Catherine Posted March 9, 2011 Report Share Posted March 9, 2011 New one -- Returning client was sent on lots of business trips to various states in 2010. Wants to know if his income while in those states counts as "sourced" in the visited states and if that means he has to file in five additional states. I've looked at the rules, and the states say things like "CA-source income" but there is no definition of "CA source". Anybody have a clue about this one? The specific states in question are CA, CO, MD, NM, and UT. All his income was from his employer here in MA. TIA, Catherine Quote Link to comment Share on other sites More sharing options...
jainen Posted March 9, 2011 Report Share Posted March 9, 2011 >>CA-source income<< California taxes wages paid for services performed within California. If a non-resident works in California at intervals throughout the year and is paid an a daily, weekly, or monthly basis, the gross income from California sources is calculated from the ratio of California days to total days worked. Quote Link to comment Share on other sites More sharing options...
Catherine Posted March 9, 2011 Author Report Share Posted March 9, 2011 >>CA-source income<< California taxes wages paid for services performed within California. If a non-resident works in California at intervals throughout the year and is paid an a daily, weekly, or monthly basis, the gross income from California sources is calculated from the ratio of California days to total days worked. Any one want to chime in on the other four states? (My client is under the income limitations on CA-source; he was only there a couple days.) Quote Link to comment Share on other sites More sharing options...
GeorgeM Posted March 10, 2011 Report Share Posted March 10, 2011 First, what is stated on the W2 form, is each state represented by an amount earned? Second, what does he do? I believe if he is just a salesperson or company rep., he will not have to file in the states mentioned. If he actually preformed work or service in the state while there he will have to file in all states. Quote Link to comment Share on other sites More sharing options...
Kea Posted March 10, 2011 Report Share Posted March 10, 2011 New Mexico taxes all income determined to be NM sourced with no minimum. But I agree with GeorgeM for help in determining what is sourced in NM. Quote Link to comment Share on other sites More sharing options...
imjulier Posted March 10, 2011 Report Share Posted March 10, 2011 Catherine- I have no doubnt that some won't like my response but here goes. If the employer does not track and report on the W-2 then no need to file in each particular state. For the employee to do so against what the w-2 says would be odd and the actual state that is on the w-2 could fight it. I've been a travelling auditor for years and I've never reported income outside my state because my employer does not track it nor report it. Also, there is no way that it could ever be proven that he worked there. Mostly, the states go after the ones they know about and that are easy to catch, like the pro athletes and major entertainers....never mind the small stuff and this is what this sounds like. OK, now how many don't like my response? Julie Quote Link to comment Share on other sites More sharing options...
Catherine Posted March 10, 2011 Author Report Share Posted March 10, 2011 Catherine- I have no doubnt that some won't like my response but here goes. If the employer does not track and report on the W-2 then no need to file in each particular state. For the employee to do so against what the w-2 says would be odd and the actual state that is on the w-2 could fight it. I've been a travelling auditor for years and I've never reported income outside my state because my employer does not track it nor report it. Also, there is no way that it could ever be proven that he worked there. Mostly, the states go after the ones they know about and that are easy to catch, like the pro athletes and major entertainers....never mind the small stuff and this is what this sounds like. OK, now how many don't like my response? Julie Well, I like your response, Julie. This guy's W-2 has one and only one state, MA. He went to design reviews and project meetings in other states, possibly even puttered about in a lab or two for a half-day here and there (most likely just got walked/toured through, though). But I used to be an engineer, and I know those meetings. There's no actual _work_ that gets done and frankly no reason they couldn't be held by conference call except to "get to know" the engineers at the other company. Some of the states I checked have filing limits and he'd be under those. Some don't have limits - but those also happen to be the states where he spent the least time. An entire NM non-resident return for ONE one-day meeting? That strikes me as ridiculous. Especially as I do several NM returns every year, and know that if I go through the exercise, he won't owe one nickel there. Thanks, all Catherine Quote Link to comment Share on other sites More sharing options...
Cathy Posted March 10, 2011 Report Share Posted March 10, 2011 Catherine- I have no doubnt that some won't like my response but here goes. If the employer does not track and report on the W-2 then no need to file in each particular state. For the employee to do so against what the w-2 says would be odd and the actual state that is on the w-2 could fight it. I've been a travelling auditor for years and I've never reported income outside my state because my employer does not track it nor report it. Also, there is no way that it could ever be proven that he worked there. Mostly, the states go after the ones they know about and that are easy to catch, like the pro athletes and major entertainers....never mind the small stuff and this is what this sounds like. OK, now how many don't like my response? Julie In the For What It's Worth Department, I agree 100%. My biggest concern is that his domiciliary state would dispute the income allocated to the other states (especially since the employer lists all income as earned in his domiciliary state). Cathy Quote Link to comment Share on other sites More sharing options...
Margaret CPA in OH Posted March 10, 2011 Report Share Posted March 10, 2011 I concur. The next thing you know, the business would be contacted as to why it didn't file withholding returns, etc. And it is possible that the business has already done due diligence, knows the amounts are below whatever threshold required, etc. I doubt there is true nexus or they would be filing corp returns as a foreign corp. Quote Link to comment Share on other sites More sharing options...
jainen Posted March 10, 2011 Report Share Posted March 10, 2011 >>his domiciliary state would dispute the income allocated to the other states << What's to dispute? It all must still be reported as taxable to the resident state in any case. For that reason, I disagree that there is some de minimis amount that depends on a third party maintaining records for the taxpayer. The employer might not even know the exact schedule of a frequent traveler over a large territory. I am (mildly) offended by the suggestion that we only have to report things the taxing agency can prove. It may sound corny, but I support our voluntary tax system as in the best interests of both the government and the taxpayers. On the other hand, the client might be offended that I want to charge for another return, when the overall tax (after other-state credit) is about the same. Quote Link to comment Share on other sites More sharing options...
Cathy Posted March 11, 2011 Report Share Posted March 11, 2011 >>his domiciliary state would dispute the income allocated to the other states << What's to dispute? It all must still be reported as taxable to the resident state in any case. For that reason, I disagree that there is some de minimis amount that depends on a third party maintaining records for the taxpayer. The employer might not even know the exact schedule of a frequent traveler over a large territory. I am (mildly) offended by the suggestion that we only have to report things the taxing agency can prove. It may sound corny, but I support our voluntary tax system as in the best interests of both the government and the taxpayers. On the other hand, the client might be offended that I want to charge for another return, when the overall tax (after other-state credit) is about the same. Understand completely your position. The domiciliary state can and my state (Louisiana) would definitely dispute the credit of taxes paid to other states in a return of this type. Louisiana is already disputing several items this year when in past years returns have flown through without any problems. They're scratching for income (probably as is all states) this year as the budget hole is getting bigger each year...after our legislature quickly spends any excess revenue found after the fiscal year ends on special pet projects. The "spending the last dime" takes place in special sessions called for just that purpose. As the extra time Louisiana Revenue employees would spend on disputing this type of return will exceed the revenue to be gained by our state, a preparer would be doing everyone involed a favor. You see....a gain for everyone involved. Take care, Cathy Quote Link to comment Share on other sites More sharing options...
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