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Telecommute Tax Relief Gathers Steam
coondoggie writes to tell us NetworkWorld is reporting that backers of new telecommuter friendly tax legislation have high hopes that this might be the year that it sticks. From the article: " If passed, the Telecommuter Tax Fairness Act would prevent states from taxing income that nonresidents who telecommute to an in-state employer earn while working from home. The legislation is aimed in particular at New York, which is legendary for its stance on nonresident teleworkers. It requires those who sometimes work in the office of their New York employers to pay state taxes -- not only on the income they earn while physically in New York, but also on the income they earn at home. This often results in a double tax when the telecommuter's home state expects tax on the income the telecommuter earns at home."
I live in NJ, work in NY. NJ only taxes me on income not subject to tax in NY -- not income not earned in NY. Not sure about how other states deal with state taxes paid to another state.
Sucks anyway for me, since NY state tax is approximately 2.5-3 times the NJ tax, and I derive very little benefit from the NY taxes I pay. But, for telecommuters who sometimes have to work in NY -- nice deal. Makes me want to telecommute and pay the NJ tax rate when I'm working from home.
A scenario though -- if an employer has a telecommuting employee in another state, do they need to pay employment taxes in that state? My company has satellite offices in other states, and legally it's a bit of a pain. Would a company have to file also as a NJ employer if their telecommuting employees were treated as working in NJ while telecommuting?
"Trolls they were, but filled with the evil will of their master: a fell race..." -- J.R.R. Tolkien on Olog-hai
This often results in a double tax when the telecommuter's home state expects tax on the income the telecommuter earns at home.
I am pretty sure that Connecticut is the only state that doesn't have reciprocity for state taxes. IOW, in most states, you can deduct state taxes paid to another state so you don't get double whacked. This is useful for people who live on state borders. Of course, you accountant makes out better.check with your accountant.
The people who really get screwed are those that don't pay any state tax.
If you live e.g. in New Jersey, how can New York expect you to pay taxes, since you don't vote for anyone in New York?
Several years ago, the city of Miami decided to raise taxes on parking so it could extort money from those workers who commuted from Broward county and otherwise were not paying for services in Miami-Dade. Someone sued the city for taxation without representation, since he lived in Broward and so could not participate in Miami-Dade elections. I believe the state supreme court agreed with him, and the city had to make other plans to get the revenue for the sports venue they were planning.
The scary part is that many of the upstate residents think their taxes are perfectly reasonable. My father-in-law thinks it's awful that I have to pay for garbage pickup, since the city of Buffalo provides his for free. Never mind that he's paying twice the taxes on half the house that I am; that extra $2500 a year will go a long, long way toward covering a $20/month trash bill.
Dewey, what part of this looks like authorities should be involved?
I would be surprised to find any instance of double taxes anywhere. I think the summary is just plain wrong.
You get a tax credit from your home state for taxes paid in the state you work in. Or the other way around.
If it didn't work that way, there would've been a revolt long, long time ago already.
In Soviet Russia, I ruled you
Are you sure about that? I have helped a coworker who moved to/from NJ/NYC a couple years and had to deal with part-year resident forms on both sides. If you make 20K while living in NJ and 40K after moving to NY (and from a NY source), only 20K is taxable in NJ. Part-year resident tax forms for NJ are much less tedious than NYS/NYC PY resident tax forms (where you have to do a column for what's on your fed forms, another for what portion was NY state, etc).
From NJ 051040i.pdf p17
Filing Requirements. Any person who became a resident of this State or moved out of this State during the year is subject to New Jersey income tax for that portion of the income received while a resident of New Jersey. Part-year residents must file a resident return and prorate all exemptions, deductions, and credits, as well as the pension and other retirement income exclusions, to reflect the period covered by the return. A person who receives income from a New Jersey source while a nonresident must file a New Jersey nonresident return.
Perhaps they think the taxes are reasonable in the big upstate cities, but the people everywhere else aren't too happy. NYC's existence screws a lot of people upstate out of land (for reservoirs and their "protective" legislation), the city types that move north take the City with them, rapidly driving up taxes in those areas, and forcing the locals to move further away from NYC. Most of the state paid 50% of their taxes to NYC, Albany, and Buffalo for the last 30 years, and lost more and more of their communities for the trouble. The taxes drove large chunks of companies, like IBM, out of the state.
Look to the majority of NY State, rather than just the few large cities. Most upstate people don't *want* to live in or near cities, much less to pay for those that do.
Yes, but Washington DC wasn't supposed to be a city in the conventional sense. It was supposed to be the seat of Federal government, period. The only people supposed to be living there would be Federal employees who weren't supposed to have a direct say in their own authority.
See Arthur C. Clarke, "Imperial Earth" and David Eddings, "The Tamuli".
General Relativity: Space-time tells matter where to go; Matter tells space-time what shape to be.
Simple - Don't be an employee. Incorporate and invoice the place you are consulting to, then pay yourself dividends. As Ivana Trump put it: Tax is for the little people...
I think your father-in-law needs to take a closer look at the bill he recieves quarterly from the city of Buffalo for trash pickup. Buffalo does not provide it free of charge.
You may be misreading your weekly pay stub.
The state tax refund is treated as "additional" income because it wasn't taxed to begin with. It's withheld from your net paycheck and, therefore, not taxed as income at that time. When you get it back via refund, it goes back in the "taxable income" column and is then taxed - after the fact.
The feds do the same thing, in case you haven't noticed. You're supposed to declare any state tax refunds on your federal return.
In all cases, the one-year-free-loan is accurate, though. And you can adjust your W-4 to deal with that (declare more 'dependents'). Instead of overpaying, just resign yourself to paying at the end of the year, but in which case you get to keep more of your earnings.