Out of state employee question

yep, that's about right. i pay tax to the state where i get my income. my home state lets me claim a tax credit for that amount, so i don't become liable for double when filing in 2 states.

since NV doesn't have a state tax at all, i'm not sure how one would best handle that situation.

 

She will have to pay Arizona state tax unless you set up a branch in NV, and hire her as employee of that branch. More paper works on you! Or, you can always give her high salary to compensate for the state tax she has to pay Arizona. Less money for you! So, either
- more paper works for you + cost of setting up branch and report tax annually to NV
- less money for you (pay her higher)
- less money for her (she gets less after tax)
One of the three choices.

 

here's a bit from the nonresident arizona tax form instructions:

Are You Subject to Tax in Arizona?
You are subject to Arizona income tax on all income derived
from Arizona sources. If you are in this state for a temporary
or transitory purpose or did not live in Arizona but received
income from sources within Arizona during 2007, you are
subject to Arizona tax. Income from Arizona sources includes
wages, rental income, business income, the sale of Arizona
real estate, interest and dividends having a taxable or business
situs in this state, or any other income from an Arizona
source.

 

Mike,

I suspect you need info from people with specific knowledge of Arizona and Nevada state tax laws.

For instance, in New York City, if a non-resident works here, her income earned here will be subject to New York City commuter income tax. It wouldn't matter if she were a resident elsewhere in New York State or a Nevada state resident. If she's a non-NYC resident and works in NYC, the income earned here will be subject to NYC income tax, specifically, the NYC commuter income tax.

EDIT: Yes, e.g., see galaxee's post about Arizona nonresident tax form.

 

Mike, maybe you should move your business to Nevada.

 

State Income Tax Returns - Tax Tips from TurboTax

Thats a good place to start. The basic rule is you file a tax return in each state you live or work in. Since the law differs across state borders, it's hard to tell right off the bat what needs to happen in a particular situation. Generally speaking, each state has a resident and non-resident tax form to fill out, and there are places to fill in the amount of tax paid to another state.

If she is currently employed in California and living in Nevada, and her employer doesn't have a branch office in Nevada, then i would guess that she is (either unintentionally or intentionally) breaking the law by not paying taxes in California. Again, thats just a guess because i can't find anything specific in my 5 minutes of google searches.

 

i can tell you from experience that Arizona is the most surcharged and excised state in the US even outdoing New Jersey...

they dont stop at anything to get you anyway they can...

let me ask you something.

how much do you pay in surcharges and taxes on your cellphone bill??

i bet its WAAAY more than anyone else here.

 

I get some income from California, and I have to pay CA tax on that income. States will do whatever they can get away with to increase tax revenues. My CA income is from real estate and it annoys me because the business already pays property tax (which I do not object to, since the property receives state services such as utilities and fire protection). But I receive no services from CA and so I get nothing in return for paying income tax to CA.

But they can do it, so they do. So, yes, in all probability, in any dealings involving California, CA will collect taxes. (I harbor particular animosity toward California, because for the first two decades of my life I lived there and the air was so filthy it was actually painful just to take a deep breath of air.) People wondered why I moved to the frigid north, but the air in ND, while cold half the year, is clean!

 

I think that makes her a tax evader.

I did not live in California. Do I have to file a return?

 

All of the above advice is correct! If you take the office in Nevada option, you will not only have to withold and file Nevada state withholding, but also as an employer, file and pay Nevada SUI for your Nevada employee. If she is infact being paid as an employee by a California employer, then the employer should be reporting her earnings to California and they are subject to California PIT, SDI & ETT for the employee and SDI and SUI for the employer.
You may want to consider increasing her wages to either cover the Arizona state taxes, if an employee(W-2) or to cover her health care if a contractor(1099). Remember as contract labor you would also save Federal FUI ($56.00/year), Employer OASDI & MEDICARE(7.65% of her wages that you pay as an employer), and Arizona SUI(depends or your rate), all of which could be added to her wages to help cover her cost of health insurance. Just a thought.

 

Every state does this -- claims tax on income derived from sources within the state, even if you're not a resident. But nearly every state gives you a credit for such taxes against your taxes you owe in your state of residence.

However this is not much help when you live in Nevada or Washington or one of the other few states with no income tax.

Another idea: employee leasing. You pay a company in Nevada to hire her and "lease" her services to you. They do all the paperwork. The cost is probably more than you would incur otherwise, but it'll save you lots of time. Maybe they could provide her health coverage too.

 

Good suggestion on the employee leasing. But the employer and prospective employee/contractor would have to crank the numbers to compare leasing company costs vs employee(W-2) costs vs contractor(1099) costs. BTW, I forgot to mention the Workers' Comp costs the employer would save for 1099 vs W-2 taht could be passed on as pay to a 1099 contractor.