I work for a corporation with multiple sites and employees in several different states. Many of my fellow workers regularly travel back and forth between states. I don't travel a lot, but do typically spend about 2 weeks a year out of my home state typically at conferences.

Was surprised when informed that starting in 2013, we will all be required to file tax returns for all the some states that we work in during the year.

Right now, this isn't exactly a rumor as it was our HR Director making the announcement. Of course a lot of people had a lot of questions on this and she did not have many answers. However, my understanding is that some states are looking at this as a source of tax revenue. Supposedly there will be more to be announced on this in the future.

So, I'm curious to know if anybody else is aware of this. I'm most concerned about my home state New York, but also Maryland, Pennsylvania, Florida and California.

Thinking this might be good news since taxes are fairly high in New York and anything that lowers my state wage base would be good. However, I've got no experience in filing out of state returns. I'm also thinking that this might make the lower income tax states (Florida maybe) attractive for conferences since doing so would allow attendees to reduce their home state wage base.

Thinking this might be good news since taxes are fairly high in New York and anything that lowers my state wage base would be good.

Nice try, but it doesn't work that way. Assuming you live in NY, you are a resident of NY, which taxes all your income wherever earned. You are a nonresident of all the other states involved. Unless NY has a reciprocity agreement with a "foreign" state you'll pay that state based on its nonresident rules. This may or may not involve actually paying anything. It all depends on the state. NY probably gives you a credit for all or a portion of what you pay another state for income NY is also taxing. You do your returns in this order:

1. Federal
2. Nonresident state(s)
3. Resident state

Try to look on the bright side. It's possible to be considered a resident of two states at the same time.

Phil
Rule Your Retirement Home Fool

Phil's right. The bottom line of all that is you will typically pay the higher of the tax in your home state or the tax in the non-resident state. You won't save any state taxes by having some income in a different state, but you could pay more if the non-resident state has higher taxes.

Why is this happening? This really isn't anything new. This is how states have taxed income earned in their state for many years (decades, even). It's just that with tight state budgets and better technology for enforcement, it's become worthwhile for states to go after smaller and smaller cases. Twenty years ago, it was pretty much just professional athletes (and the especially honest) who got caught up in this.

--Peter

Thank-you Phil & Peter;

So, are there any states with particularly stiff non-resident tax laws?

For myself, I'm thinking about less than $7K of wages.
Of course, I know some people who are earning a lot more than that.

So, are there any states with particularly stiff non-resident tax laws?

New York ;-)

California

New Jersey is probably up there, too.

--Peter

So, are there any states with particularly stiff non-resident tax laws?

For myself, I'm thinking about less than $7K of wages.
Of course, I know some people who are earning a lot more than that.

Most states are equally stiff (on paper). It's their willingness to devote resources to pursue the non-resident wage earners that's important. New York is perhaps the worst, having found several ways to classify non-residents as residents for income tax purposes. As Peter said, CA is usually near the lead in pursuing possible tax revenue sources. NJ has been generally inept at figuring out who to go after, but exceptionally tenacious once they've identified a target.

Ira

NJ has been generally inept at figuring out who to go after, but exceptionally tenacious once they've identified a target.

And has an utterly indecipherable tax system. (At least to those who don't practice in it regularly.)

--Peter

PS - I loath preparing NJ tax returns. Give me a couple more years, and I'll hopefully be in a position to refuse to do them. Fortunately, I very rarely see them. Thank you, Ira, for handling those!

And has an utterly indecipherable tax system. (At least to those who don't practice in it regularly.)

NJ is really simple. Add up all the positive income items; ignore the negative ones. Eliminate all deductions other than medical and real estate taxes and pay what's left to the state.

Ira

NJ has been generally inept at figuring out who to go after, but exceptionally tenacious once they've identified a target.

And has an utterly indecipherable tax system. (At least to those who don't practice in it regularly.)

I make quite an effort to pay the end-use tax when I buy something from out of state, but it is impossible to do this correctly. I do the best I can. No one else I know ever pays the end-use tax.

The big problem I have is that I cannot find a complete list of taxable items and untaxable items. Either list would be enough. I did find a publication of a couple of dozen pages that gave examples of taxable items, but it said it was not complete, and a list of untaxable items, that it also said was not complete. And there is no logic to either list. One example (and I may have this backwards): books are taxable and magazines are not. I assume a paperback with perfect binding is a book and thus taxable, and a magazine with a staple or two is a magazine. But how about a fat magazine with stapled perfect binding? Is Cosmo a book or a magazine? If it comes out regularly, is it a magazine? How about "What Color Is Your Parachute" that comes out once a year? Is it a magazine?

Food is not taxable, unless you eat it in a restaurant, in which case it is taxable. What if you buy it at a street fair? If you eat it before you bring it back in the state, it is probably not taxable.

Another problem is that some on-line vendors DO charge me end use tax, and some (Amazon comes to mind) do not. So I must keep track of every damned thing I buy out of state, guess if it is taxable, remember if I paid the tax, etc... I happen to use GnuCash, but Quicken could manage this too. But I must remember to record each item purchased, and separate them according to the taxable and untaxable list, and flip a coin on the other things... If there must be end use taxes (I think they are unconstitutional, an import tax on things imported to the states, but they do not care what I think), I think they should be uniform across the states, the Federal Government should collect it, and distribute it ALL to the states. But if that almost happened, I do not suppose the states would get it all.

I think my friends who never pay end use tax may have the right idea. Any state whose laws are too incomprehensible to obey deserves to have them disobeyed.

Ever look at the U.S.Criminal Code? IIRC, it is about 4 to 6 feet of thick books on my public library's shelves. I never chose to look inside them. Ignorance of the law is no excuse, they say, but that is ridiculous. I have no idea if I obey all those laws or not. I do not even know how many there are. Did my congressman or senator actually read all the bills that must have been passed to get such a code? Not likely. How about the Internal Revenue Code? It must be at least as bad. Now about the states, counties, municipalities...

I suppose all laws are passed to benefit lawyers.

I cannot imagine what NBA player's accountants go through at the end of each year. I mean, there are, I believe, 22 states and the District of Columbia, who sponsor at least one NBA team. And I believe that NBA players are contracted, which should mean they'd file a schedule C (IRS), but would likely also have to file as a business in those states that don't have individual income tax like FL or TX....but that's only a guess.

BruceM

I cannot imagine what NBA player's accountants go through at the end of each year. I mean, there are, I believe, 22 states and the District of Columbia, who sponsor at least one NBA team. And I believe that NBA players are contracted, which should mean they'd file a schedule C (IRS), but would likely also have to file as a business in those states that don't have individual income tax like FL or TX....but that's only a guess.

No, they're ordinary employees, not independent contractors. They receive W-2s for their team salaries. An employment contract does not make an independent contractor.

Ira

I cannot imagine what NBA player's accountants go through at the end of each year. I mean, there are, I believe, 22 states and the District of Columbia, who sponsor at least one NBA team.

Don't forget Canada.

Ira

I cannot imagine what NBA player's accountants go through at the end of each year. I mean, there are, I believe, 22 states and the District of Columbia, who sponsor at least one NBA team.

Don't forget Canada.

Ira
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At least Florida and Texas have multiple teams and no income tax.
California has an awful tax but multiple teams.

And professional athletes and entertainers always seem to need an extension anyway.

Thank God for small favors.

Bill