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Here is my situation: I am resident of Wisconsin. I recently joined Consulting. I will travel to different states depending on my project. I am interested in know what would be tax implications ? I am also interested in knowing in these kind of scenarios which state is best to live ? Please advise |
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It's not clear from your question whether you are self-employed or working as an employee. If you are self-employed, reasonable expenses, including travel expenses are deductible against your income. However, earnings in other states may be subject to tax in those states. If you are an employee, any expenses reimbursed by your employer are neither income nor a deduction. (If the company REQUIRES you to travel but does not reimburse you, something doesn't sound right there.) Legitimate, reimbursed business expenses can potentially be taken as itemized deductions, subject to the 2% AGI limitation. In either case I would encourage you to consult a professional preparer to discuss the specifics of your situation. And if you itemize for employee business expenses?. IF you cannot itemize deductions, you will essentially "lose" your deduction. State for residency is tricky. You have to have nexus in that state, to just "pick" a state to be taxed in may not be correct. Some states do not have state income taxes, but your nexus is determined by your tax home :)
(21 Jun '10, 23:37)
SandySea
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Each state has it's own laws regarding taxation. Google the state name and department of revenue. You can look up what each state you will be working in considers taxable income to be. |
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It is best to live in a state without a state income tax, so that you only have to pay tax on your income from each state to the state where it was earned and do not have to deal with the rather complicated "credit" to avoid double-taxation. It is best not to live in Hawaii or Alaska, because of the high travel expenses between those states and the other 48 states. This narrows the field to Texas and two others. |
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Live in a State that mirrors your life style and don't worry about tax as a driver. If you are one who needs a well established cultural, social and nightlife community suggesting you live in New Hampshire (one of the States that has no income tax) makes less sense than say moving to Miami FL, another State without income tax. Also, if considering tax you need to look at taxes other than income tax such as sales tax. NH has no sales tax while FL does. It also makes sense to look at your territory. Suggesting living in FL if all your activity is west of the rockies makes less sense than Washington that has no individual income tax. Also, the answer will depend on your personal structure related to consulting. If you form a corporation you then will need to look at the income, franchise and registrations in the States as well as the multi-state apportionment rules. Then there is the issue of sales tax registrations and reporting and business licensing, insurance, and so on. I always suggest to persons looking for curbside advice to seek out a competent practitioner and invest in some good advice. Sometimes you get exactly what you pay for - there usually is a relationship. |
