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Topic: Which state do you file in?
| Author | Message |
| Little Fingers | Posted – 2/7/2007 2:51:29 PM | show profile I'm just wondering...since as freelancers our work can come from any number of employers across any number of states, what state's tax laws apply to you when you file? I know, for example, that in NYC freelancers get socked with an extra tax. Most of my work is in NYC, but for 2007 I'll be wholly located (residence-wise) in another state. Will my NYC work still obligate me to pay that extra tax? |
| dribbledrive1 | Posted – 2/7/2007 4:26:45 PM | show profile Typically, you file in the state in which you reside. Some states have tried to collect taxes on out-of-state residents based on the income that is paid to them by companies in that state. Generally, that only comes into play if you physically go into the state to do that work. (And, by the way, on the rare chance that you might owe tax to a second state, it's not a second tax -- the two states split the tax.) Let's say, for example, you moved from NY to CA in the middle of the year. Since you lived in two states for six months each, typically you would pay 50% of the state tax to each based on your total income. All that said, I am not an accountant, so it's wise to check everything without someone who does this stuff. --I'm just wondering...since as freelancers our work can come from any number of employers across any number of states, what state's tax laws apply to you when you file? I know, for example, that in NYC freelancers get socked with an extra tax. Most of my work is in NYC, but for 2007 I'll be wholly located (residence-wise) in another state. Will my NYC work still obligate me to pay that extra tax?-- |
| Cyrus | Posted – 2/7/2007 11:17:27 PM | show profile To clear up some confusion, NYC freelancers don't get socked with any extra tax. They're subject to the same tax rates as everybody else on the state and local level. *EVERY* self-employed person pays what's commonly known as self-employment tax on the federal level, which basically means you pay the portion of the FICA tax that is traditionally borne by an employer. The rates are currently 6.2 percent of gross wages for both the employee and the employer. Everybody pays 6.2, but self-employed individuals pay double that. The maximum anyone is taxed for, regardless of what they actually make, for purposes of Social Security is $94,200. This is why some in D.C. are saying that the law needs to be changed so that wealthier individuals contribute more of their income in an effort to keep Social Security afloat. ------ Cyrus Afzali Astoria Communications www.astoriacomm.com |
| Cyrus | Posted – 2/7/2007 11:21:39 PM | show profile To answer your primary question, generally you owe the tax primarily to the state that employs you. So you fill out those forms just as normal. But you *don't* get taxed again by the state where you live at the full rate because the tax you paid to the state that employs you serves as a credit to the taxes owed by the state where you reside. That may or may not help you much, depending on the tax rates of the two states. If you work and live in the NYS tri-state area, for example, it comes out close to being a wash in many cases because rates are similar. But it might not if you work in a state with a low rate, but live in one with a high rate. If you expect your income will be sizable from NYS, don't forget to file estimated taxes to Albany just as you might do to the feds. ------ Cyrus Afzali Astoria Communications www.astoriacomm.com |
| SPF 30 | Posted – 2/7/2007 11:40:35 PM | show profile So, Cyrus, if I understand correctly, you're saying that freelancers who live in a state with no income tax (for example, Texas) but whose freelance work comes from publications in Massachusetts, New York, and California would have to file and pay state income taxes for all three of those states? |
| nellie bly | Posted – 2/8/2007 9:31:42 AM | show profile RE "the extra tax that NYC freelancers get socked with," I think the OP is referring to NYC's Unincorporated Business Tax (UBT for short). Basically if you're not a corp and have profits ABOVE a certain amount (I can't recall what it is, something like 50K or 60K or 75K maybe?--check the web site), you pay this tax in ADDITION to NYC's personal income and nonresident income taxes. The first time I heard about it was from a friend who had earned above that amount for the first time, hadn't paid it because she always did her own taxes, and then got socked with interest and penalties! As for having to pay NYC or NY State taxes if you're not a resident and don't physically work here, I've never heard of that. But I can tell you that NY is very aggressive about TRYING to collect taxes from former residents who claim to have moved to say Florida or other states that have no income tax. If you've really moved, but kept an apt, banking and investment advisors here, they may try to claim you're still a resident--as you can imagine this happens a lot with retirees and when theres substantial $$$ involved. |
| maphop | Posted – 2/8/2007 10:14:29 AM | show profile Because you're the one who has to sleep at night on this, you really should address this question to either your accountant or to the IRS via their website (you can email questions) or by calling their 1-800 number if it concerns Federal Tax. With regard to state income taxes, unless you've moved mid-year as another poster gave as an example, you report the tax appropriate to YOUR state, not the states of the companies or individuals who hired you. If you live in TX and there is no income tax in TX, you don't file an income tax return other than your Federal return. |
| Cyrus | Posted – 2/8/2007 2:00:54 PM | show profile Stet, If you work in a state that has no income tax, then generally you don't have to be concerned with anything but federal. Now, having said that.... there have been a few cases over the years where NY and other states have gone after people who lived in other states because they said their situation amounted to full employment by a NY-based company, which made them subject to paying NYS and, if applicable, NYC taxes. If I recall correctly, those cases involved full-time employees who were W-2'd for a NY-based company, but were physically located out of a home office or some other situation in another states. So most likely, that situation wouldn't apply to you. ------ Cyrus Afzali Astoria Communications www.astoriacomm.com |
| soonerscribe | Posted – 2/8/2007 3:11:13 PM | show profile I file in a state of disbelief over how little money I actually made the previous year...:) |
| SPF 30 | Posted – 2/9/2007 1:26:38 AM | show profile Thanks, all! |
| DHernandez | Posted – 2/9/2007 3:33:45 AM | show profile If you're freelancer, you should be getting 1099s, not W2s. As a freelancer, you are in business for yourself. You file in the state(s) where you conduct your business. If you conduct your business from the kitchen table, you file in the state in which the kitchen table is located. |
