Paul L. Caron

Monday, June 28, 2010

Kristan: State Taxes for the Traveling Employee

Joe Kristan has a great post on Franken’s Monster: State Taxes for the Traveling Employee:

[Al] Franken has a lot of company in going from state to state without paying all of his taxes (he also has a lot of company in dumping on his accountant to weasel out of the blame). It’s a lot of work, and a lot of expense, for a traveling worker to pay taxes in every state. Every state has its own tax rules, and preparing all those returns isn’t cheap. Unfortunately, current law can make you taxable in a state with as little as one day of work.

State taxes are a compliance nighmare for glamour professions like sports, entertainment, construction and auditing. That’s why the Multistate Tax Commission is working on model legislation that would exempt workers from state taxes if they work in a state for less than 20 days in a year. That is, unless they work in sports, entertainment or construction (perhaps the only known instance where auditors aren’t abused worse than other professionals). A bill going nowhere in Congress, the Mobile Workforce State Income Tax Fairness and Simplification Act, would would create a 30-day threshold, but similarly screw entertainers and athletes, but not construction workers.

This raises the obvious question: why do they want to screw the athletes and entertainers? Presumably the states all want to pick Taylor Swift’s pocket (understandably), but for every Taylor Swift there are hundreds of struggling young musicians trying to scrape by and make a name for themselves. Yet the tax law, in all its majesty, requires the same level of tax compliance for millionairess Taylor Swift and the wonderful, but surely less prosperous, Carrie Rodriguez.

Small businesses used to be able to blow off states they only visited for a brief time. That’s becoming a bad bet. Better and cheaper data mining software makes it easier each year for state revenuers to sniff out temporary presence. If there is any publicity for your visit, you leave a Google trail. If you don’t file in a state, the statute of limitations never runs there, and you can build up a painful multi-year liability. If they catch you after the statute of limitations for your home state runs out, you lose your credit on the home state return for taxes paid in the other state — meaning you pay tax on the same income in two states.

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I like the Ricky Nelson Tribute! ;) Thanks!

Posted by: Car dealership Waco | Jun 28, 2010 3:02:52 PM

Also, there is no minimum state income tax filing amount in many states. A former colleague entered a state, which shall remain nameless, for two days to conduct a workshop. He received a notice for failure to report his income tax. He spoke with the auditor and explained that he had only been in the state for two days--not a defense. He then calculated the tax, and he owed about $60 to the state. My friend asked if he could send them a check without filing a return, which of course is not allowed. He spent over $100 to get a tax return prepared, on top of the $60 in tax.

Posted by: Beau Baez | Jun 28, 2010 5:41:27 AM