Question on state tax?

Question

hi

am a contractor working as as software consultant. i move around various client across US. but my employer is based in texas...and runs my payroll on texas....

so i woudl like to maintain texas as a my home address. so, in that case, which state am liable to pay my state taxes....

Answer 1

From a strictly legal standpoint, you are required to pay state income tax in each state where you receive income. (Pro baseball players for example pay taxes on 1/162  of their income every time they play baseball in yankee Stadium, regardless of their state of residency).

Most likely you will not ever be discovered at your income level.

As long as you do not reside in any other state for more than `82 days of the year, you can claim Texas, and pay no state income tax.

Answer 2

Dave, the unfortunate fact is that some states, not all, will require you to file a non-resident tax return for any income earned while you were physically working in that state.  It gets a little complicated, because you have to check the laws in each and every state you go to, and may end up filing several state tax returns.  Examples that come immediately to mind are new jersey, Massachusetts, and California.  Your resident state remains Texas.

Hello to Texas!  I used to live there, in San Angelo.

Answer 3

Not only states have their own laws on income earned in them, some cities (St Louis comes to mind) have their own city tax on income earned while in St. Louis.

You need to do the research.

Answer 4

I'm confused Dave, and I'm not sure the other posters caught this or not... First you say you're a contractor, but then mention an employer and payroll.  

If you're a contractor, the client is paying you directly, and therefore self-employed, then yes, you will need to research each of the states to see what rules they have... or hire someone to do it for you.

BUT, if you're an employee, receive a W-2, the employer is paying you and not the client, then it doesn't matter.  Your employer is based in TX, your tax home is TX if you are maintaining a home there, and TX is the only state return you will need to file.  Your employer will be the one who reports the income they make from each state. (See amended information below.)

Also, if you are paying for your travel expenses, or part of it, you might be able to deduct those expenses you weren't reimbursed for on your taxes as Employee Business Expenses.

You need to figure out which one you are.

Hope this helps!!

Amended Information:  After I posted that I realized it might not be 100% correct in regards to state filing requirements.  I live in FL so I don't have to worry about state taxes, and I haven't come across too many multi-state returns, so I'll be the first to admit I might not be as up on that issue as others.  So, after checking with someone who has more experience than myself (Thanks, Walter!), I need to amend my response.

While it's still going to be important to figure out if you're an employee or contractor, and the majority of my response is accurate, even if you are an employee some states might still require you to file on your earnings.  You're still going to need to research each state, but the chances of filing in the other states as an employee are probably going to be less than if you are a contractor. And, evidently, TX has no individual income tax.  Learn something new everyday!

I apologize for any confusion.