Tax Guru – Ker$tetter Letter

Helping real people win the tax game.

Multi-State Taxes

Posted by taxguru on July 13, 2013

Q:

Hello Kerry,

I was in full time Real Estate and you came and done a Tax Seminar on Tax Free Exchanges. I still have me Real Estate License, but work full time now as Industrial Lumber Salesman for a company that is based out of  Texas. My question is this I live in  Arkansas and I was hired to be a salesman for the Oklahoma plant. I have an office at the plant and chose to work there most of the time, but I could work from home or really anywhere I have a phone and a computer.  My dilemma is this our company is not set up to do Arkansas State Tax withholdings, and do not want to get set up because they are concerned about being subject to additional franchise taxes.

My problem is they are paying all my State Tax to Oklahoma, and I get about a $50.00 refund from Oklahoma and owe Arkansas about $2000.00 in state tax every year. I do not think I have should have to pay state tax in 2 states, and would like to know if there is a legal way out of paying state tax in 2 states. If nothing else could I set up a checking account in Texas for my check to be Direct Deposit to and then transfer the money to a local account online.?

Please Advise…

Thanks,

 

A:

There is a mechanism for dealing with your situation that you and your professional tax preparer appear to be overlooking.

If your employer is treating you as an OK employee, you need to file a non-resident OK tax return.

When you file your AR tax return, you are supposed to report all income, including the OK wages.  However, to prevent paying two state income taxes on the same OK income, you are allowed to claim a tax credit on the AR return for the income tax that you had to pay to the State of OK.  To document this, you need to attach a copy of the OK tax return to your AR return.

Your professional preparer should have know this because it is a very common situation with people working across state lines.

It looks like it would actually be worth filing amended AR tax returns for the past three years to claim the credit for the OK taxes paid.  Any tax return older than three years can’t be amended.

Good luck.  I hope this helps.

Kerry Kerstetter

 

Follow-Up:

Kerry,

I appreciate your advise, let me ask are you taking on any new clients. I would be interested in having you do my taxes.

Thanks,

Beginners QuickBooks 2013 Training Videos

 

 

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