Corporate Member Paying Out of State Tax

[geekgirldany]

Client lived in TX majority of 2014. W-2 has GA state taxes withheld on the entire amount and the company is physically located in GA. He lived in TX until Sept then moved to GA. When questioning him why they withheld GA taxes, he was told because he is a corporate member and had to pay GA taxes whether or not he lived there.

Has anyone else come across this before. I can not find anything in Georgia tax booklet about this.

[Golden Rocket]

Georgia Source Income

If the work itself was in Texas, he should not have been subject to Georgia taxes. However, if he was doing company work in Texas and the work happened to be in Texas, it would be Georgia source income.

This is difficult to determine sometimes, and sometimes states slug it out as to where the "source" is. (NY and NJ had a bloody battle a few years ago and I still don't know who won). Example: The Georgia company acquires, assembles traffic lights in Georgia and installs the lights nationwide. A lengthy installation could keep a crew in Texas for a long time, but it still would be Georgia source income.

Scenario 2: Poultry is shipped from Gainesville GA to a refrigerated warehouse in Irving, TX for storage until the product can be loaded on trucks and distributed in that area. The warehouse employs five people. The Georgia company has not only established a physical location in TX (for sales tax purposes) but also has a Texas payroll to the extent of at least those five people. Their payroll is TX and not GA.

If your client lived in TX and did work in TX which was permanent and not transitory, he should not have to pay Georgia tax. I would file a GA PY resident return (if there is such a thing), and reclassify that portion of wages to Non-Georgia income. I think this would create a problem with the state if they are matching GA wages, but I think your client would have a winner if he is willing to pursue it.

[geekgirldany]

Thanks so much. I am going to apply the income to TX and GA as it should be. I agree that GA may question it since all the income was reported to GA as taxable income. This makes the second state situation I have went through this year. Just dealt with NY and their office in home rules.

Thank you again.