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Advice on Income Taxes for the "Virtual Office"
Silas asks: "I've been working for a website development firm in Indiana, but will soon be moving from Indiana to Ohio. From Ohio, I'll continue to work for that Indiana-based firm via phone, e-mail, and the occasional commute. I'm wondering what the implications are for income taxes - namely, am I living and working in Ohio, or am I living in Ohio and working in Indiana, or some weird mutation of those? Any advice from others working in similar 'virtual office' situations?"
"Some additional info is below for IANAL and IAAL readers alike:
- The firm is an LLC based in Richmond, Indiana. I'm moving to Cincinnati, Ohio.
- I am an owner/partner of the firm, so my taxes are paid as quarterly estimates instead of being drawn from each paycheck.
- I'm interested in legally minimizing the chunk of income that the gub'ment gets.
- I'm interested in keeping my tax return as simple as possible.
I currently live in Maryland and work for a company in NY.
Tax wise I reside in Maryland and pay taxes here. My company withholds Maryland Income Tax for me automatically so if there's anything complicated, they handle it on their end, but as far as I know, you always pay income tax based on where you reside.
seriously, don't ask slashdot goons for tax advice. it's worth paying the 100 bucks or whatever to a tax firm to do your return for you, and tell you what information you need to keep track of for the next year.
http://www.in.gov/dor/assistance/index.html= default%5E20&10=TAX
https://ohiocrm.das.state.oh.us/tax/default.asp?2
It looks like Indiana and Ohio have some sort of recriprocal agreement on income taxes.
Ever dream you could fly? Get up from the Flight Sim. I Fly
What the hell?
Ask a tax attorney, or just make something up and hope they don't catch you doing the wrong thing.
Is the 'Ask /.' submission queue that bad? This is... really of no interest. This is what accountants are for.
Jesus was all right but his disciples were thick and ordinary. -John Lennon
In this situation, since you don't work and live in the same state, you pay no taxes at all on your income.
Or do you trust Random Slashdot Yahoo #17166?
IANAA (I am not an American) but I am a big NFL and MLB watcher. And I think that, along the way, I've spotted a potential answer to your question.
Obviously, MLB and NFL players are on the road a lot - one moment they'll be playing in California, the next they'll be in New York, then Texas and so on.
Now I'm not sure it's the case for NFL players (who will only spend eight or so days actively participating in their profession* outside their home state, where they'll play the rest of their games, train, etc) but it's true that MLB players (who will spend as much time on the road as they do at home) have to play state taxes where they are actually playing.
So, when Alex Rodriguez of the Texas Rangers plays a series in Oakland or Anaheim, then he has to pay Californian taxes on the relevant portion of his $25 million salary. When he plays a series against New York, then it's New York taxes he has to pay. And when he's playing at home, or at Houston, it's Texan taxes he's liable for.
The fact that he works for a Texas based organisation is irrelevant - the fact that he's physically doing his job in California, New York, etc is what's relevant.
In your case, I would assume that you would pay Ohio taxes for the time that you work from home and Indiana taxes for the time that you are in your parent office.
But, to quote Silence Of The Lambs, "When you assume, you make an ass out of u and me." It may be that, if you don't spend a significant portion of your time in Indiana, you don't have to worry about your occasional trips to the office.
Personally, I think you should clarify the issue with an accountant (doesn't the company have one that you can consult?) and even the relevant state authorities.
Good luck with your telecommuting. Hope it goes well. Don't forget to tell your friends that someone compared you to A-Rod...
(* I refuse to call it work.)
(** OK, so I lied. Work is a nice short word to use in this situation.)
"Accept that some days you are the pigeon, and some days you are the statue." - David Brent, Wernham Hogg
I currently in the process of relocating (so my wife can finish her MS) to Illinois from the South... :)
:\). My employer had to get a tax id from the state of Illinois. AFIAK, that's all that was required in my situation.
Here's the scoop that my company's accountants and lawyers dug up. I'm not a lawyer or an accountant (insert the rest of the standard disclaimer here)...
Since I will be residing in Illinois, I will pay Illinois state taxes (and Chicago Income taxes as well
My employer was even nice enough to transfer my health insurance into a group local to Chicago!
-pointer
[%- PROCESS life -%]
I am part owner of a Software / Internet development house. It is headquartered in Indiana and the main office is there... however I am in Hawaii and run the Pacific Rim office.
Being a resident of Hawaii, I must pay Hawaii taxes on my earnings. Also, since Hawaii has a gross corporate tax, the company must pay that tax on any business that I get the company from Hawaii.
I do not believe (though I could be wrong) that I pay taxes to Hawaii on money made by the corporation outside of Hawaii, with the exception of my salary.
I think, however, that this is dependent on state laws of both where you work and where you live (eg., Ohio may, or may not have tax laws governing this, or additional taxes, etc... Hawaii does).
What we did, and what you should probably do, is find an accountant who is knowledgable in both Indiana and Ohio tax law... since they are neighbors, that should be pretty easy to do (especially if you look for accountants that are positioned near the border). For Hawaii / Indiana, it was a bit more difficult and we actually have two accounting firms, one here and one in Indiana who communicate back and forth to figure out what I and the company owe in regards to the various earnings and payments.
Let's assume what you said holds true. If my company sends me to another state for 2 weeks to do a server installation or LAN setup or whatever in another office of the same company, then I would have to pay the taxes for the 2 weeks worked in that other state. Fill out the proper tax forms for each state to start working there, etc.
But I don't think that happens. When I go out of state for my job, I'm still "on the clock" (I'm not a contractor, I'm employed by and do work for the company that pays me directly) as far as the company's concerned, but I don't pay that state's taxes on wages.
HIRE A TAX ACCOUNTANT.
If you are part owner of the business, and the business is out of state you want, you NEED an accountant.
That's the theory, but it doesn't always hold true in practice.
Tax laws vary state by state. You will NEED to consult a tax person who is familiar with tax laws in both states.
If you border hop to go to work, IE live in NH and work in MA, you pay MA income tax. NH doesn't have an income tax, but DOES have really high property tax (about 4 times the rate in San Jose for example) and high sales tax. A person in this situation gets screwed.
If you work out of a home office, things get "tricky" but you will probably only need to pay local (to where you live) taxes.
First of all, get an accountant or to handle the details. I believe in do it yourself, but if you have to ask this question, it means that you either don't have the time, or don't want to find out the details the hard way. (Nothing wrong with that, you have a job to do, and you can probably make more money doing your job than you would save by not hireing a pro)
Now that I've said that: you don't nessicarly want to take all deductions you can. For instance you can deduct your home office space from your taxes. However when you deduct that space (beyond all the rules for using it, which I assume you can follow), you pay more when you sell the house because the part you deducted you owe taxes on, while the rest of the house you don't owe taxes on. (subject to certian rules you don't pay taxes when you sell a house that you lived in)
Note, tax law is extreemly complex. You have in your situations many deductions you can take, but some will be counter productive in the long run. Worse yet, they change the law from time to time, so you might decide to take or not take a deduction, only to discover latter that you should have done it the other way. (In the house example, if most people telecomut in the future odds are you could have it both ways)
Good luck. Your situation is extreemly complex, what is right for you could easially be wrong for everyone else. You either get to study the tax code in detail, or hire someone who hopefully knows it well enough to get the right details for you.
You have nothing to worry about. I live in Cincinnati. Mark Twain(!) noted that if the world were going to end, he'd want to be in Cincinnati, since everything arrived there 10 years later. So you've got 10 years before the taxman knows you're here.
Better yet, a newspaper columnist noted that Cincinnati was once the very model of 19th Century German Liberalism - and still is! Heck, they didn't even HAVE income taxes in the 1800's!
Envy my 5 digit Slashdot User ID!
If you have a virtual office than you can pay the $200 to have HR Block tell you exactly what to do, not the mention that they will insure their advice for a certain amount ($4k for individual, more for other accounts I guess).
You come to slashdot when you need advice on stuff that's fun, NOT stuff that will land you in jail if dick up.
Get a lawyer. Now. By asking slashdot about TAXES you've already proved that you are incompetent and likely to be Darwin-ed out of the game.
[o]_O
To clarify a few things: