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  1. #1
    Join Date
    May 2013
    Posts
    2

    Default Are Benefits Based on Net Income or Gross Income

    My question involves unemployment benefits for the state of: California

    After I was separated from my employer (not for cause), I began forming my own professional practice. When reporting what income I should report, EDD said I should report net income. For 5 months now my expenses have been greater than my income, and I am living off of what was going to be retirement funds. Early this month in another conversation with another EDD employee, I was told that *gross income* must be reported, and my U/E checks stopped coming.

    Which EDD ruling was correct? Reporting gross income without considering expenses seems to be patently unfair and does nothing to encourage job growth through business development.

  2. #2
    Join Date
    Jun 2006
    Location
    Massachusetts
    Posts
    24,521

    Default Re: Net Income or Gross Income

    I always understood it to be gross income, but I am not in your state.

  3. #3
    Join Date
    Jan 2013
    Posts
    17

    Default Re: Net Income or Gross Income

    Self-employment always has gray areas.

    Yes, the CA claim asks about gross income for "wage-earners."

    Self-employment is a totally different animal. Did you clear your self-employment w/CA earlier? There are many people running ebay businesses who report their net income and collect benefits from CA.

    This from CA:
    Self-employed persons who receive their "wages" in the form of commissions, report their net earnings just as for any other type of earnings. For example, the insurance agent uses his care and telephone in the course of his business. If it is determined that he is self-employed as an independent contractor, his business expense such as automobile and telephone costs is deductible from his gross income and he should report only his net income as earnings. But when it is determined that he is an employee, he should not deduct his car and telephone expenses when reporting earnings since these expenses are considered when the rate of commission is established.

    http://www.edd.ca.gov/uibdg/Total_an...t_TPU_4602.htm
    Read the entire page. CA has its entire UIBDG on its website. It is a great resource with a great search function. Took me less than a minute to find the above, although I could not specifically find anything relating to deduction of business expenses when attempting to establish your own "practice." Independent contractors, however, who are in business for themselves have clear guidelines.

    Appeal this decision. Good luck.

  4. #4
    Join Date
    May 2013
    Posts
    2

    Default Re: Net Income or Gross Income

    Ariadne22--thank you for that!--exactly what I needed. Now to convince the public servant who doesn't know this.

  5. #5
    Join Date
    Jan 2006
    Posts
    38,867

    Default Re: Net Income or Gross Income

    Did you miss the first statement ariadne22 posted:

    there are gray areas


    What may appear clear to you may not be seen the same by the claims judge or the EDD system in whole. The citation provided spoke of commission based earnings as well. Are you commission based? While generally expenses are expenses, that page was titled "Commission". If it was not important to the issue, I would not think they would have made a page speaking exclusively to commission based income.

    Your situation could be much more complex and, in addition to many other bits of info, how is your business structured? Is it an incorporated business, LLC, sole proprietorship, partnership. Is the money paying the business expenses yours or the company's?

    Also, in the example cited, those are regular business expenses. I do not know if yours are but given you have a start up business, are there capital investments in the business that you are considering when calculating your net pay?

    While that page may answer your questions, based on what you have said, it doesn't.

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