I have been in business for almost ten years in Texas and so far have never ventured out to other states. Now I have an opportunity to do some light commercial in three other states. As most of you probably know Texas doesn’t have a state income tax. These jobs will last about 8 days apiece and will be scattered, sometimes from one state to the next on a week by week basis.
If my home office is in Texas, do I have to pay state income tax in other states?
Also, does WC prices vary from state to state?
I cant ask my CPA as he is on vacation for this week and I have to have an answer by Friday.
Replies
You will have to pay taxes on income earned in that state.
Typically the way that it works is tht you start with your total income/expenses/deductions as you report on the federal return.
Then take the amount of income earned in the other state and figure the percentage of income from that state.
Then you that percentage is used to figure the deductions that are allowed.
That is how it works for income earned from a job. I am not sure exactly how it works for self-employement income with the specific business expenses.
But that will give you some idea.
I think you are talking about my income. What I meant to say is taxable income on my employees. Also does it work the same way as federal income taxes?
Do I have to pay state income taxes on them also?
What is the best way to find out the rates for each state?
Do you know if WC rates vary from state to state.
"Do I have to pay state income taxes on them also?"You mean withholding.Yes, you will have do withholding. But that is the employee's money, not yours.You will probably have to pay a state unemployement tax. There might be others. But state laws vary alot. You might try the states website and see if there is a "starting a buiness in the state" section. Or call the department of revenue and find out what the basics are.
You will have to pay state income tax (personal) in each state. To accomplish this, you will need to keep track of your profit or loss on each job.
You will have to pay unemployment taxes on your employees in each state they work in.
The workmans comp policy you have now should cover work done in another state. In this case, the rate should be the same. Check with your Insurance guy.
Your employees will pay taxes in the state they work in unless there is a reciprocal agreement between their home state and the state where they are working.
You get out of life what you put into it......minus taxes.
Marv
Edited 7/3/2006 9:38 am by Marv
I think a tax atterney or accountent needs to be consulated.When I worked I taveled a lot and never paid income taxes in other states I worked as they were not places of permanent employment.If you live in one state and your place (company) of employment is in another then you pay.
bobl Volo, non valeo
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You will have to pay state income tax (personal) in each state.
Hmm, if the employees are from the state in question, and paid in that state, I can see that. But, he's talking about (I think) bringing his guys over the line to work a project. I'm guessing they are still going to be paid versus a Texas bank account and to Texas-addressed employees.
Now, the trickier part, I'm thinking, would be state contractor licensing. Which might be the place to look for an FAQ on pay, taxes, etc.Occupational hazard of my occupation not being around (sorry Bubba)
Yes, that is exactly what I'm trying to do. I already have a crew in Texas and will use them in other places.
I'm just trying to get an average cost of doing business in LA, OK. and ARK.
But, he's talking about (I think) bringing his guys over the line to work a project.
His employees still could be required to file in that state. On the bottom of each employees W-2, you would list wages made in OK and Withholding, wages made in KS and W/H...etc.
It happens all the time. Some professional sports players must file in every state they play in.
I have a client that works for Intel. She travels around the country as a trainer. One year, she had six different states on her W-2.You get out of life what you put into it......minus taxes.
Marv
Every state differs on that. Some base it on the total amt of dollars earned there, some on number of days in their jurisdiction, some one what the percetage of your annual total is, some a complicated formula involving all of these.
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As far as I know, it pretty much amounts to setting up a branch in whatever state you're working in. You need to get a tax ID number, worker's comp, possibly a sales tax account, etc. I had an employee who came from another state and worked for me here. He would have had to pay WA income tax... except we don't have one. Your employees will have to file in each state at the end of the year.
I dont think a branch office would work for me because a besyt case senario there is only 2 years worth of work. That would be a lot of trouble and expense for that short of time.
I'm not saying you have to rent an office or have an address there, but I bet you have to do everything else in terms of registering your business, getting licensed, getting insurance, doing workers comp, etc. etc.
Okay, that wouldnt be so bad because I've already got WC and insurance.
You might be able to re-use your existing liability insurance out of state, as long as you tell the company and get a written rider. My insurance is specific to my state. If your work comp is not thru the state then you may be able to do the same. My WC is thru the state and does not cover anything that happens out of state.
Good luck, it sounds like you're getting ready to go global!
Thaks for the help. I'll be able to check that out in the morning.
As employee of a corporation (live in WA state) , have had to pay income tax to other states during the last 40 years only when physically in that state more than 29 nights consecutively.
Missouri seemed to be the state that really kept track of out of 'staters the most.
"have had to pay income tax to other states "
Did those states include LA. OK. and ARK. by any chance.