Telecommuters: Beware the tax man

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Some tax facts: I'm a tax professional; let me slip in a few facts to help keep the
discussion near the real world.
1. Every US citizen, no matter where he or she lives,
telecommuter or not, is subject to US taxes on ALL their
worldwide income--but they get credit (varying by scores of tax
treaties) for tax paid on that income to another country. The
goal is no double taxation...
2. State taxes in the US are incredibly inconsistent, and 10 don't
tax income--so many pro sports (and military) people choose
them for their "tax homes" in IRS terms, especially FL and TX.
Those states that do tax income usually allow credit for taxes
paid to other states; again, the goal is no double taxation. The
potential inequity for telecommuters, or people simply on
temporary assignment out of state, is when the state rates are
greatly different and they get caught at the higher rate.

Yes, New York is about the most aggressive and once they have
your withhholding, they are the most difficult to deal with on
getting back what they are not owed, by law.

I've not had a national pro athlete as a tax client, but my circus
employee and my rock band road manager clients each work in
15 or more states in any given year. Their employers are
required to withhold tax in almost every one of those states on
the income earned while they were within the state borders.
They often end up not having to pay tax in most states, as the
income for a few days is short of the lowest level for taxation--
but they have to file returns to get the withholding back. Fair?
No, but the states want to make sure they get what they believe
they have coming, and they never consider the time and money
spent to comply with their regulations. It's good for my
business, and such clients are usually quite used to such tax
treatment as a "cost of doing business," but seeing a 6" stack of
state tax returns for a five-figure income person is jolting.

Oh, yes, New York also tried to tax pensioners from New York
companies who moved out of state, claiming the income was
"earned" in NY--but they finally lost that one in court. That is
another reason why so many retirees head for Florida--no state
tax on their pensions.; Posted by: frabjous Posted on: 11/02/05 You are currently: a Guest | Members login | Terms of Use