S corporation doing work in another state

[oceanlovin'ea]

We briefly mentioned this in another post but this is from a different angle.

One of my clients with a Florida s corporation is temporarily doing some work in Georgia. It might end up a permanent move but at this point it looks like it was just for a few months.

I could go get a job in Georgia for a few months and still have my residence in Florida with no issues. I would just have to file a Georgia state tax return at the end of the year to report those wages earned in Georgia. But is it different when it is an s corporation. She will get a 1099misc to report the earnings and it will be made out to the s corporation. I think that the payments would have to be to the s corporation since her licenses are in her business name.

I called the division of corporations in Georgia and they told me that she had to fill out an application for certificate of authority for foreign corporation and mail it in with $225. Then in reading the form it asked for the date business commenced in Georgia and there is a $500 penalty if the date is more than 30 days from the date it is filed and it says the penalty is statutory and cannot be waived by the Secretary of the State. That would mean that it would cost her $725 and she might not even continue to work there. This doesn't seem right.

The other post was about unemployment tax being paid to the state of Georgia. I can understand that except that her s corporation is not registered in the state of Georgia.

What is our obligation? Maybe she should have contracted with the people she is working for as an individual and not the s corporation????

Linda, EA

[Golden Rocket]

Too Much Information

Linda, probably should have looked under Georgia filing requirements before calling them. Their standard answer is to throw a fee at everyone who asks, and give them the electric chair if they don't pay up.

As far as her working as an employee for someone who is already a Georgia employer, that would solve one problem - S corp would not have to file. But then she would receive a W2 with Georgia wages and have to file individually as a non-resident. Since FL has no income tax, there would be no way to take "credit for taxes paid to another state." Also don't know the legal implications about claiming to operate as a corporation, etc.

Out-of-state taxpayers, foreign corporations, and even motorists have to endure cash-register tactics from the various taxing authorities in states where they can't vote or influence anything. Virtually true in every state. However, if Ford Motor Company (or some other large manufacturer) wanted to build a plant in Georgia they would be begged to come, and issued a permanent "Get Out of Jail Free" card.

[oceanlovin'ea]

not employee

She isn't working as an employee but as a sub contractor through her s corporation. So the other company wouldn't be paying for her. her s corporation would have to do that.
I talked to a lady and she told me how to fill out the form.

I didn't understand what was online for sure so I called. That was when I got all that info.

Linda, EA

[ATSMAN]

I have a LLC that does sub-contract work in 3 states and we have to file state partnership returns and pay the min. for NY and CA. If the 1099misc is issued to the business EIN you can't avoid this problem.

[ChEAr$]

To recap, the corporation (S or not) must registered as a foreign corp with Atlanta.
The corporation must also file appropriate withholding and state unemployment taxes with same.

The corporation may fill out a W9 of course, and should, but corporations do not receive 1099-misc forms.

[oceanlovin'ea]

Just thinking out loud now. What if she was working for the company as an individual and not through the s corporation. If so, she wouldn't have to register with the state, would she?
Wonder if that would be better for her.

Linda, EA

[ATSMAN]

Just thinking out loud now. What if she was working for the company as an individual and not through the s corporation. If so, she wouldn't have to register with the state, would she?
Wonder if that would be better for her.

Linda, EA

Linda, if your client works as a W2 employee at a out of state employer, she would have to file an individual non resident state tax return for that state, pay any applicable taxes and then get a credit for that on her resident state tax return.

The problem that you have is that because she is getting paid via her S corp, the corp has to file a state corp return and these returns have min. tax or fees associated with them. Most states do that for partnership and corp. returns.

So depending on what she is getting in gross revenue from this gig, the percentage as a tax may be much lower if she goes individual for those of of state gigs.

[oceanlovin'ea]

never W-2 employee

She would never be a W-2 employee. She would be a sub contractor.

Guess the trouble is that they have already paid some checks in the s corp name for a couple of months. Now it was time to do unemployment compensation and I started to look at Georgia's requirements and found the thing about application for certificate of authority for foreign corporation and the $500 penalty that won't be waived. I really hated that she would have to pay that.

I filed the unemployment with Florida already for the 2nd quarter.

But she has to file this form with the state of Georgia by tomorrow IF I date it July 1st. If I date it earlier, she would have to pay an additional $500.

We don't want to do anything that is wrong so we will do what we should legally and morally do that is right.

Linda, EA

[ATSMAN]

She would never be a W-2 employee. She would be a sub contractor.

Guess the trouble is that they have already paid some checks in the s corp name for a couple of months. Now it was time to do unemployment compensation and I started to look at Georgia's requirements and found the thing about application for certificate of authority for foreign corporation and the $500 penalty that won't be waived. I really hated that she would have to pay that.

I filed the unemployment with Florida already for the 2nd quarter.

But she has to file this form with the state of Georgia by tomorrow IF I date it July 1st. If I date it earlier, she would have to pay an additional $500.

We don't want to do anything that is wrong so we will do what we should legally and morally do that is right.

Linda, EA

Same filing as my previous reply if she is going to be a 1099 Misc recipient under her SS# (not Sub S EIN). She files the Georgia version of Sch C for her income from Georgia with her Georgia non resident tax return.

It may be too late to do anything now since it is due tomorrow but for future work you can advise your client.

[oceanlovin'ea]

problem solved

well, we solved the problem. We dissolved the corporation. No need to ask Georgia for foreign corporation status since the corporation doesn't exist.

She filled out a W-9 for the company she is doing work with in her name. She will just be a sole prop for the rest of the year or until her and her husband decide where they are going to live from now on.

Thanks for all your suggestions and ideas.

Linda, EA

[ATSMAN]

If I recall you had stated that the license is in the name of the S-corp and not the individual? Will that have any legal impact?

[oceanlovin'ea]

The license is in her name. She is a massage therapist and she is the one licensed.

The W-9 she filled out was in the name of the s corp. But she filled out a new one for them in her name.

Linda, EA

[ATSMAN]

You are good to go!

Good luck.