Suggestions needed - Pennsylvania preparers

[Gary2]

For those (most ??) here who have not yet bothered to read PA REV-611 PO, I still see a conflict between domicile and statutory residency. (You might even want to read through that two-page document.)

Of course there's a conflict between domicile and statutory residence; that's the whole point of enacting statutory residence laws.

Once upon a time, all we had was domicile. While there are many indicators of domicile (voter registration, organizational memberships, etc.), at its core, domicile is a subjective test. How do you prove where the person "intends to return"? So wealthy people in the Northeast could buy a condo in FL or TX or other states with no income tax, change their voter registration, and start claiming that state as a domicile, thus limiting the state where they lived and worked to taxing just the wages earned there.

So states enacting statutory residency for the explicit purpose of coming up with a result that could be different from domicile. The effect is that it's perfectly possible to have a domicile in one state (and thus be taxed as a full year resident of that state) and be a statutory resident of another state (and thus be taxed as a full year resident of that state as well). It might seem fairer if a state that enacted statutory residence would give up the domicile test (and some do, to a limited extent), but that still wouldn't remove the case of being a statutory resident of one state while continuing to be domiciled in another.

[Bees Knees]

I agree with Gary2. Nobody is suggesting your client will be domiciled in PA. That issue is irrelevant, so stop trying to understand PA domicile definitions. The only thing at issue is the 183 residency rules and whether renting an apartment for 2 years to work in the state is considered a permanent abode. In my opinion, it is.

[BP.]

the issue is whether the person can file as a non-resident (pay PA taxes only on PA income) or as a resident (pay PA taxes on all income, to include filing MFJ and
perhaps taxing that of spouse who will remain in NC).

Whatever decision is made, paying PA tax on the NC resident-spouse's income should not be the result.

[Bees Knees]

What is a permanent abode?

https://revenue-pa.custhelp.com/app/answers/detail/a_id/849/~/what-is-a-permanent-abode%3F

A permanent abode is a house, apartment, dwelling place, or other residence that is maintained as a household for an indefinite period, whether the occupants own it or not. An abode is not permanent if it is occupied only during a fixed or limited period of time for a particular purpose. Barracks, bachelor officer’s quarters, quarters on ships, and other living accommodations provided by an employer for a definite period do not qualify as a permanent abode. College dormitories, fraternity houses, sorority houses, and off-campus rentals by students do not qualify as a permanent abode.

Note that it has to do with being able to fix a limit on the time spent. A college dorm or other student housing is generally occupied for a specific number of semesters, thus they do not qualify as indefinite. A barracks or quarters on a ship is generally occupied for a specific tour of duty, thus they do not qualify as indefinite.

If your client is provided housing by the employer for a specific period of time to complete a specific work assignment, then that could be considered fixed and not indefinite. If your client finds his own living accommodations and the length of the work assignment cannot be fixed or limited, then I could see PA consider it as indefinite.

[Gary2]

to include filing MFJ and perhaps taxing that of spouse who will remain in NC)

Whatever decision is made, paying PA tax on the NC resident-spouse's income should not be the result.

I skimmed over this part my first time through.

The PA return should be MFS, even when the federal is MFJ. The spouse will not file a PA return at all. Thus the spouse's income will not be taxed by PA.

[FEDUKE404]

And, in conclusion....

All right, so the following is the board conclusion?


Husband files a resident PA income tax return, files as MFS. Reports only wage income earned in PA. (Per W2, PA wages will likely differ from IRS/FICA wages?)

While in PA, husband will claim zero "temporary" living expenses. (Rental of small apartment is the most likely scenario.)

Couple files a resident NC income tax return, filing as MFJ. All income (H/W), to include the PA income of H, is reported to NC.

NC tax return will allow a potential tax credit for PA income taxes paid on husband's PA income.

PA tax return will allow no tax credits for amount of NC tax applied to the PA income.

IRS return will be MFJ.


I simply cannot wait to see how my tax software will handle the filing of two "resident" state tax returns (NC and PA) for the same individual.


Thanks to all for taking the time to respond.

FE

[Gary2]

All right, so the following is the board conclusion?

Husband files a resident PA income tax return, files as MFS. Reports only wage income earned in PA. (Per W2, PA wages will likely differ from IRS/FICA wages?)

I'm not sure this is quite right. Assuming he starts working in PA during the first half of the year, he'll be treated as a part-year resident of PA. You'd report all of his income starting at that point. That includes any wages earned outside of PA during this period, as well as pro-rating any investment income for the period.

While in PA, husband will claim zero "temporary" living expenses. (Rental of small apartment is the most likely scenario.)

Couple files a resident NC income tax return, filing as MFJ. All income (H/W), to include the PA income of H, is reported to NC.

NC tax return will allow a potential tax credit for PA income taxes paid on husband's PA income.

PA tax return will allow no tax credits for amount of NC tax applied to the PA income.

IRS return will be MFJ.

The rest looks right to me. Technically you could omit the credit on the NC return and take it on the PA return instead, but I believe NC has a higher tax rate, so that doing it the way you stated is likely to come out better.