Do I have to file state tax just because my company is based there?
January 30, 2011 5:46 PM
State Tax Question: I live in Florida (no state tax) full-time, year round; the company I work for is based in North Carolina (state tax); I work in Florida in a home office set up by the company (co-workers home) year-round. NC State Tax is being deducted from my paycheck; is this correct?
Is this what non-resident filings are for? or do you have to physically work in North Carolina to file a state tax with NC? I don't work in NC at all, don't even have to travel there...
Is this what non-resident filings are for? or do you have to physically work in North Carolina to file a state tax with NC? I don't work in NC at all, don't even have to travel there...
What has most likely happened is that your employer has incorrectly reported you as a North Carolina resident. While the company may be based there, the fact that you perform all your work in Florida, and are a resident of Florida, is what's relevant for personal income tax purposes.
While the company won't be able to reimburse you for their incorrect withholding, they will be able to issue you a corrected W-2 showing no North Carolina income. This will allow you to file a non-resident North Carolina return, demonstrating no North Carolina source income, which will result in a refund of the entire NC withholding.
This exact scenario happened to me, as a Texas resident who worked full-time in Texas for a Pennsylvania-headquarted form. The filing for reimbursement was a beating, I won't lie. (But not as much a beating as when the company didn't correct it the following year also. Argh.)
Feel free to Memail me on this if you want. It's a pretty easy fix.
FYI, non-resident filings are for a case where you live in one state and work in another. Many people who work in NY but live in NJ and CT have to deal with this.
posted by pineapple at 6:02 PM on January 30, 2011
While the company won't be able to reimburse you for their incorrect withholding, they will be able to issue you a corrected W-2 showing no North Carolina income. This will allow you to file a non-resident North Carolina return, demonstrating no North Carolina source income, which will result in a refund of the entire NC withholding.
This exact scenario happened to me, as a Texas resident who worked full-time in Texas for a Pennsylvania-headquarted form. The filing for reimbursement was a beating, I won't lie. (But not as much a beating as when the company didn't correct it the following year also. Argh.)
Feel free to Memail me on this if you want. It's a pretty easy fix.
FYI, non-resident filings are for a case where you live in one state and work in another. Many people who work in NY but live in NJ and CT have to deal with this.
posted by pineapple at 6:02 PM on January 30, 2011
To clarify two things:
I worked for a PA firm, not a form.
I know I said it was both "a beating" and an "easy fix", which seems confusing in hindsight. The beating part was because my company was not very helpful—so it was this massive HR mess trying to get the corrected W-2, etc. Once I had the correct W-2 in hand, filing the PA non-resident return was easy.
posted by pineapple at 6:12 PM on January 30, 2011
I worked for a PA firm, not a form.
I know I said it was both "a beating" and an "easy fix", which seems confusing in hindsight. The beating part was because my company was not very helpful—so it was this massive HR mess trying to get the corrected W-2, etc. Once I had the correct W-2 in hand, filing the PA non-resident return was easy.
posted by pineapple at 6:12 PM on January 30, 2011
Definitely check into it. But some states have rules like that, were they demand tax for work that is kinda-sorta in their state. They may say that since the company doesn't have a business license in FL (do they?), the work you do goes through NC.
posted by gjc at 8:07 PM on January 30, 2011
posted by gjc at 8:07 PM on January 30, 2011
They may say that since the company doesn't have a business license in FL (do they?), the work you do goes through NC.
This isn't accurate. In the situation that the OP describes, he has no liability at all to North Carolina for income tax. He lives in FL, he works in FL.
posted by pineapple at 8:18 PM on January 30, 2011
This isn't accurate. In the situation that the OP describes, he has no liability at all to North Carolina for income tax. He lives in FL, he works in FL.
posted by pineapple at 8:18 PM on January 30, 2011
He, in fact, may owe tax in both states. If the NC company has no actual business/office/branch presence in FL, the OP is very likely employed in NC. The company will owe taxes on him to NC. But, the OP lives in, and telecommutes from FL. By fact of his residence, he probably owes FL, as well.
Had he merely been a contractor (and not a full employee) this issue would have been avoided, and he would only owe tax in his state of residence, FL.
posted by Thorzdad at 6:44 AM on January 31, 2011
Had he merely been a contractor (and not a full employee) this issue would have been avoided, and he would only owe tax in his state of residence, FL.
posted by Thorzdad at 6:44 AM on January 31, 2011
>> the OP is very likely employed in NC.
Where his employer is physically located is not the IRS determination criteria for personal income tax liability. It is where the taxpayer does the work.
>> By fact of his residence, he probably owes FL, as well....
...he would only owe tax in his state of residence, FL.
These are inaccurate guesses. Florida does not have a state income tax.
If you'll notice in the NYT article, each case where the taxpayer had dual state liability was clearly a situation where the worker did work in multiple places.
For example, in my situaton with the TX/PA taxes (very similar to the OP in that my home state has no income tax while my employer's HQ state did), I actually had to count up how many days of the year I had physically been in the PA office doing work—and those were applied to my amended W-2, and I didn't get reimbursed for those 15 days.
Another example is the IRS rule known as the "jock tax"—if a professional athlete from a visiting team shows up in, say, Chicago for a game, then his pay for that day's performance lands him an Illinois state income liability, because that's where he physically did the work.
But the OP has stated that he does not work in NC "at all", nor ever even travels there for work. He has no tax liability to NC, based on the information we've been given.
posted by pineapple at 7:27 AM on January 31, 2011
Where his employer is physically located is not the IRS determination criteria for personal income tax liability. It is where the taxpayer does the work.
>> By fact of his residence, he probably owes FL, as well....
...he would only owe tax in his state of residence, FL.
These are inaccurate guesses. Florida does not have a state income tax.
If you'll notice in the NYT article, each case where the taxpayer had dual state liability was clearly a situation where the worker did work in multiple places.
For example, in my situaton with the TX/PA taxes (very similar to the OP in that my home state has no income tax while my employer's HQ state did), I actually had to count up how many days of the year I had physically been in the PA office doing work—and those were applied to my amended W-2, and I didn't get reimbursed for those 15 days.
Another example is the IRS rule known as the "jock tax"—if a professional athlete from a visiting team shows up in, say, Chicago for a game, then his pay for that day's performance lands him an Illinois state income liability, because that's where he physically did the work.
But the OP has stated that he does not work in NC "at all", nor ever even travels there for work. He has no tax liability to NC, based on the information we've been given.
posted by pineapple at 7:27 AM on January 31, 2011
The IRS has nothing to do with this, this is STATE tax. From the NC income tax instructions on who must file a NC tax return:
posted by gjc at 5:35 PM on January 31, 2011
Every nonresident who received income forSo, like I said, NC may be construing the work as having been done in NC because the income was generated in NC. Or it is a mistake. But it isn't impossible.
the taxable year from North Carolina sources
that was attributable to the ownership of
any interest in real or tangible personal
property in North Carolina or derived from
a business, trade, profession, or occupation
carried on in North Carolina, or is derived
from gambling activities in North Carolina
and whose total income from all sources
both inside and outside of North Carolina
equals or exceeds the amount for his filing
status shown in Chart A or B.
posted by gjc at 5:35 PM on January 31, 2011
>> "The IRS has nothing to do with this, this is STATE tax."
Yes, the OP's issue is to do with STATE tax. But the State of North Carolina doesn't get to singlehandedly override national standards for declaring individual taxpayer liability and residency. If that were the case, then dozens of enterprising and money-grubbing states would simply declare that non-residents have loads of arbitrary tax obligation, in order to stuff their coffers.
>> "So, like I said, NC may be construing the work as having been done in NC because the income was generated in NC."
I don't how else to tell you it, gjc: this is simply a misinterpretation of the NC state tax code. Individual taxpayer liability is based on the residency of the taxpayer and the location where the work was performed. Both of these are Florida. Where the income from the work ends up is not a criterion in this case. If the OP were the Florida-residing owner of a North Carolina business, it would be a different story.
By way of example: does a Wal-Mart employee in North Dakota owe state income tax to Arkansas, since that is where Wal-Mart is headquartered? It's where the revenue from the employee's individual labor ends up—so by your argument, they owe Arkansas.
The key phrase in the piece you cut and pasted from the NC state instructions is "carried on in North Carolina." No part of the OP's occupation is carried on in North Carolina. He is an employee, and he does work in Florida. Who the work is for not relevant in this case.
>> "Or it is a mistake. But it isn't impossible."
Yes, it is a mistake—in that the employer mistakenly withheld NC state income tax.
It is in fact impossible (based on present laws and the information that we were provided in the AskMe) that the OP owes NC state income tax.
From the NC income tax FAQ (emphasis mine):
Yes, the OP's issue is to do with STATE tax. But the State of North Carolina doesn't get to singlehandedly override national standards for declaring individual taxpayer liability and residency. If that were the case, then dozens of enterprising and money-grubbing states would simply declare that non-residents have loads of arbitrary tax obligation, in order to stuff their coffers.
>> "So, like I said, NC may be construing the work as having been done in NC because the income was generated in NC."
I don't how else to tell you it, gjc: this is simply a misinterpretation of the NC state tax code. Individual taxpayer liability is based on the residency of the taxpayer and the location where the work was performed. Both of these are Florida. Where the income from the work ends up is not a criterion in this case. If the OP were the Florida-residing owner of a North Carolina business, it would be a different story.
By way of example: does a Wal-Mart employee in North Dakota owe state income tax to Arkansas, since that is where Wal-Mart is headquartered? It's where the revenue from the employee's individual labor ends up—so by your argument, they owe Arkansas.
The key phrase in the piece you cut and pasted from the NC state instructions is "carried on in North Carolina." No part of the OP's occupation is carried on in North Carolina. He is an employee, and he does work in Florida. Who the work is for not relevant in this case.
>> "Or it is a mistake. But it isn't impossible."
Yes, it is a mistake—in that the employer mistakenly withheld NC state income tax.
It is in fact impossible (based on present laws and the information that we were provided in the AskMe) that the OP owes NC state income tax.
From the NC income tax FAQ (emphasis mine):
Q: I am a nonresident employee of a North Carolina company. Is my employer required to withhold N. C. income taxes from my wages?posted by pineapple at 4:09 PM on February 2, 2011
A: Yes. A nonresident employee is subject to N. C. withholding tax on any part of his wages paid for services performed in this State.
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It may be that NC is such a state.
See this article for more info.
posted by dfriedman at 5:52 PM on January 30, 2011