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Telecommuters May Owe Extra State Taxes
marct22 writes "According to Cnet News, the US Supreme Court refused to hear an appeal by a Tennessee programmer who was forced to pay extra taxes because he was telecommuting to a job in New York. Apparently he worked in NY 25% of the time, which he didn't argue about, but the other 75% of the time he worked from home in Tennessee, which doesn't have income taxes. Also, it appears that right now, for those of us who live in one state and telecommute in another may be doubly taxed if both have income tax. There is a Telecommuter Tax Fairness Act in the Senate, but it has not emerged from committee so has not been voted on."
"What about people who live next to state lines? Surely there are other cases where people live in one state and work in another."
Yup. I live in NJ, work in NY. Pay income taxes to NJ, NY, Federal Government. If they reinstate the commuter tax in NYC, I will also pay income tax to NYC (I did until about 4-5 years ago). Pay sales tax in NYC to the city, the county, and the state. Pay sales tax in NJ to the state. Pay property tax to my municipality in NJ. My wife pays gas tax in NJ -- I take mass transit (but still pay for roads via taxes).
The way I see it, people should pay income tax in the state that they earn the income, not the state in which they reside. If my home state wants to tax me for simply importing cash into their state, that's a problem -- since import taxes between states are illegal in the US. Besides, when I spend cash in NJ, they get to tax it then.
"Trolls they were, but filled with the evil will of their master: a fell race..." -- J.R.R. Tolkien on Olog-hai
It's always been my impression that this type of thing wouldn't fly, that you were just taxed in the state you live in. For an example around me, DC would dearly love to tax commuters from MD & VA who pour into the city every day yet provide no direct taxes. Every time DC tries to implement such a commuter tax, they're shot down. I didn't realize that states could do this - I assumed that if you lived in CT and worked in Manhattan, all your income tax would go to CT. Guess I was wrong.
This has been tax law for ages. If you live in one state and work in another, whether driving over the state line to work in an office, or telecommuting in, you owe taxes in both states. That's why you make sure you register your residence in the same state as your job, for the purposes of taxes. It certainly doesn't help his case that he was physically in NY 25% of the time, although many states allow you to deduct taxes paid to another state on a given income from the amount you owe them.
This also opens up states to taxing foreign nationals who never leave their country of origin....for example if some guy in Finland SSHs in to NY to work on a project. He owes NY taxes, but will they ever be collected? Probably not.
I also live in London, and I think we both know the difference between Income Tax and Council Tax. Nobody is asking this guy to pay for local amenities. However, after doing a bit more Googling, I think that the issue is not that he is being asked to pay Income tax in new York for his telecommuting, but rather that he is being asked to pay that tax on his full income, without regard for where he earns it.
Modest doubt is called the beacon of the wise. - William Shakespeare
Another post says new york wants him to pay taxes on his full income.
I think whatever state the company your working for is in, despite your physical location, is the state who you should pay taxes to- for the time worked for that company only- and not have to pay it again in your home state.
Now here's a bonus question, I'm an independant contractor from Iowa, but my main client is out of california. I'm technically an employee of myself, but am receiving 'employment'/work from CA. Am I exempt from CA taxes? My tax man thinks so.
A couple hundred years later, we like to believe that the ideals expressed during the founding of the country are still important, so a complaint such as this is likely to appeal to a US citizen that has even the slightest knowledge of history.
-- $SIGNATURE
This has been tax law for ages. If you live in one state and work in another, whether driving over the state line to work in an office, or telecommuting in, you owe taxes in both states.
I'm not a tax expert, but I do know how my own taxes work and I'm pretty sure what you just said is not right. As a consultant, I work in many different states during the year, and my firm keeps track of how many of my billable hours are in each state. At the end of the year, I file taxes by state based on the time I was billable in each state. I do not pay taxes on that income twice. Considering we're one of the largest tax firms in the world, I tend to think we're probably doing it right.
This may or may not be relevant to a telecommuting discussion, but you're claiming the tax laws, which seem ambiguous regarding telecommuting, are the same for people physically traveling and that has not been my experience.
For your perusal: Renunciation of U.S. Citizenship right from the State Department.
Note that this doesn't excuse you from prior taxes or other financial obligations in the US.
Okay, it's not flamebait but it is misleading. The middle and bottom in the US pay significantly more than an equitable share of taxes.
The low 50% of wage earners earn less than 2% of the total income in the US, meaning that the top 50% of earners are not pulling their weight.
More to the point, the top 10% of earners earn _way_ _way_ more than 10% of the income, (I believe it's on the close order of 90% but I can't confirm it) yet pay way less than the correct proportion.
Who, me?
Disclaimer: I am not a Tax accountant, but I AM an Expat
It's also exempt from Income Tax. I think you also have to be on an overseas payroll. If you're on the payroll of a US company, they still take out FICA/Medicare.
HOWEVER, you MUST be out of the US 330 out of a 365 day period. For example, if I leave the US on 01-NOV-2005, then until 01-NOV-2006, I can only be in the US a total of 35 days, or else I owe taxes on that 80,000. There's a form you fill out with your employer (I think its form 679... I just did mine for 2006) that will keep your employer from deducting any taxes on the first 80,000.
Non tam praeclarum est scire Latine, quam turpe nescire
-- Cicero