State income tax & paid piloting

[JD318]

No kidding, they tried to tax me while I was stationed there. Said, "I paid taxes to my home state and was not a resident" They said, "Prove it." I said you're the one making the claim that I was, you prove it." They said, "you live at this address, now pay up." I said, "that is a military base address, despite being stationed there I retain my original state of residency. Thanks for proving that I wasn't a resident." Since they had calculated the amount I owed them, I assumed they had seen my W2 and already knew I had money deducted for my home of record income tax. They were just trying to shake me down, wonder how many other service members didn't know any better and paid.

Yeah I believe that items should only be taxed once not every time the item exchanges hands. Taxing cars every year and every time you buy fuel is ridiculous. I had one state that tried to force me to buy tags for a track day car that was never driving on the street, they would drive around looking for cars in driveways without tags and then send a letter certified mail. Never mind the trailer and the tow vehicle both had tags. Also feel like racers should be able to purchase tax free fuel at the track similar to off road diesel for farming.

I've had many clients receive letters from both California and Iowa trying to assess state income taxes because the taxpayer received a 1099-Misc from a payer that happened to have an address in their state. They assumed my client must have worked in the state. Once I explained the 1099 was issued from the payer's headquarters and the fact that my client never worked a day within the state, the assessed tax, penalty, and interest was dropped and abated. I figured it was similar to a shakedown just trying to generate some additional revenue for the state coffers.

As far as sales tax, many states classify it as a "transactional tax." Meaning the tax is assessed on the transaction, not the item. By doing this, the tax is only assessed a single time...for the transaction. The next time the item is sold, it is a new transaction and therefore may be taxed.

 

[luvflyin]

I always thought the tax was for the state in which you reside... hence a lot of New Yorkers taking residence in Florida, and Californians taking residence in Washington or other non income tax states but still living in NY and CA

I believe in California they have been trying to change the law to minimize the residency, that is, if you're at your "vacation home" in California for more that three months of the year you're paying California state income tax...

"...but still living in NY and CA..." is the key thing here. That's fraud. Ya ain't gonna get away with it if ya get caught.

 

[luvflyin]

Tax is generally paid where earned, not where you live. There are exceptions as noted above regarding pilots. My dad lived in Illinois and worked in Indiana. He paid Indiana income tax. But Illinois also passed a law that if you live in IL, you must remit to them anything not covered by another state’s lower rate. So indiana was 3ish percent and IL was 5%. He paid 3% to IN and 2% to IL.

I am a CPA but there are reasons I don’t do taxes. This thread highlights a big one.

Hmm. I suppose a logic could be applied and a case made to validate that. But I don't think it would stand up to the US Supreme Court decision that said a State cannot tax money taxed by another State. I don't remember it saying any thing about different 'rates' in the different States.

 

[NealRomeoGolf]

Hmm. I suppose a logic could be applied and a case made to validate that. But I don't think it would stand up to the US Supreme Court decision that said a State cannot tax money taxed by another State. I don't remember it saying any thing about different 'rates' in the different States.

Then someone should go to court.

https://www2.illinois.gov/rev/questionsandanswers/pages/806.aspx

 

[luvflyin]

Then someone should go to court.

https://www2.illinois.gov/rev/questionsandanswers/pages/806.aspx

Yup. If my memory of the the US Supreme Court case of Whoever vs California is correct. If so, the States that tax income earned in, and taxed by, other States but offer a Credit for taxes paid to another State is an end run around the Law. I don't remember anything in that ruling that addressed the actual dollar amount paid. It said simply that a State may not tax money that was taxed by another State. But my memory may be wrong

 

[NealRomeoGolf]

Yup. If my memory of the the US Supreme Court case of Whoever vs California is correct. If so, the States that tax income earned in, and taxed by, other States but offer a Credit for taxes paid to another State is an end run around the Law. I don't remember anything in that ruling that addressed the actual dollar amount paid. It said simply that a State may not tax money that was taxed by another State. But my memory may be wrong

Surely there would have been some rich Chicagoans who would've challenged by now. But again, this is why I don't do taxes. These types of issues do not interest me at all.

 

[Let'sgoflying!]

I reside in Texas
All of my flights originate and end in Texas
The aircraft are all registered to a Texas address
The owner lives in Texas
The checks come from a Texas bank
However the owner's company has a NM address which appears on the checks*

Am I liable for NM tax?

*I am having that changed right now

 

[NealRomeoGolf]

I reside in Texas
All of my flights originate and end in Texas
The aircraft are all registered to a Texas address
The owner lives in Texas
The checks come from a Texas bank
However the owner's company has a NM address which appears on the checks*

Am I liable for NM tax?

*I am having that changed right now

I would say your "tax home" as it has been called in litigation, is Texas, subjecting you to Texas income tax. This is not official advice given to you by a tax professional.

 

[Jeff767]

There is mostly terrible tax advise in this thread. State income tax is based on where the income is earned. There is a exception if you are a transportation worker and don’t perform more than 50% of your work in one state. In that case you pay state income tax in your state of residence. If you live in New Jersey and work in New York you pay New York State taxes. If you work in multiple states and are not a transportation worker you must file taxes in every state you work in.

 

[aggie06]

There is mostly terrible tax advise in this thread.

I agree. It’s never a simple answer and there are varying levels of aggressiveness in tax positions. Everything is fact dependent. SC tax cases are rarely broadly applicable and usually take some wrangling to make your facts fit the opinion. If this is a material item to you, your best bet is to get specific answers based on your specific facts from someone being paid to do it.

 

[Let'sgoflying!]

don’t perform more than 50% of your work in one state.

So on each trip I would record the time I worked in (above) each state as I crossed state boundaries; tally the times for all states at the end of the year and I would see if I was in (above) any one state more than 50% of the time!

 

[Pilots Of America Management]

Too bad the OP couldn't get his question answered because too many people wanted to get in their political digs and take this into the Spin Zone. Posts have been deleted and posters warned. Thread closed by MC vote.