Client has negotiated contract with the Veterans Assn in NC. He lives in VA, will perform work in VA. Telecommuting. Is he required to file NC non-resident on this income?
-
-
A State of Flux
The laws on this keep changing as NC and nearly every other state looks for ways to generate more tax dollars. I don't like the fact that they are doing this but I can't change facts just because I don't like them. I think the question boils down to whether the money in question is enough to make a court fight all the way to the US Supreme Court worthwhile. If it is not then his only practical choice is to pay the tax to NC. -
The way states have always treated such situations, is that if he has no presence in NC, i.e. performs no work there, he is under no obligation to file with that state.Originally posted by Burke View PostChEAr$,
Harlan Lunsford, EA n LAComment
-
I dont think he owes tax to NC
If no services are performed in the state by a non-resident, then NC has no claim on income tax. The fact tht the contracting agency is located in NC is irrelevant."The only function of economic forecasting is to make astrology look respectful" - John Kenneth GalbraithComment
-
I don't
differ lightly with John and Harlan but in this case I must. Telecommuting in original post has a specific meaning and if that was not the meaning this word should not have been used. Telecommuting means that he is logging into a computer in NC from his computer in Virginia. I believe NCDOR will claim that is Nexus and if the money in question is not worth a court fight over then there is no practical way to contest NC's position.
If there is mere communication back and forth by standard phone calls and emails and maybe the PO or a courier then I still think NC may try to claim its piece of the pie but the situation as I see it is not so clear cut.Comment
-
I think nexus via telecommuting is a bit of a stretch when there is no physical presence at any time. But on the other hand, it may be a safer approach. By filing in NC you are at least starting the SOL to run, whereas not filing could potentially leave the client open to an assessment indefinitely. Since the net effect would essentially be a wash due to the credit allowable on the VA return, there's little risk with this approach. A resident of TN or FL might have a different viewpoint on all this.Last edited by JohnH; 01-19-2012, 07:09 AM."The only function of economic forecasting is to make astrology look respectful" - John Kenneth GalbraithComment
-
NC Dept of Rev woes
NC will likely try to tax the income (rightly or wrongly) because the NCDOR is desperate for money. Governor Blue Eyes and her ilk will try to tax anything/everything possible.
Whether that is correct may be a close call, at least to the tax experts. One determining factor will be related to what, if any, state withholding taxes occur.
The slippery slope here may be the "telecommuting" issue which is likely to become more prevalent for us all in the oncoming years. Some determined NC revenue folks might just see telecommuting as working from his house.....instead of "going to the office" in NC.
This past fall I had to intervene for a client who was finally threatened with five-figure property seizure letters for unpaid NC taxes. This person is a VA resident, and last NC income (other than continuing government retirement income) was part-year NC/VA returns around 2004 when move occurred. NCDOR had taken federal AGI (to include W2 wages clearly earned in VA) and all investment income, and then calculated "its" unpaid tax bill based upon 100% of all known income as being from NC sources. The crazy thing was client had called ("I'm away from my desk, please...."), sent letters, left voice mails, sent copies of applicable VA return, and NCDOR basically ignored client. The only thing that finally stopped the madness was I went up the food chain at NCDOR, talked to a powerful person, and that person had the matter resolved within 24 hours. The client did not owe 1¢. Who knows if this exercise will resume for the next tax year.
In summary: Whatever you decide for your client, tread lightly if the facts may go against you. Be sure you are getting all of the details!!
FEComment
-
Go back to the OP, wherein it is stated the client has negotiated a CONTRACT. This doesn't in the least sound like he is a common law employee. Instead an independent contractor who is paid 100% of gross.
Telecommuting means he does all his work in Virginia.
North Carolina will never know or be concerned.ChEAr$,
Harlan Lunsford, EA n LAComment
-
Yes, but...
While I agree with your tax logic, I would not be willing to bet the farm on your statement about NCDOR.Originally posted by ChEAr$ View Post
FEComment
-
Employees routinely have employment contracts. Senior level employees are even able to negotiate them. As I'm sure we all know, a piece of paper saying "we (business and individual performing services) both agree that so-and-so is an independent contractor and not an employee" is not one of the tests the IRS uses to determine employee status. While the phrasing of the question certainly leans towards independent contractor status, we can't be sure without more details.Originally posted by ChEAr$ View Post
Whether it's employee or independent, it's important to stay on top of the most recent developments. New York State has won court cases (at the state level) concerning telecommuters that would surprise many of us. I'm not sure if any of these cases have made it to federal courts yet. Search for "Telecommuter Tax Fairness Act" (regardless of year; as far as I know, none of the bills with this name have ever been passed, though they have been submitted multiple times).Comment
-
As far as I know, NY is the only state so far to deem a telecommuter as working in NY rather than the state in which he lived (TN) and actually did the work. If I'm wrong, please let me know. I did do a residency audit for someone who had worked in MA and moved to FL & telecommuted, and MA does have a statute that deems a telecommuter who only has de minimus presence in MA (attending a few business meetings, week of training) as not working in MA.
Has NC done something along the lines of NY in deeming a non-resident performing the work out of state as working in the state? It seems to me that this situation would create nexus with VA for the company rather than nexus for the employee in NC.Comment
-
NC hasn't done anything along this line that I'm aware of. But it is true that the state is trying to find every conceivable source of revenue to cover the bad judgement and excesses of our incompetent politicians."The only function of economic forecasting is to make astrology look respectful" - John Kenneth GalbraithComment
-
Are there competent politicians?Comment
-
Great observation.
The term "incompetent politician" is redundant, isn't it?
I guess we're channeling Mark Twain here:
" Suppose you were an idiot, and suppose you were a member of Congress; but I repeat myself. "Last edited by JohnH; 01-21-2012, 07:07 AM."The only function of economic forecasting is to make astrology look respectful" - John Kenneth GalbraithComment
-
Just wondering, but did you really mean a contract with the Veteran's Administration? a federal agency?Originally posted by Burke View Post
I've a client who did that once. She received 1099misc and we had to divy up her income according to Georgia or Alabama.ChEAr$,
Harlan Lunsford, EA n LAComment
Comment