Three Ring Circus - States

[buzzardbreath]

My client is local, but works as a claims adjuster for a huge national casualty insurance company.
He is single, so he works in whatever location has suffered a natural disaster. This past year he
worked in NY (Hurricane Sandy), in IL (tornado outbreak), and in LA. State of residence is Alabama.

In prior years, he would receive various W-2s for state wages in numerous states where he worked.
For example, in 2012, he had State taxable wages in four states. No problem.

This years' W-2 had his entire salary in Louisiana, although he worked in three different states.
I asked him if he knew why and he said he was converted from an hourly employee to a salaried
employee.

Doesn't make sense. Employer has an accountable plan, so they know where he is every time he
submits an expense report. They reimburse almost everything, including hotels.

Any comments? Why the change? And worse still, does the preparer have any obligation to the other
states not covered by the W-2??

[JohnH]

I'd trust the employer's record keeping.
No sense complicating your life.

[ChEAr$]

(snipped for brevity)

Any comments? Why the change? And worse still, does the preparer have any obligation to the other
states not covered by the W-2??

I used to think so, but like JohnH changed my mind. Most egregious case was Pittsbugh Plate Glass withholding Alabama wages on an employee who worked at their store in Georgia. I prepared the Georgia non resident showing hugh balance due with corresponding hugh refund for Alabama. He paid me, not sure if he filed or went elsewhere. At least not back to me the next year.

In your case you were already on notice of his work situation, but for a new client, sometimes better not to ask.

[buzzardbreath]

Giant Entities Never Accountable

I don't think I have a lot of choice due to the company's W-2. Even though I believe there is source income from New York and Illinois, there is no withholding for either of those states. So even if I had enough scruples to report accordingly, client is left with little choice to be fair to him.

Why are we preparers stuck with the fallout when these mega-institutions [be they large financial institutions, educational, governmental, brokerage, whatever] screw up the information? Why is the IRS drooling at the mouth to penalize preparers for EIC fraud perpetrated by large masses who get off scott-free, and will never mess with the large entities who mess up everything and won't listen when someone tries to correct them?

BTW ChEAr$, you might know this taxpayer...

[ChEAr$]

I don't think I have a lot of choice due to the company's W-2. Even though I believe there is source income from New York and Illinois, there is no withholding for either of those states. So even if I had enough scruples to report accordingly, client is left with little choice to be fair to him.

Why are we preparers stuck with the fallout when these mega-institutions [be they large financial institutions, educational, governmental, brokerage, whatever] screw up the information? Why is the IRS drooling at the mouth to penalize preparers for EIC fraud perpetrated by large masses who get off scott-free, and will never mess with the large entities who mess up everything and won't listen when someone tries to correct them?

BTW ChEAr$, you might know this taxpayer...

well, buzzardbreath, if that IS you name!!!! (grin I can only think of one fellow that maybe you and I both knew as a client. Yep.

[Gary2]

Check if any of the states have exceptions for incidental work. Massachusetts does, though from your description, I don't think this work would qualify.

You are not required to prepare all these state returns if the client doesn't want you to.

You are required to tell the client if you believe they have a filing obligation in those states, and the ramifications of not filing.

Assuming there is an obligation for the other states, presumably some of it will be recovered via credits on the home state return, though I'm guessing the tax rate in NY is higher than in AL. If you wait for the other state to audit, it may be past the SOL for home state refunds.

As for any under-withholding penalties, perhaps the employer could make good, as if there's an obligation, they should have gotten the withholding correct.