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College Student - State Residency


Edsel

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Situation:  Couple with 18-yr old daughter lives in Texas.  In August, 2019, daughter begins attending college in Oklahoma.

Then, in January 2020, father and mother move permanently to Florida.

Question:  For purposes of state tax residency, which state should the daughter claim as her resident state in 2020??

Daughter is a part-time employee working from her computer.  Neither Texas nor Florida has an income tax, but the employer will have to be liable for SUTA for some state.  All states have SUTA.

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1 hour ago, Edsel said:

Which state does the employer have to incur SUTA for 2020?

"working from her computer"

Wherever the employee physically located while doing the work creates nexus for the employer in the location the employee is in.  For the employer, hopefully they are already "in" the state(s) the employee is working from, instead of this employee creating a new state nexus (don;t ignore the locality nexus issues, such as different min wages, local taxes, PFML, etc.).  Hopefully the employer has complied with their requirements, such as treating the home location as a proper "office", such as labor law posters, liability insurance, etc.  The employee should mostly care about the liability insurance aspect.

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Just wondering why Edsel is worried about the employer.   Paying the SUTA is their issue, not the employee.  And it is not the parent's issue either.

Unless the parent is the employer?    Or the employer is also a client of Edsel?   Or the student is going to get a 1099 MISC and not a W2?

So long as the student gets a W2 from the employer, Edsel can prepare the returns.  

It is a slow day and I am bored, so I am thinking about this instead of working like I should be.   

Tom
Modesto, CA

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5 hours ago, BulldogTom said:

Just wondering why Edsel is worried about the employer.   Paying the SUTA is their issue, not the employee.  And it is not the parent's issue either.

 

The employer is my client, and that is indeed why it is an issue.  If SUTA is due to Oklahoma, this will create a need for doing a corporate return on a allocation of payroll basis.  This would be the only employee creating an Oklahoma requirement, and as such may result in the employee's termination, along with other issues involving the employee.

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Check the state laws of each relevant state. Many states have gone to Sales only to apportion income, and therefore income tax filing requirements.

However, the payroll regulations of the state in which the employee performs work still rule for payroll taxes.

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13 minutes ago, Max W said:

You will have to find the rules for nexus in OK.  For example, in CA if the employee earns less than $50,000, there is no nexus.

 

Is that figure just for business income tax ("doing business in")?  I have seen those types of references before.  For employees and payroll taxes, regular work performed in CA triggers payroll nexus...  Most states are similar, albeit maybe not as aggressive.

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3 hours ago, Max W said:

You will have to find the rules for nexus in OK.  For example, in CA if the employee earns less than $50,000, there is no nexus.

Good basic information:

"Income tax withholding. An employer is expected to withhold state income tax from an employee’s wages any time that employee is subject to an out-of-state income tax. An employee will be subject to an out-of-state income tax if he or she resides within the state or if he or she works within the state on more than just a transient project or contract.

Employment Taxes. Some other payroll taxes include Social Security, Medicare, and unemployment taxes. A business may be required to remit these taxes when (1) an employee is working in that state for more than just a temporary work project, (2) an employee resides in that state, or, (3) an employee travels into that state to solicit business or perform other business duties.

Some states are stricter with what constitutes a “temporary” work project and will impose a withholding requirement on an entity whose employee performs work inside the state for even one day. Other states hold reciprocal agreements where both states agree not to impose a withholding requirement on any employee who works in their state. Missouri, Kansas, Nebraska, and Oklahoma do not hold a standing reciprocal agreement with any other states, but Iowa and Illinois hold reciprocal agreements with each other. As these rules vary wildly, more research will be required when looking into any one state’s requirements."

--- 

OK has/had some sort of dollar amount limit/trigger.  Many states are all amounts earned while in said state.  Not sure how current the list I found is, but OK non residents trigger nexus at  300 in a quarter.

Practically speaking, the limits and triggers are so low, and the liability is so high, the remote worker must be very valuable to be kept.  The cost of a new nexus, and compliance, is significant, especially because a specialist attorney should be used to create employment documents which protect the employer.  College student remote employee, no way for me to see it as being profitable, even in a state the employer already has nexus.

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18 hours ago, Edsel said:

 If SUTA is due to Oklahoma, this will create a need for doing a corporate return on a allocation of payroll basis.  This would be the only employee creating an Oklahoma requirement, and as such may result in the employee's termination, along with other issues involving the employee.

Appears OK has a 300 in a quarter threshold for withholding.  Their UI threshold appears to be 1500 in a quarter.  The withholding threshold will trigger needing to register as an OK employer, which will be costly enough to manage.  I cannot fathom what WC and liability insurance would cost on a college student's residence, and it would be expensive to draft and execute an agreement limiting the work location to their residence (and not allow anyone else in the work space for liability reasons).  Unless the employee is extremely profitable/desirable, your termination assessment is the only logical choice.

Unfortunately, (what is now un) common sense no longer prevails, and we must all consider the cost of defense as well as the liability costs...

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On ‎7‎/‎19‎/‎2019 at 11:18 AM, Max W said:

You will have to find the rules for nexus in OK.  For example, in CA if the employee earns less than $50,000, there is no nexus.

Max, my client just lost in CA.  They have an employee that works out of his home in CA on his computer and makes less than $50K.  They want the franchise tax $800.00 and a 100S.  Client has paid all state required withholding, wc, etc.

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17 hours ago, mwrightea said:

Max, my client just lost in CA.  They have an employee that works out of his home in CA on his computer and makes less than $50K.  They want the franchise tax $800.00 and a 100S.  Client has paid all state required withholding, wc, etc.

The company may have one or more additional employees in the state which would push them over the limit.  

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2 hours ago, Max W said:

The company may have one or more additional employees in the state which would push them over the limit.  

They have only the 1 employee that lives in CA, all other employee's and company are in Colorado. All revenue generated in the State of Colorado.

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20 hours ago, mwrightea said:

They have only the 1 employee that lives in CA, all other employee's and company are in Colorado. All revenue generated in the State of Colorado.

"All revenue generated in the State of Colorado."  Not if there was an employee in CA (the position CA likely takes.)  From a company perspective, it may be prudent to pay without fighting, since defense can be more costly, with no guarantees of success.  How many who get dunned for this will fight over $800 and form prep fees?  I did see an article where this type of enforcement may be going to the supreme court, based on another state claiming CA enforcement is hurting them (taxing on passive investments is the source of irritation in the case).

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56 minutes ago, mwrightea said:

FTB stated that the 1 employee creates presence in California.  My client will pay the prep fee and $800.00 rather than fight, they feel this employee is worth it. 

I would fight this on principle alone and appeal it.  It is not just the $800  and the 100S, it is the $800 and the 100S every year.

Did the FTB reject solely for having one employee that earned less than $57,000?   If that is the case,  I think an appeal would be relatively easy.   I deal with the FTB a lot and they do make mistakes and give out incorrect advice.   In recent years they have been issuing penalties for all sorts of minor things which don't exist and because the amoutns are low - usually less than $200, most people dont want to bother fighhting it and just pay up.

 

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58 minutes ago, mwrightea said:

FTB stated that the 1 employee creates presence in California.  My client will pay the prep fee and $800.00 rather than fight, they feel this employee is worth it. 

Made me look... FTB Pub 1050.  The unprotected activities list is fairly extensive.  Dollar amount is not a catch-all for protection from taxation.  "In-home" offices have what appears to very specific "protection", which extrapolates to anything not in the permitted list for in-home offices will trigger taxation.

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1 hour ago, Max W said:

I would fight this on principle alone and appeal it.  It is not just the $800  and the 100S, it is the $800 and the 100S every year.

Did the FTB reject solely for having one employee that earned less than $57,000?   If that is the case,  I think an appeal would be relatively easy.   I deal with the FTB a lot and they do make mistakes and give out incorrect advice.   In recent years they have been issuing penalties for all sorts of minor things which don't exist and because the amoutns are low - usually less than $200, most people dont want to bother fighhting it and just pay up.

 

That is my understanding.  I had POA on file with the protest, the FTB called the client  and stated the above.  I have not received any written documentation nor have I talked with anyone @FTB.  Max I would love to talk with you about this matter.  I have never filled out a 100S and I am not looking forward to it.

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Unlike the IRS, the FTB does not mail out letter copies.  You say you had a POA on file with the protest.  FTB POA's have to be uploaded on their website, otherwise they won't accept them.     Wasn't there a letter from FTB restating the results of the 540?   The sequence of events is not clear to me.   

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