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."

Comments

SSH? VNC?

[Short Circuit]

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?

Re:SSH? VNC?

[TheOtherAgentM]

Seriously, I would owe taxes in a lot of states if this were taxable. Shouldn't you just tax a person in his place of employment if he is a remote worker?

Re:SSH? VNC?

[boldtbanan]

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.

Re:SSH? VNC?

[packeteer]

Are you serious? Do you think that the government takes losing money mroe lightly than any business?

Re:SSH? VNC?

[rosciol]

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.

Re:SSH? VNC?

[Darby]

.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?

Re:SSH? VNC?

[dajak]

The reasonable thing would be to tax them in their place of presence.

IANA, but the reasonable thing to do seems to me allowing the taxpayer to choose domicile for the purposes of taxation. This creates competition between states for the favour of the taxpayer.

All civilized countries, including the US, have tax treaties establishing some domicile principle to prevent the obvious injustice of double taxation, but states inside the US apparently still have to solve this problem? I do understand it is problematic to negotiate a tax treaty with a state that does not have an income tax at all, but it's surprising that this can happen in 2005.

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[account_deleted]

Comment removed based on user account deletion

And his point is???

[Chocolate Teapot]

A guy plies his trade in a place where certain taxes apply and he has a problem with this? Since when did not having a physical presence in a place exempt you from from their laws? Really, as far as New York is concerned this guy is working in their manor and drawing an income from their economy and is therefore liable for their taxes. The fact that he does not actually shift his carcass over the the state line is irrelevant. Everyone expects free beer these days.

Re:And his point is???

[Angostura]

Speaking as someone who lives in London, UK, and is employed by a New York-based company, and pays UK taxes, I think I see a flaw in your argument.

Re:And his point is???

[Anonymous Coward]

What physical services or resources, for which the state wishes to be compensated, is he using? Does he have the right to vote in that state, prorated by his taxed percentage? I suspect the answers are, respectively, "none" and "no."

It's not expecting free beer. It's expecting to pay for beer only when you get beer in return.

Re:And his point is???

[grommit]

I think you're forgetting what those taxes are for. It may seem like it but taxes aren't there just to take your money. They're there for the government to provide services (such as roads, police, etc) for those people that make use of them, the residents. Hence, if you aren't a resident of a state and benefit in no way from the services that the government there provides, why should you be paying taxes to that government?

Re:And his point is???

[Laura_DilDio]

Screw that! Does he utilize any New York resources? Does he get the right to vote? No taxation without representation? Taxes paid while visiting in New York, or even taxes paid on wages earned while physically in New York are a little more understandable.

If they decide to tax this guy under the auspices that he is drawing an income on NY economy, then they should FULLY TAX all of the Indians who work at call centers for NY companies!

Re:And his point is???

[SpiceWare]

He's not using their roads, emergency services, etc.

Also, since he doesn't have the right to vote there it could be considered taxation without representation.

Re:And his point is???

[orderb13]

Ohh, there is a good one. Off shoring would be just as taxable. Someone should bring this up to a congress critter that is in favor of off shoring.

Re:And his point is???

[madajb]

That's the whole point of the Republic.
New York's laws stop at the New York border.
Tennesee's laws stop at the Tennessee border.

The fact that he did not "actually shift his carcass over the state line" (at least 75% of the time) is highly relevant.

-ajb

Re:And his point is???

[DrFrob]

This is a good point. If he couldn't vote in NY but was being taxed for working in NY, then he would be taxed without any representation... a principle that kinda started the revolutionary war.

Re:And his point is???

[JesseMcDonald]

Actually, the taxes do exist just to take your money. If, as you say, the taxes exist to pay for things the taxpayer in question uses, then why is one required to pay the tax when one does not take advantage of the benefit? If the government limited taxation to only cover the things one used, then it would be no different than any other private-sector service. Instead, they apply threat of force to aquire from everyone, even those few who do not benefit, the property to pay for services used by (in most cases) the majority of residents. There is a phrase for that: legalized theft.

A government which rested solely on the authority of those governed -- which truly ruled by the consent of those governed -- would have no need for forced taxation, and might as well be replaced by private enterprise. There is no reason why there cannot be private-sector police, arbitrators, roads, etc. The use of force proves that the government has already failed to demonstrate that its taxation is justified.

More Information

Serves 'em right!

[Shadow Wrought]

And no, I'm not bitter that they get to stay home while stand out in the cold, blustery rain. That has absolutely nothing, NOTHING, to do with it. OK, so it actually has everything to do with it, dagnabbit.

As it becomes more commonplace, congress will figure it out. They always do, right?

So does this mean..

[twiddlingbits]

Programmers working in India who are using Servers hosted in the USA to do development for a US firm will owe US Income Tax ;)

Re:So does this mean..

[magarity]

Parent is 'insightful', not funny.
 
Yes, they would, using the same logic as where the work is actually done whether it's from one state to another or one country to another. And to get you to pay it would probably be deducted up front and you'd have to file for a refund. Does India's equivalent of the IRS give a discount for income taxes paid to other countries like the US's IRS?

Re:So does this mean..

[CGP314]

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

Re:So does this mean..

[forand]

Well assuming you are a US citizen. . . do you use your passport? Do you use all the treaties that have been signed by the U.S. government to allow you to travel freely in other countries? If you get injured or arrested while in another country are you going to use the US consulate services?

The government is not in the business of charging use fees instead it is like having insurance; you hope to god you won't need the military to come in and get your butt out of Sudan but you are really happy that they do. The US government is a social contract with the people it governs to provide them with what they expect from it: roads, trade agreements, international treaties for travel and business. All of these things cost money and we ALL use them in some sense even if not personally we benefit from them everyday. The only people would may have ANY reasonable excuse for not wanting to pay taxes are those living on their own land, growing their own food, and not using ANYTHING outside that, and even then they are using the resources of the land which they will not always own so they are in fact relying on the government to ensure that such land is available.

Re:So does this mean..

[the phantom]

Here is where I see the problem occuring (even assuming that I agree that I am paying taxes for a service -- I do not agree that it is quite that simple):

In meatspace, you are expected to pay the taxes in the state where you earned the money. This can be a pain in the ass sometimes -- I once had to file in three different states because I had worked in three states that year (i.e. actually physically worked in those states, and was paid by employers in those states). In theory, I was taking advantage of the services offered by those states during my tenure there. So, it seems that this is some attempt to bring meatspace rules to the world of telecommuting.

The problem is this: where should you pay your income taxes? in the state where you are working, or in the state where your employers are paying you? I was a bit unclear from the article, but it sounds like it boils down to this question. Obviously, as the technology is relatively new (in the broad scheme of things), there are going to be some problems ironing things out. It sounds like some folk are having to pay two states for the same income, which just seems wrong to me. On the other hand, they really ought to be paying income taxes in one state or the other.

If anyone cares for my opinion, they should be paying taxes in the state where living. In theory, they are using the government services in that state, so should pay taxes in that state to provide for those services. However, as there does not seem to be a great deal of federal regulation of state tax systems, it seems that both states are trying to get a chunk of the change.

Re:So does this mean..

[rk]

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.

Re:So does this mean..

[honkycat]

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.

Income Tax

[nurb432]

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

Re:Income Tax

[Seanasy]

So, how should the government generate revenue without an income tax? Sales tax? Property tax? Estate tax? Donations?

Re:Income Tax

[Aexia]

It's hard to get people to take this seriously, but the idea of abolishing the IRS, income tax, capital gains and estate taxes, and implementing a National sales tax makes a lot of sense.

No it doesn't. The sales tax is *incredibly* regressive. And the % necessary to even begin to make up the difference would be insanely high.

The basic end result is that the poor and middle class get screwed out and the rich get a massive tax break. I won't even tough the myriad of other problems. Whether it's rampant opportunities for fraud(With no IRS, how will you make sure people pay the sales tax?) to the massive invasion of privacy necessary to enforce it (now, instead of tracking your income, the gov't tracks *all* your purchases), it's just a bad bad bad bad idea.

Why not tax me for working out of another state?

[ajdowntown]

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...

You're missing the point

[Crazy Man on Fire]

Taxes pay for the services that you use. Is this guy using the roads to get to work? Are his kids going to the schools? No! Why should he pay for that stuff? The taxes he pays in his home state cover this stuff in his home state. The people who live in the other state should be paying for those services provided there.

Re:You're missing the point

[Soko]

Besides, does this guy get to vote in New York State elections now? If not, it's taxation without representation.

Soko

Re:You're missing the point

[TVC15]

I'd like to start by saying that I'm not entirely sure how I feel about how this should ultimately play out but would like to respond to this specific point that the guy in Tenn is not benefitting from the taxes he would be paying for the New York work. One argument to the contrary would be that he _is_ benefitting from that tax money he is paying as the company he is working for couldn't exist to give him a job if the roads there weren't built/maintained. He would not be able to get the job if the 'local' employees hadn't gone to schools or aren't sending their kids to schools there. Etc. Basically, my point is that this is alot more complex than you are making out and resolving this is tricky.

Re:You're missing the point

[humina]

If you move to another country like India, you won't have to pay taxes in New York.

Re:You're missing the point

[iambarry]

If not, it's taxation without representation.
Lots of taxes are without representation. Non-citizens pay taxes, but don't vote. If you travel to another state and purchase goods you may pay sales tax, but not vote. I work in another state and pay plenty of taxes there, but can't vote there.

So, what's representation got to do with it?

He wants to earn money in New York (as they pay him in New York). New York wants to tax that money. The courts say New York has a right to tax income paid in New York. What's wrong with that?

Re:You're missing the point

[Loconut1389]

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.

Re:You're missing the point

[frodo from middle ea]

I live in D.C. you insensetive clod.

Fairtax

[ScoLgo]

This is why the US of A needs the FairTax.

It would do away with all this income tax malarkey. At least at the federal level. Once that happens, it's a good bet that individual states would follow suit.

Re:Fairtax

[Monkelectric]

Every tax proposal I see somehow provides extreme benefit to the extremely wealthy. Is the fair tax any different?

Re:Fairtax

[GreyWolf3000]

Define what you mean by "extreme benefit."

The extremely wealthy are always going to be the best off at the end of the day. They are, after all, the richest. Any tax system that would break that would break the fundamental laws of the universe. You can't have the extremely wealthy wind up poor after taxes, and vice versa

As far as a tax code going out of its way to help the extremely wealthy, well, all I have to say is that our graduated income tax in the US pretty much proves that we don't have such a tax code.

Re:Fairtax

[ScoLgo]

Yes. It really benefits everyone. It's best to read it for yourself, but here are some quick points...

1. The tax burden shifts from those who work to those who spend. This would now include tourists, drug dealers, prostitutes, children, retirees, etc...

2. You are only taxed on new goods. Sell your used computer, car, house, whatever, without worying about taxes.

3. Every head of household will receive a monthly 'rebate' check from the federal government to reimburse the taxes collected on basic necessities. The closer to the poverty line you are, the larger the check. For instance, a family of four living at the poverty line would receive a monthly check of $497.00, (estimated at the time the Fairtax book was written).

4. Every pay period, you receive your gross wages. No Federal Withholding, no Social Security withholding, no Medicare withholding. Those taxes are paid from the sales tax.

5. No more April 15th. It's just another spring day.

6. Outsourcing of jobs and finances will stop as the flow is reversed to what will become the biggest and best tax haven in the world.

So... do the rich benefit? Sure they do. But not at the expense of the middle-class or the poor. Our current tax system is almost completely broken and needs a major overhaul.

Oh, and sooner is better than later.

Re:Fairtax

[dfjghsk]

No, it's not any different. FairTax allows those with a lot of money (which they couldn't possibly spend all of) to then save that money with out paying taxes on it. So under FairTax, someone who is a billionaire pays the same amount in taxes as someone who makes 40k a year (assuming they both spend the same on living expenses etc).

FairTax would be similar to the VAT taxes in Europe. It would result in a higher sales tax rate than we currently have (to make up for the lack of taxes collected from other sources, like income tax). If it's anything like the UK, it will be upwards of 30-something percent.

Net result with FairTax: the billionaire pays less taxes than they currently do, and the working class (who has less disposable income) pays more. Helping further the disparity between the rich and poor.

Re:Fairtax

[mc6809e]

Every tax proposal I see somehow provides extreme benefit to the extremely wealthy. Is the fair tax any different?

Don't confuse income and wealth. They're not the same thing at all.

Compare the widow that owns her home and has $1,000,000 in the bank making 3% interest and the programmer making $50,000 with a mortgage.

Her income is just $30,000/year compared to the programmer's $50,000, yet it's obvious she's more wealthy.

This is how rich New England Democrats can get away with advocating "taxing the wealthy", because in reality they don't really want that. They want to tax income eaners instead.

Re:Fairtax

[ScoLgo]

"People with money do not need to spend it. They make money with money and do not need to spend it so they get weathier."

I respectfully disagree.

People with money may not need to spend it - but they do spend it. How about all those huge mansions that celebrities buy? The cars they drive? The private planes they have?

The problem with income tax is that the government takes your money up front and gives you back a small portion without interest - if you don't owe more than they've withheld, that is. It's much, much more simple to pay as you go. The amount of time that millions of people spend preparing their taxes, keeping records, etc. could be put to better use, could it not?

Income taxes foster tax loopholes. Sales taxes do not.

Re:Fairtax

[rabtech]

FYI: rich people hire lawyers and accountants to make sure they pay the least amount of taxes possible. They also often setup non-profit trusts and such to shelter much of their money.

Not to mention that the really, really rich (like >1 million in investments) generate their money via capital gains which is an entirely different issue.

So while the "nominal" rate in some of these systems (fair tax, sales tax, etc) may appear to decrease we must realize that the really rich aren't paying the so-called nominal rate in the first place.

Re:Fairtax

[ScoLgo]

What you say would be true if the billionaire bought the same size house, the same car, the same clothes, and had the same lifestyle as the 40K-per-year guy. The fact is that the 40K guy is not going to be buying jet fuel for his private plane. While rich folks may pay a smaller percentage of their income as taxes, they will pay more dollars than poor or middle-class people.

Re:Fairtax

[d_54321]

The plan is designed to be revenue-neutral, so all the money that is supplied to the federal government for road work now will be there after the plan is enacted. How much you use the roads does not necessarily affect how much you pay in taxes. How much gasoline you purchase at the retail level does.

You can learn more about it here: http://www.fairtax.org

Re:Fairtax

[ScoLgo]

"Um, actually the rich guy would have his corporation pay for jet fuel, even if it is his private plane."

Ok. So his corporation pays the tax. So what? It still gets paid. Under the current system, that's a write-off for the corporation - which results in less taxes collected!

"You really drank the Fair Tax Kool-Aid, huh?"

(Score:-1, Ad hominem)

Re:Fairtax

[Red Flayer]

"As far as a tax code going out of its way to help the extremely wealthy, well, all I have to say is that our graduated income tax in the US pretty much proves that we don't have such a tax code."

That's pretty funny. Last I checked, the extremely wealthy pay a smaller portion of their income in taxes as any group except for the destitute. Seeing as most of their income is not wages.

The stated graduated income tax rates are a joke. No person making six figures or more is paying even 25% of their income in taxes each year... unless they are absolute morons. Just forget about those who make 7 figures. Yet I pay 25% of my income in taxes and use all the deductions at my disposal to pay as little as possible.

Re:Fairtax

[Ken D]

The other problem with switching to a consumption based tax is that it unfairly penalizes anyone who has been saving their (income)taxed income for the future. First they paid income tax when they earned it, now they're going to pay consumption tax when they spend it?

Re:Fairtax

[SeattleGameboy]

Only problem is that percentage of poor people's income spent on buying goods (necessary goods like food, clothing, etc.) is MUCH higher than rich people's income spent on buying goods (even when you factor in $35 million for Gulf Stream Jet).

Why should poor people pay more (in relative scale) than rich?

Even if you can address the equality issue, when you are rich, you have multitude of ways to avoid paying it.

Let's take the Gulf Stream example.

Let's say income tax has been replaced by 30% sales tax on everything you buy. "Well, no problem", says the rich. He just buys the Gulf Stream in France instead of US.

Let's say you somehow close that loop hole (I don't know of any easy ways), "well, no problem" says the rich. He creates a charitable organization which goes out and buys the Gulf Stream tax free and leases it back to the rich guy for pittance.

There is no tax system that cannot be gamed by people with resources to game it.

Re:Fairtax

[wayland]

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 :)

Re:Fairtax

[chill]

The other problem with switching to a consumption based tax is that it unfairly penalizes anyone who has been saving their (income)taxed income for the future. First they paid income tax when they earned it, now they're going to pay consumption tax when they spend it?

How is this different from the current system? You'll pay sales tax when you spend it, unless you spend it all in NH, OR, MT or one or two others. You'll pay a luxury tax if you buy something really big, like an expensive car or boat.

  -Charles

Re:Fairtax

[TheSpoom]

No income tax = more income for spending.
More income for spending = more spending.

It's simple.

Re:Fairtax

[khallow]

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?).

Re:Fairtax

[SeattleGameboy]

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...

Welcome to the USA...

[Mydron]

... where its a-okay to outsource to China and India, but to a low-tax state? Hell no.

Ironically the Military is the Reverse

[LexNaturalis]

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.

Re:Ironically the Military is the Reverse

[HardCase]

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-

Re:Is this a new issue?

[Red Flayer]

"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.

How does this apply to DC?

[b0bby]

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.

Re:How does this apply to DC?

[conJunk]

didn't you get that memo? all bets are off for DC... no congressional representation (you know what i mean), and your rinky-dink underemployeed population can pay for the landscaping, roads, and sewage/waste removal for tens of thousands of daily visitors... face it, DC is america's *real* armpit

(is it a troll if it's true?)

Re:How does this apply to DC?

[arkanes]

I used to live in CT and work in Manhattan, and I paid taxes (on my full income) in both states. CT got first dibs - NY gave me a credit for the CT taxes I'd paid. I also had to pay NY city taxes. Many, many states work like this, especially the ones with high commuter populations - NYC even has it's own commuter tax for just this reason. No idea why DC can't get away with it - the people hit by the tax aren't the ones who get to vote on it, so they tend to pass pretty easy.

Re:Have a reality check

[sillybilly]

Pennsylvania and Ohio have reciprocal tax agreements, where even if you telecommute, you pay your own resident state's taxes only. It's kind of neat, because less headaches for you. This is state tax only, you still have to look at local city taxes, depending on city you worked in.

Make another corporate entity?

[GlobalEcho]

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.

I am turning in the editors

[Work Account]

I just emailed the IRS informing them that CmdrTaco owes a decade of back taxes.

INFORMANT FORM

Name: Robert Malda
Aliases: CmdrTaco, (1)
Residence: Michigan
Company: Slashdot (OSDN)
Occupation: Human dupe machine, spellcheck input tester
Taxes Owed: 120 months
Salary: $0.02/click

Huh?

[Chocolate Teapot]

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.

Missing the point!

[Crazy Man on Fire]

That's why his employer pays taxes...

Re:Missing the point!

[keraneuology]

pretty much any higher tax burden on the company I used to work for would have driven it out of business

There is a concept the businesses more" ilk: businesses do not pay any taxes. 100% of taxes levied against businesses are paid by their customers or the company will go out of business. If you tax the businesses and corporations enough they may no longer be able to pass those costs on to their consumers and will go out of business. Or they might go offshore. But a business never pays taxes out of their own pocket.

Re:Missing the point!

[bnenning]

100% of taxes levied against businesses are paid by their customers or the company will go out of business.

They can also be paid by employees via lower wages, or stockholders via lower profits. Your central point is correct though: every tax is ultimately paid by a human being, but that's not obvious to most people which is why politicians like to "tax" businesses.

I think I speak for everyone here..

[Hits_B]

when I say to them "KISS MY ASS!!"

I'm willing to bet...

[Ryan Amos]

The reason the Supreme Court probably refused to hear this case is specifically because there is legislation in the works to address the issue. They tend to let the legislative system work before rushing to judgement (there are exceptions; namely "political suicide" issues like abortion and gay rights which the legislators won't touch.)

Hmmm....

[porcupine8]

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*

Short sighted states

[EmbeddedJanitor]

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.

IANAA

[fatmal]

IANAA (I am not an American), but didn't you guys have some kind of beef with 'Taxation without Repesentation?' Surely this is exactly what NY State is demanding?

What defines where you did work?

[Thedalek]

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.

Re:Government Revenue

[Seanasy]

First of all, except for a few rare exceptions the government does not GENERATE revenue. Thats why it has to tax the citizens. If it generated revenue, it would be self-sufficient.

Huh? Tax money == state revenue. The state generates revenue by collecting a tax on incomes (among other things).

That being said, a better way of doing it would be via a sales tax. That way you get charged for the commerce you actually participate in, not your potential to particpate.

That'd be a big sales tax. And why should people be charged for participating in commerce? Commerce redistributes wealth and keeps the economy healthy. Taxes are supposed to pay for government services. There may be better ways than income tax but sales tax sure as hell isn't it.

Re:The system works!

[mcrbids]

There is no worse tyranny than to force a man to pay for what he does not want merely because you think it does him good

Sounds good, but just rediculous when you think about it. Examples of "worse tyranny":

1) Force a man to pay for something he does not want because you think it will hurt him.

2) Force a man to pay for something desired by the ruling class, to hell with whether or not it hurts him.

3) Force a man to sit and rot in prison, unable to even distract himself from his misery with work routines because he disagrees with the ruling class.

4) Force a man to occupy a particular position in society, with no hope or opportunity of improvement or self-betterment.

5) .... I could go on, and on, and on, and on.

PS: I'm a populist libertarian.

Re:Why not tax me for working out of another state

[sweetnjguy29]

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*

Re:Maybe it's your definition of tyranny

[JesseL]

While it's true that the "no worse tyranny" quote is a bit strong on the hyperbole (why does everybody nitpick what constitutes 'the worst tyranny' rather than addressing its point? I'm gonna hafta get a new one.), I think that what you take for petty technicalities are simply an expression of most libertarians uncompromised belief in their principles. What good are principles if they are easily compromised?

I think you'll also find that libertarians are very well focused on solutions to the problems of "murder, mayhem, and general starvation and deprivation." Most libertarians see these issues as symptoms of the larger problem of misguided gorvernment mismanagement.

Anyone else read this as...

[c_forq]

Telecommuters May Owe Extra State Texas? I was confused as hell trying to figure out who was going to get and extra state, and why the hell telecommunications was involved.

Representation

[antizeus]

So, what's representation got to do with it?

Taxation without representation was one of the big gripes that the American colonists had with England, their mother country at the time. The crown was increasing taxes on the colonists to help raise funds that were depleted during the French and Indian War, but was not giving them representation in Parliament.

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.

We have a winner.....

[vwjeff]

Besides, does this guy get to vote in New York State elections now? If not, it's taxation without representation.

I was thinking the exact same thing. Some of my friends are in a simliar situation because they live on the Wisconsin/Illinois border. I live and work in Wisconsin so I pay Wisconsin Income taxes. Some of my friends work in Wisconsin but live in Illinois. Do they pay the Wisconsin and Illinois income tax? No. They pay the Illinois income tax because that is where they live. They do not get to participate in Wisconsin elections (state and local) because they are not a resident.

This only makes sense.

No Taxation Without...

[Nom du Keyboard]

may be doubly taxed if both have income tax

First, this is wrong. The states may fight over who gets to tax him, but in the end he'll only pay taxes to one state. (Yes, my wife is and accountant.) You are able to deduct taxes you pay in one state against taxes owed in another state.

Second, if he's paying taxes to NY he ought to be demanding the right to vote there. It's taxation without representation (and the right to vote against people who impose such taxes) otherwise!

Now that would make a great Supreme Court case. The guaranteed right to vote in any state that collects anything above a certain percentage of your income in taxes.

Third, I wonder if that includes City and Burough taxes in NYC?

Re:Look at the breakdown of tax returns...

[Fulcrum of Evil]

The problem that I have with comments like this is that the extremely wealthy pay the majority of US income tax. Therefore, any change will affect them disproportionaly. Look at IRS data. Taypayers in the top 1%, as ranked by income, pay 34% of all federal income tax.

Well of course they do. They own 80% of all property!

Stupid public policy

[einhverfr]

The problem I see though is that you could live in one high-income-tax state and work in another. This could effectively double one's taxes in extreme cases. Now, of course if you are a consultant and your own business, then the tax situation gets easier. So this is good for freelancers and bad for employees.

And with the attmept at the moment to take away the state tax deduction from one's income tax, this could get even messier.

It also seems to me that this could continue to accellerate offshoring trends...

Sigh

[geekoid]

"1. The tax burden shifts from those who work to those who spend."

thus hurting the people in the lowest income levels. Many of those people wither don't need to pay taxes i.e. EXEMPT or low income person who gets most, if not all, of there money back.

"2. You are only taxed on new goods. Sell your used computer, car, house, whatever, without worying about taxes."

The volume of lost tax revenue on home sales alone would intitute a huge amount of maoney you will need to recoup. That for the times you actuall keep the money. If you sell a house, and roll the money immediatly(30 days) into a new purchase, you don't pay taxes. I don't know what the upper limit is.

"3. Every head of household will receive a monthly 'rebate' check from the federal government to reimburse the taxes collected on basic necessities. The closer to the poverty line you are, the larger the check. For instance, a family of four living at the poverty line would receive a monthly check of $497.00, (estimated at the time the Fairtax book was written)."

do you reallt think people making less the 15,000 dollars spend 6000 a year in taxes on 'basic necissities'? or does rent count into this?

"4. Every pay period, you receive your gross wages. No Federal Withholding, no Social Security withholding, no Medicare withholding. Those taxes are paid from the sales tax."

I get taxed about 600 dollars a month, and I have no sales tax in this state. so now they need to get that money back through sales tax. that meand if I am taxed at 10%, I must spend 7200 dollars a monthfor the state to get the same amount of money. FYI I get about 2000 doallrs a year back.

"5. No more April 15th. It's just another spring day.
"

if 4/15 is an issue, then you are just lazy. It's not like it happens on a different time every year!

"6. Outsourcing of jobs and finances will stop as the flow is reversed to what will become the biggest and best tax haven in the world."

ummm why would people buying things in a different country want to come to a country where they would have to pay more in taxes?

Taxes?

[Aexia]

The first $80,000 or so you earn abroad is exempt and isn't subject to SSI or Medicare payroll taxes. And that's before you even touch the usual cornucopia of tax exemptions.

Re:Taxes?

[Stephen Maturin]

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.

Re:Good news for ending offshoring? No, not really

[DrLlama]

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.

Re:State screws people who can't screw back...

[bladesjester]

Funny that. I remember this little scuff with a small island nation over taxation without representation.

Kind of reminds me of that...

Last Year I Paid Taxes in 5 states

[polv0]

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.

Re:Good news for ending offshoring? No, not really

[ShieldW0lf]

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?

I'm not going to say it is or isn't fair, but there is a case to be made for the fact that when you're making such a dramatic amount more than your fellows, it's not because you were doing such a dramatic amount more work, it's because you managed to get a setup going where you're being paid for other peoples work, and you're getting a higher return on the infrastructure than others because you've got all your underlings using it to make you money. As in, I'm only using and relying on the infrastructure for my own use, but Bill Gates is using and relying on the infrastructure for the many thousands of people who work daily to earn him his money. It's not as cut and dried as that in most peoples cases, but the fundamental principle is the same. You pay more because, at the end of the day, it doesn't matter fair or not, if control over the wealth is concentrated in a few hands, those few hands are going to have to feed the machine that gives them that wealth whatever it needs or they won't continue to have it.

Re:Good news for ending offshoring? No, not really

[Skjellifetti]

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.