Work, Travel and State Taxes: Tips to Avoid Double Taxation

tax issuesIt is not uncommon to travel for work. Various professions require travel to other states. But when do these trips trigger tax obligations in those states? This post will help provide some guidance on this slippery tax issue.

 

Can you get taxed by two different states? First, it is best to answer the obvious question — is it possible to get taxed twice, once by the state you consider your home state and again by another you travel to for work? Yes, this type of double taxation is possible.

 

A recent publication in Market Watch discussed this issue through the story of one man’s unexpected and massive tax surprise. The man worked as an executive with Major League Baseball. His office was in New York, but his family lived in Florida. The exec chose to keep Florida as his home state and commute to work.

 

The piece notes that many who find themselves traveling for work operate by the general 180-day rule. Although this rule provides some guidance, tax matters are not always this simple. States can vary in the exact number of days that are used and the definition of a countable day. Does it matter if the person flew in late on a Sunday night and did not actually work that day? Does that day count in the calculation to determine if a state can hold the taxpayer accountable? The answer can vary.

 

The exec in this story received notice that his tax filings were under investigation by the Internal Revenue Service (IRS). This case involves traveling to New York. In New York, anyone that works for over 183 days in the state is taxed by the state. This includes “all of your income — capital gains, passive income, interest income,” any property sold in other states, everything could be subject to taxation in New York.

 

How can you avoid double taxation? Entrepreneurs are playing with the idea of an application to help keep track of the days that are spent working in each state as a means to help reduce the risk of getting caught in a situation that would require you to pay taxes to different states.

 

Although such technological advances are helpful, they cannot replace legal counsel. Those who are concerned their work travels may increase their tax liability in various states are wise to hire an attorney. Experienced legal counsel can help to better ensure you avoid double taxation and other tax issues.

Contact Robert J. Fedor, Esq.