Tax Guru-Ker$tetter Letter
Thursday, January 08, 2004
I received the following from someone who was shocked to learn that states other than his home state would hit him with income taxes.
I’m not sure who to contact on this question, I get different answers depending on who I talk to. I’m a computer consultant that travels and last year the company I work for said that they have to take state taxes out of my paycheck for work I've perform in each of the states I was in. Which means this year I will have to fill out state taxes for 3 states, Michigan, where I live, Pennsylvania and West Virginia where I worked. Is this right? If it is right what happened to the words “taxation without representation”, because I cannot vote in those states and I have no access to whatever benefits people living there may get
If you were working as a W-2 employee, it is correct that you will have to file part-year or non-resident income tax returns with each of the states in which you earned income for the year.
All states that have income taxes require taxes and tax returns on income earned from services provided inside the state as well as from property located inside the state (rentals).
You are right that you have no recourse against the elected officials in those states; and that is why they love to tax tourists and other non-residents. It's not anywhere close to being fair; but it is how things are.
It's not as bad as you may think. You won't end up paying three state taxes on the same income. On your home state return (Michigan), you will be able to claim a credit for the state taxes paid to PA and WV. You will need to attach copies of those state income tax returns to your Michigan tax return in order to properly document your eligibility for that credit.
If you were an independent contractor or incorporated, there are ways to possibly avoid the other state taxes; but that didn't sound like your situation. When you are a W-2 wage slave, your tax savings options are very limited.