Lives in TN, did some work in MS, MS income tax on W2

[stacye78]

I am doing taxes for a friend who lives in Memphis, TN and is in the TN Elevator Worker's Union. His work took him to Corinth, MS for a few weeks of work in 2007. The Elevator company (incorporated in Illinois) sent him his W2 and state income tax was taken out for the state of MS. Is this correct? Does he really need to file a MS state income tax return? He LIVES in TN. Anyone know the rules of paying state income tax to a state where you DO NOT reside?

[glgillis]

The rules , in general, are that if the states do not have a reciprocal agreement, you pay taxes to the state where the money was earned. Since Tennessee does not have an individual income tax, I would assume there is no reciprocal agreement and your client needs to file a Mississippi non-resident return.

Gerald

[Burke]

I am doing taxes for a friend who lives in Memphis, TN and is in the TN Elevator Worker's Union. His work took him to Corinth, MS for a few weeks of work in 2007. The Elevator company (incorporated in Illinois) sent him his W2 and state income tax was taken out for the state of MS. Is this correct? Does he really need to file a MS state income tax return? He LIVES in TN. Anyone know the rules of paying state income tax to a state where you DO NOT reside?

Each state has its own rules. HOWEVER, almost always in these cases, the state where the income is earned wants its money, and the state where the TP lives also wants its money (if it has an income tax.) This is why the out-of-state tax credits evolved so that a TP avoids double taxation in two states. It does not always work out equally, depending on whether one state's tax rate is lower or higher. I have clients who live in one state and still receive earned income in another state. (Not reciprocal). So every year we have to file a resident and non-resident return on the same income using a credit to offset. Since the resident state's rate is higher, the earned-income state credit does not completely offset. Each state also has its own deduction rules which may affect the situation as well. In your case you will have to file a non-resident MS return -- I don't know MS rules but in most states it is only on the income that is earned there, not total 1040 income. But that figure is probably where you start from. Some people don't want to bother filing, and just let the state keep the withholding. Failure to file in a non-resident state is why now most states automatically withhold on property sales for a non-resident owner.

[gkaiseril]

No Reciprocal Agreement

Tennesse does not have a reciprocal wage agreement with Missippi, so the client has to file and pay taxes to or get a refund from Mississippi as a non-resident. Since Tennesse does not tax wages, there is no relief for the taxes paid to Mississippi.

The filing requirement for Mississippi is Mississippi gross income for single $8,300 plus $1,500 for each dependent and $16,600 plus $1,500 for each dependent. At those levels of gross income your client could get a refund.

More information is in the The TaxBook All State Edition.

[Snaggletooth]

Stacye

Stacye welcome to the board! Always good to have another Tennessean. We've got plenty of preparers from all over the country.

There are two elements to your question: First is whether this should have been subject to Mississippi tax. Secondly, assuming it is subject, then what does the taxpayer do with it?

I don't know the answer to the first question, but he is probably subject. A construction worker with an out-of-state company is usually able to come and do a minimal amount of work. If the out-of-state company has a presence in the state where the work is located, it is usually a "slam-dunk" that tax subject and withholding are inevitable.

Tennessee does not have a reciprocal agreement with any other state because it would have no consequence, having no tax on wages itself. The usual scenario where both states have income tax is as follows: the state where the work is located will tax the income earned in its own state, and the worker's home state will tax the same income (again) but then allow a credit for the income earned in the foreign state. Since TN has no tax, then the tax in MS is laid naked and bare with nothing to apply against it.

Don't know for sure, but I'd be willing to bet if you file a Mississippi return as a non-resident, you'll get most of the withheld money back. Makes for a happy client, and sorta takes the sting out of the tax situation.

Come back and visit often! Ron Jordan, Manchester, TN

[stacye78]

Thanks everyone! One more question (1099 MISC)

I went ahead and filed the MS state return and my friend got $47 of his $113 back. So he was happy. Thanks so much for the clarification from everyone. Coming from Destin, FL and now living in TN, I am a bit of novice on the state income tax subject.

Thanks to all who responded.

One more question: Do you HAVE to list 1099 MISC income on 1040 Schedule SE form? What about this "other income" line?

[Snaggletooth]

No

The most common fate is for 1099-MISC amounts to be listed on the "Sales" line of the Schedule C. The "net" on the schedule C, after all expenses, is entered on Sch SE.

Occasionally, you will see a 1099-MISC for rent. That amount goes on Schedule E.

[gkaiseril]

1099-Misc

The 1099-Misc covers a lot of income, everything not covered elsewhere. Box 7 is considered Schedule C income and subject ot Se tax. Some payments can go on 1040 line 21 and may need to be placed on the SE schedule. You as a taxpreparer have to look at the client's situation and make the determination based on your research.

Florida does not have an income tax but did have the intangilbles tax. But you should have the other states income taxes from the common snowbird.