Income taxes on remote work may get a supreme court review

[JRP]

A subject often discussed here,  may be headed to the US supreme court. Those fulltimers who work for pay have always been interested in which state gets to tax their mobile income. In the past its usually been the state where you physically earned the income that got to tax it. Although there were 6 states that took a different approach called the "convenience rule"; meaning if your mobile work outside the state was for your convenience, then the state the employer was physically located could tax you. This "convenience rule" by some states has never been successfully challenged in court. With the drastic increase in working from home due to the Covid restrictions, this issue is coming up in many locations where it wasn't an issue in the past.  There are several areas of the country where its common practice for workers to commute across state lines, such as NYC, Boston, Omaha, and others. A recent case that is working its way toward a possible supreme court hearing is New Hampshire vs Massachusetts. New Hampshire residents working in Boston were taxed by Massachusetts. Now due to Covid those folks are staying home in NH and working remotely. Mass maintains they have the right to continue taxing their total income; NH disagrees.  Although the case is not based on fulltime RV'ers; if the court eventually makes a ruling in this case, it has the potential to impact working fulltime travelers. 

 States Square Off Over Taxing Remote Workers’ Income - WSJ  

NJ says billions in taxes ‘sacrificed’ to NY by Garden State’s remote workers | Fox Business

Edited December 23, 2020 by JRP

[Kirk W]

Now that is interesting. Thanks for sharing the story with us.

[podwerkz]

Can you imagine if they tried that nonsense with interstate truck drivers? They are earning money in a lot of states in the course of a year...

[sandsys]

1 hour ago, podwerkz said:

Can you imagine if they tried that nonsense with interstate truck drivers? They are earning money in a lot of states in the course of a year...

Plus Canada every other day on one route our daughter worked for awhile. One day up then one day back carrying a load each way.

Linda

 

[Twotoes]

8 hours ago, podwerkz said:

Can you imagine if they tried that nonsense with interstate truck drivers? They are earning money in a lot of states in the course of a year...

They do it for professional sports athletes. In the NFL, for example, when one team visits another’s city, ie: Green Bay at Chiefs, the players for GB must file a tax return in the visiting teams State, MO. 

[bobsallyh]

Twotoes, the same way for any NASCAR Series that run anywhere in Canada, those taxes must be paid before transporters cross back over into the U.S.

[ToddF]

Not all states have an income tax, so the issue only applies to those that do. Many with an income tax, have a "filing threshold" and if income is below that number, no need to file.

If your domicile state has an income tax, it will usually give you a credit for taxes paid to another state.

The issue pertains to "earned income", not retirement income. I'm visiting New Jersey and my pension check arrives in the mail at my rV park, no NJ tax. But if I'm in my RV working on the internet earning $, worth checking out.

When in doubt, go to the state's department of revenue website and review their requirements.

Enrolled Agents (licensed tax professionals) are your friends when you need help.

https://taxexperts.naea.org/

[Chalkie]

6 minutes ago, ToddF said:

The issue pertains to "earned income", not retirement income.

But the problem is that retirement income can also be taxed depending on what state you are in.

[Kirk W]

Nine states — Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming — have no income taxes.

[lappir]

42 minutes ago, Kirk W said:

Nine states — Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming — have no income taxes.

Only partially correct. They have no STATE income taxes. Federal income taxes are collected in all 50 states. 

[Kirk W]

5 hours ago, lappir said:

They have no STATE income taxes. Federal income taxes are collected in all 50 states. 

😏    No state collects any federal income taxes. The IRS does collect federal taxes in all US states and territories. 

[Chalkie]

2 hours ago, Kirk W said:

😏    No state collects any federal income taxes. The IRS does collect federal taxes in all US states and territories. 

While they may not collect federal taxes, they do (in many states) use the federal adjusted gross income to calculate the state taxes. Its why a number of years ago I quit doing my own taxes and started using a CPA or tax specialist to do our filings.

 

[Kirk W]

31 minutes ago, Chalkie said:

While they may not collect federal taxes, they do (in many states) use the federal adjusted gross income to calculate the state taxes. Its why a number of years ago I quit doing my own taxes and started using a CPA or tax specialist to do our filings.

Very true. Since we moved to WY in 1971, then to TX in 1989, it has been a very long time since I had to deal with state income tax, other than two times that I had s stipend that was taxable in the state where it was earned. I don't really understand why your adjusted gross caused you to go to paying to have taxes done? Do they somehow get you a lower adjusted gross? Can they do something for you that you couldn't do with a good computer tax program? 

I am not doubting, just trying to understand. 

[ToddF]

It's a common misconception that moving to a "no state income tax" state will be a smart move by itself. In Texas, for example, you will pay sales tax on your groceries. (Not so in Minnesota). In Texas, your property taxes will be approximately double what the typical Minnesotan pays after factoring in a state refund program. Also, 40-50% of retirees don't have enough income to pay any federal or state tax, so their state of domicile makes no difference in their income tax bill.

As far as preparing your own taxes, yes. You can change the oil in your motorhome and truck too after you cut your wife's hair.

[Chalkie]

14 hours ago, Kirk W said:

Can they do something for you that you couldn't do with a good computer tax program? 

I am not doubting, just trying to understand. 

For several years before retirement my wife and I had jobs where we worked from home. The company she worked for paid a portion of her internet and phone bill as well as providing the computer equipment. The company I worked for provide none of that and in fact made having all that a requirement for hiring consideration. We both were required to set up home office areas where we would have a workable, quiet area for our work.

Now, a tax program is alright, but even the best to do not come up with the legal deductions that a CPA will. Things like depreciation on desks and chairs, or in my case computer and monitors or the advice on when to purchase new to maximize depreciation deductions. We had to maintain separate internet providers and phone services. Her employer wanted a traditional landline, while mine preferred you use VOIP. And the list goes on. I simply felt it was money well spent.

With as many folks that are now working from home, whether full time or part time (for example, my daughter works for a school and when the school is forced to close periodically for a COVID breakout, the staff all work from home during that period) the knowledge of how to treat all that work in terms of taxes becomes very complicated.   

[Kirk W]

1 hour ago, ToddF said:

It's a common misconception that moving to a "no state income tax" state will be a smart move by itself. In Texas, for example, you will pay sales tax on your groceries. (emphasis added)

You need to check your information as you disagree with the Texas Comptroller's office.

Quote

Grocery stores and convenience stores not only sell food products, they also sell a wide variety of other items and services – some of them taxable, and others nontaxable. For example, flour, sugar, bread, milk, eggs, fruits, vegetables and similar groceries (food products) are not subject to Texas sales and use tax. Tax is due, however, on non-food items such as paper, pet, beauty and hygiene products; clothing; books; and certain edible items.

This demonstrates once more the need to check information for accuracy before you make decisions based on any public forum. 

[TXiceman]

2 hours ago, Kirk W said:

You need to check your information as you disagree with the Texas Comptroller's office.

This demonstrates once more the need to check information for accuracy before you make decisions based on any public forum. 

Try Oklahoma.  They have a state income tax and charge sales tax on ALL groceries.  Texas only taxes basically prepared foods.

 

Ken

[Kirk W]

2 hours ago, TXiceman said:

Texas only taxes basically prepared foods.

Quote

flour, sugar, bread, milk, eggs, fruits, vegetables and similar groceries (food products) are not subject to Texas sales and use tax.

In other words, foods not intended to be consumed on site are exempt from sale/use tax. Food at a restaurant of fast food store is taxable.

Edited December 29, 2020 by Kirk W
correct typo

[ToddF]

Sorry about the misstatement on Texas sales tax. Truthfully, I think I was remembering Alabama which I think taxes all groceries.

But the point is, look at the full picture. Another surprise...Pennsylvania has an inheritance tax which applies very broadly upon death. 

Illinois will kill you with their property tax but let you off easy on income tax after you retire.

Also, services, especially medicaid, vary widely from state to state.

Edited December 29, 2020 by ToddF

[sandsys]

8 hours ago, ToddF said:

It's a common misconception that moving to a "no state income tax" state will be a smart move by itself. In Texas, for example, you will pay sales tax on your groceries. (Not so in Minnesota).

 

1 hour ago, Kirk W said:

In other words, foods not intended to be consumed on site are exempt from sale/use tax. Food at a restaurant of fast food store is taxable.

So the tax rules on groceries are actually the same in Minnesota and Texas. What other similarities or differences might there be? For instance Minnesota does not tax clothing or textbooks. Many RVers wait until they get to Oregon to buy tires so they won't have to pay tax on them. What else?

Linda

[ToddF]

Considerations would include everything mentioned in this thread. Of course, many RVers end up in a state close to family (I assume)...taxes and other related concerns are only 1 factor.

Income Tax (varies widely from state to state). 

Sales and Use Tax  (If I buy tires in Oregon, I have to pay MN USE tax if the total of out of state purchases > $770).

Gas Tax

Vehicle Registration Tax. Inspection Fees. (MN low on RV. Runs $125. annual for a Class C. Much lower for a trailer).

Property Tax and any rebate scheme (MN has a very generous refund system).

Inheritance (Estate)Tax. Probate and transfer on death issues. (MN has a "TOD" option for a simple transfer of homestead at death - no probate if done properly).

Medicaid/Health Insurance options for those below certain thresholds.

 

[Lou Schneider]

On 12/23/2020 at 8:50 PM, podwerkz said:

Can you imagine if they tried that nonsense with interstate truck drivers? They are earning money in a lot of states in the course of a year...

Truck drivers are usually dispatched and paid out of a single terminal, even if they are driving across the country.  This becomes their place of employment for tax purposes.

Even independent truckers have a fixed addres somewhere they use as their office.  Even if it's just the kitchen table in their home.

[Kirk W]

1 hour ago, ToddF said:

Considerations would include everything mentioned in this thread.

And don't forget to look at legal issues as well. A former active member of these forums made me aware of one that I had never thought of in that he traveled with a lady, not his wife and in TX they would have been legally married once they shared the RV for 2 years. As it is, they did later marry, but it made me realize that you need to look at your own legal issues and check them out before you choose. It appears to me that taxes and fees are all that any people even look at. It was thanks to Stan that I took the time to examine such things as laws about wills and estates, and several other legal issues. 

Edited December 30, 2020 by Kirk W

[mptjelgin]

 

45 minutes ago, Kirk W said:

A former active member of these forums made me aware of one that I had never thought of in that he traveled with a lady, not his wife and in TX they would have been legally married once they shared the RV for 2 years. 

11 hours ago, Kirk W said:

This demonstrates once more the need to check information for accuracy before you make decisions based on any public forum. 

That is incorrect information regarding Common Law Marriage in Texas.

Common Law Marriage in Texas - Debunking Two Typical Myths.

[podwerkz]

3 hours ago, Lou Schneider said:

Truck drivers are usually dispatched and paid out of a single terminal, even if they are driving across the country.  This becomes their place of employment for tax purposes.

Even independent truckers have a fixed addres somewhere they use as their office.  Even if it's just the kitchen table in their home.

Yes, I know how it works. The point I was making is the nonsense (in my opinion) of making a person pay state taxes based on what state they happen to temporarily be in when they earned that income.