Should I pay state tax where I do not live?

[japss]

Hi
I live and work in TX but my employer is registered in IL. Should I pay state tax for IL?
Initial couple months (Jan, Feb, Mar 2007) my employer deducted IL state tax from my payroll and it is there in my W2.

Now my tax consultant says that I should pay IL state tax for the remaining months too. When I do not live or work in IL, should I pay IL state tax?

Please clarify

Thanks
Senthil

[Bees Knees]

The location of your employer is irrelevant. You pay tax to the state of your residence, and any state in which you work.

If state tax was withheld for IL and you never lived nor worked in the state, you will need to file an IL return as a nonresident to get a refund of those taxes.

[japss]

State Tax Refund form for IL?

Thanks for you all for the assistance.
Could you please also let me know which form should I file to get refund of state tax withheld? Is this IL-1040 NR?

[dsi]

Hire a professional tax preparer for that.

[Snaggletooth]

Can of Worms

I am not an expert on NY, but I have read that they are aggressively going after tele-commuters. These are people that live in another state like NJ and work from home logging into the company's computer in NY.

Sova raises a real possibility that strikes at the heart of nexus definition. States are going to be fighting each other, and they will resort to harassing taxpayers rather than going to court when they don't even know what state in which to go to court. I can just hear the NY revenue people "We want our money. If NJ is after you for the same income, that's between you and New Jersey." I see the Supreme Court settling on something eventually.

Last year I billed out some 900 hours working at home for companies in other states. For one company, I sent e-mail attachments back and forth, but never logged onto their computer. 700 hours were spent logging onto a server in Alabama (two customers) I only was on their servers long enough to extract information to enable me to work at home. To make matters harder to settle, I was a consultant and never an employee for anyone.

Lots of problems here. Until something is definitized, I'm afraid working at home for an out-of-state company will result in BOTH states claiming the income.

[erchess]

Snags

Do you really mean that if a Wisconsin company sets up an office away from my home and I go to that office to work by logging onto their computer in Wisconsin, then I am fine but that if I work from home by logging onto their computer in Wisconsin then Wisconsin could demand that I pay Wisconsin tax as if I commuted to work every day in Wisconsin?

[Snaggletooth]

No Position

Erchess, I'm not really saying anything with any degree of conviction. I'm just saying that states have been very aggressive in pursuing revenue, and any way they can approach the "work from home" phenomenon to interpret revenue for themselves, they will try.

[Bees Knees]

I think there is a difference between an IL company hiring a TX resident to work out of his home office, verses a NY company hiring a NJ resident to commute 30 miles into work, and that NJ resident decides to work out of his home office rather than make the commute. It’s probably a facts and circumstances thing, but I would think a lot depends on whether the NJ resident is required by his employer to work out of his home office, verses simply choosing to take work home with him.

[joanmcq]

The recent case pertaining to NY was a TN telecommuter who worked for an NY company. NY stated that he had to pay NY taxes per their law. MA, however, specifically states that telecommuters who spend de minimus time in MA do NOT pay MA taxes. I don't think any states are as aggressive as NY, and I'm sure it will be litigated further.

[Auto]

pay the state where you worked

I live in Georgia and take care of clients by phone & computer who are located in NY. If I travel to NY, I pay NY tax on the money I earned while I was actually working in NY. If I am working for a NY client from my home office in Georgia, I pay Georgia tax because that is my physical location for performing the work.

[Zee]

We live in FL full-time and my wife telecommutes for an IN company. She's in Business Development. She travels 80% of the time visiting with prospective clients throughout the US, but performs no services in IN. We do not pay IN taxes, and FL does not have an income tax. As others have already indicated, NY and NYC do try to tax all income sourced from NY and NYC (including telecommuters).

[taxxcpa]

I never paid out-of-state tax

I used to work for the State of Texas and my work took me to New York for up to four months every couple of years. Can you imagine the State of NY taxing an employee of another state who went on extended trips to NY?

Now the State of Texas has actually hired NY residents and set up a full-time office and hires New Yokers to do the kind of work I used to do. In their case, I'm sure the State of NY would tax them.

There was an interesting article about it several years ago. Those New Yorkers got the day off for Texas holidays like Jefferson Davis' birthday and Robert E Lee's birthday and San Jacinto day. (Texas dropped those holidays a few years ago when we became more politically correct.)