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Telecommuters May Owe Extra State Taxes

Posted by ScuttleMonkey on from the death-and-taxes dept.

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."

20 of 617 comments (clear)

  1. SSH? VNC? by Short+Circuit · · Score: 3, Interesting

    Don't tell me half the people here haven't used these tools...Work on a website in California? A chicago colo? Did you earn money for it?

    ...Do you owe taxes on it?

    --
    tasks(723) drafts(105) languages(484) examples(29106)
    1. Re:SSH? VNC? by Anonymous Coward · · Score: 1, Interesting

      But how would this affect those who are working in India and China, who have outsourced jobs? They often telecommute to work, do they not?

    2. Re:SSH? VNC? by Darby · · Score: 2, Interesting

      .for example if some guy in Finland SSHs in to NY to work on a project. He owes NY taxes

      So what if he does all his coding and testing at home and then just uploads the final version?

  2. Comment removed by account_deleted · · Score: 2, Interesting

    Comment removed based on user account deletion

  3. Income Tax by nurb432 · · Score: 2, Interesting

    This should be abolished anyway. This is yet another example of why.

    --
    ---- Booth was a patriot ----
  4. Why not tax me for working out of another state? by ajdowntown · · Score: 3, Interesting

    This would be stupid. If this were true, then I would owe my left arm. Let me explain.

    I worked as a flight attendant. I was based out of a nearby state. And very often, I would be sent to other airports to work out of there. So, could I possibly owe taxes in every state I worked out of?

    I know this is telecommuting, but the idea is the same, I technically lived in one state and worked out of many others...

    Stupid...

  5. Ironically the Military is the Reverse by LexNaturalis · · Score: 4, Interesting

    If you're in the military you can choose your "state of residence" and that's the state that you actually pay taxes to, not the in the state that you work. Florida is a brilliant choice because there is no income tax. So even if you live in New York, you won't pay New York income taxes. I find it somewhat ironic that a telecommuter pays taxes in New York without actually living there whereas a Military officer would live there and not pay taxes.

    Caveat: This might have changed in the past 4 years, but I know in 2001, that's how it worked. The military has been, as of late, cracking down on people who claim non-tax states as their home while having no plans of ever actually living in that state or having any ties in that state.

    --
    Men occasionally stumble over the truth, but most of them pick themselves up and hurry off as if nothing ever happened.
    1. Re:Ironically the Military is the Reverse by HardCase · · Score: 3, Interesting

      Even more interesting, some states, including Idaho (my home state) do not tax income that is not made within the state. So, when I was stationed in Rhode Island and California, I did not pay income tax to either of those states. But since I did not make my money in Idaho, I didn't pay them, either.

      When I was in California between 1992 and 1996, the legislature passed a law defining what qualified a person as a resident of California. If I recall correctly, the criteria were any two of home ownership, driver's license and (I think) a certain time of continuous residence. The net result was that most military members would end up being California residents (according to California) and would have to pay income tax, even if their official state of residence was elsewhere (and where they were also paying income tax). The DoD pounced on that very quickly and it was successfully challenged in court.

      -h-

  6. Make another corporate entity? by GlobalEcho · · Score: 2, Interesting

    For companies that are either small enough to nimbly do so, or large enough to handle the red tape for a large number of employees, it seems the solution to this problem would be to create new corporate entities in each state containing some of their telecommuters. The telecommuters would then be made employees of their local corporate entities.

    That really screws the 10-500 employee businesses that make up the backbone of the US economy, of course. They have too much infrastructure to just go ahead and do this for the fairly nominal setup cost a small company would encounter, but too little to already be incorporated in multiple locations.

  7. Re:So does this mean.. by CGP314 · · Score: 4, Interesting

    Hell, I moved out of the US and trained as a teacher in England and now work at a school in London. Can anyone explain to me why I still have to pay income tax to the U.S. government when I don't use any of their services?


    -Colin

  8. Hmmm.... by porcupine8 · · Score: 3, Interesting
    My husband lived in NC for five years as a grad student, but his "legal residence" was in Colorado where his mom lives, for various reasons. He paid income tax both in NC and CO, even though he was only in CO once or twice a year to visit family - HOWEVER, both states let you deduct taxes paid to another state when you were figuring what you owed, so he didn't really wind up paying that much (if any) more than usual. (Aside from the fact that NC has a pretty high income tax.) I forget the exact way it works, but he definitely didn't have to pay full taxes to both states.

    Of course, if TN has no income tax, I guess there would be no credit for it on this guy's NY taxes. *shrug*

    --
    Warning: Apple/Nintendo fangirl. Likes her electronics cute & cuddly. May be rabid.
  9. Short sighted states by EmbeddedJanitor · · Score: 2, Interesting
    States love doing this sort of thing because it brings in revenue without hurting most of the voters. Most voters see moves like this as giving them more for nothing.

    But this is just short-sighted. Business will just go to states with more tax-friendly policies or maybe offshore.

    --
    Engineering is the art of compromise.
  10. What defines where you did work? by Thedalek · · Score: 2, Interesting

    What exactly rises to the level of "You worked in state X and must pay taxes?" Is it the location of the business? If so, why aren't we all paying taxes to the location of the home office of whatever company we work for? Is it the location of the services rendered? If so, then why aren't we paying taxes for each state of customer calls? Or should we be paying taxes for everywhere in the world when the services are on a globally accessable web site?

    This opens a great big mess-o-worms.

    --
    Happiness is relative, Based upon the way we live.
  11. Re:Why not tax me for working out of another state by sweetnjguy29 · · Score: 2, Interesting

    The idea is actually very different. Under most state laws, if you work in the state, you are subject to its income tax. Also, as a general rule, you can only be taxed by one state at a time. So, lets say you are a baseball player. You physically go to a ball park in a different park. And you ply your trade there. Thus, you owe income tax in that state, on the portion of income you earned there. Over a year, you might play in 30 different states. That means one 1040 + 30 state returns. Pain in the ass. But your income shouldn't be taxed more than once. So you might owe 1% of the $100,000 for 5 games in State A and 3% of the $200,000 you earned at your home stadium in State B.

    That doesn't mean that you should worry. Truck drivers don't pay income tax to every single state they drive in...that would be silly. They have a home base that they work from. In fact, I think they are exempted from the baseball player rule. Same thing with airline stewards...I think. Ask your accountant or lawyer. *ducks*

  12. Re:Fairtax by wayland · · Score: 2, Interesting

    An even fairer tax would be a Resource Rentals tax:

    http://www.prosper.org.au/index.php?module=Website &action=Text&content=1127459164453-3824

    (Australian link, but it should give the idea)

    It taxes the rich, but only the undeserving rich :)

  13. Last Year I Paid Taxes in 5 states by polv0 · · Score: 2, Interesting

    I am a consultant with one of the big four audit firms, and each week I submit billable hours by state and city. Last year I spent 150 nights in hotels, and for any state where I worked over 40 hours I had to pay income tax. Aside from inflating my H&R block bill, I think the system is fair. I get a tax credit in NY (my home state) for the hours I don't work here, and pay those taxes (often at lower tax levels) in the states I travel to.

  14. Re:So does this mean.. by honkycat · · Score: 2, Interesting

    You're free to go to the US Consulate and renounce your US citizenship at which point you will no longer owe US taxes. Until you do that, you have all the rights and privileges of a US citizen (whether or not you choose to take advantage of them) and hence are responsible for all the obligations it entails.

    And it's usually not as bad as you make out. With many countries (Canada for sure, don't know about others), the US has tax treaties that specifically avoid this double-taxation. With Canada, the US waives (at least most, maybe all) income tax it would otherwise levy on Canadian citizens in the US in exchange for Canada's doing the same for US citizens in Canada.

  15. Re:Fairtax by khallow · · Score: 3, Interesting
    A fairer scheme would be a tax on assets. After all, wealthy people and businesses are really the ones who benefit from government above all others. So they should be the ones who pay for government services that protect their wealth. And such a tax is not regressive unlike this sales tax (incidentally the so called "rebate check" is just a kludge that doesn't change the fundamentally regressive nature of the tax).

    Also, this aligns government with the preservation and increase of wealth in its citizens. After all, under your current scheme, government has a strong incentive to increase spending on new goods in order to increase tax revenue. OTOH, if they can only tax assets, then they have a strong incentive to increase the value of assets in order to increase revenue.

    This scheme also drives up the cost of goods and services and makes the cost of taxation less transparent to the end user. That adds economic inefficiency to the system and hides important information from the citizen (namely, how much of your money went to government?).

  16. Re:Good news for ending offshoring? No, not really by Skjellifetti · · Score: 2, Interesting

    So, the real question is: Why is it fair that I pay a much larger portion of my wages than someone making less than me?

    Go read up on John Rawl's and The Veil of Ignorance. The basic idea is that before you are born, you don't know if you will be born as the gifted child of a wealthy family or a mentally handicapped child of a poor family. What tax system would you choose for the society you will live in before you discover the actual alternative into which you are born? Is it fair to newborn children that some are born into wealthy families and others into poor families or that some are born with great talent and others with physical or mental handicaps? To me, a fair tax system is one that balances incentives to work hard and grow the economy with the moral understanding that people don't all start out equally.

    --
    FreeSpeech.org
  17. Re:Fairtax by SeattleGameboy · · Score: 2, Interesting
    Hmmm... that sounds very nice... in theory.

    Actually, the scenario that I described with the jets occurs today. It is one of the most abused tax evasion scheme.

    Today, if you take a ride on a "corporate jet" for a private purpose, all you have to report on your income tax is the equivalent cost of a commercial flight. It is a specific benefit written into the tax code by your Congress.

    This means that if I am Jack Welch, I can use GE corporate jet to go vacation in Hawaii (which probably cost the company about $100k), and the tax I have to pay on that benefit is the equivalent commercial flight, which is about $500 to $1000 (tax of $100 to $400 for $100k benefit).

    It doesn't stop there. The company that lent the jet can deduct the depreciation occurred on that flight.

    Just look at all the guys on fortune 100 list. Almost NONE of them own their own jets. They all "borrow" the jets from the company they work for or companies they control.

    Fair Tax is for poor (actually, middle class) people. Rich don't pay (unless the have no other option).

    There is a reason why prominent tax attorneys make tens of millions of dollars a year. People don't pay that kind of money just to prepare 1040's...