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603Bushcraft

Being taxed for a state that I neither work or live in

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I work for a company with branches in almost every state. Recently they told us that because another branch in another state was going to be paying us from their budget, that we would be required to pay that states income tax. for context I work and live in a state with no income tax.

 

is this right, unethical, or even legal?

 

If anyone can anwser this can you site the law? I cant seem to find any info.

 

Thanks in advance

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The person at your company that made that statement doesn't understand the law or screwed up in stating what the law is. While state income tax law depends, of course, on the law of the state imposing the tax, it is the case in every state of the U.S. with an income tax that income from wages is taxed only by (1) the state of the employee's residence and (2) by the state in which the work was actually performed. If both your home state and the state where you did the work are different and both impose tax on that income, then your home state would provide a tax credit for the tax paid to the other state. As a result, in the end you only get taxed on any particular item of income from one state. So if your state has no income tax and you do all your work in that state, then you will pay no state income tax on your earnings. It is only the earnings you would have while working in state that does have an income tax that would result in state income tax for you.

 

Now what the company might have been saying is that they will withhold tax from your pay for that other state, either because that other branch doesn't know the law or is simply not set up to not withhold for employees who don't work in that state. It can withhold tax from your pay and remit it to the other state as no law in that unnamed state likely prohibits that. That would then require you to file a return in that other state to get a refund of what was withheld. It would be a pain, for sure, but you'd not pay tax in that other state. You'd just be waiting to get your money until you filed that return.

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2 hours ago, 603Bushcraft said:

so just to clarify..

 

A company can withhold taxes for a state that you dont work or live in?

and to get the money back I will have to file a tax return with that state?

 

Thanks

 

In general, yes.

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