for calendar years 2021 to 2025. Further, the new law allows employers to file a group return during these same calendar years on behalf of those foreign employees who do not have these identification numbers.
Employees’ compensation included in such a group return would be taxed at the highest marginal rate of 12.3% (or 13.3% if the nonresident’s taxable compensation exceeds $1 million) and no deductions or credits would be allowed, except for a credit for taxes previously withheld.
This new California law can be a positive step toward simplifying the reporting process for employers that bring certain nonresident aliens into California to perform services. While similar federal relief currently does not exist, the new group return procedure helps business travelers and employers alike to ease administration while still ensuring proper tax compliance.