Residents in Los Angeles with home-based business received letters from the Office of Finance that said, “The following amounts are due and payable immediately: $4,363.81.”
People who work as independent contractors and had failed to register their businesses with the city’s tax and permit division by Feb. 28 received the letters in March.
The city calculated the number by estimating $200,000 in gross income for each business over the last three years – the annual average for city business taxes – added interest and late penalties and arrived at the $4,000-plus number.
The letters arrived at a time when many laid-off employees are working as independent contractors themselves. To add fuel to the fire, many who received the letters might have generated income less than the total amount of the tax.
Though the city has denied that the letters were any kind of “scare tactic,” the program stems from a 2002 push to identify unregistered businesses using records “disclosed to the city by the California Franchise Tax Board.” The program has added almost 100,000 businesses to the tax roll and generated $107 million in revenue.
This issue has a particular sting at the moment, particularly given LA’s 10% plus unemployment rates.