Multi-state income tax

[remotegeek]

What is the name of your state? Iowa

I live in Iowa, but I telecommute for a global company who doesn't have a business presence in Iowa. I'm technically classified as working in California (where the rest of my group, including my manager, is located). So, they can't withold Iowa state taxes, but they withold California state taxes. I'm figuring Iowa will want taxes on my income, and it sounds like California will too. It seems unfair to pay income tax in two states, but perhaps that's the price of interstate telecommuting? Is there any precedence or opinion on this sort of arrangement?

Thanks for your time and help.

Remote Geek

 

[LdiJ]

What is the name of your state? Iowa

I live in Iowa, but I telecommute for a global company who doesn't have a business presence in Iowa. I'm technically classified as working in California (where the rest of my group, including my manager, is located). So, they can't withold Iowa state taxes, but they withold California state taxes. I'm figuring Iowa will want taxes on my income, and it sounds like California will too. It seems unfair to pay income tax in two states, but perhaps that's the price of interstate telecommuting? Is there any precedence or opinion on this sort of arrangement?

Thanks for your time and help.

Remote Geek

Actually, whether they have a business presence in Iowa or not, your employer should be withholding Iowa taxes rather than CA taxes. You are physically located in Iowa.

What you need to do is file a non-resident tax return for CA (I think its form 540NR) showing that you have no CA income, and then file an Iowa return as a regular resident.
That way, you should get back the CA taxes withheld. You probably want to consider getting help from a tax pro on this one.

Then have a discussion with your employer about properly withholding Iowa taxes....or if they won't do that, then not withholding any state taxes at all.

 

[abezon]

The employer has to withhold IA taxes. If they claim they can't, just ask the IA Dept of Revenue to write them a nice letter. It's amazing what employers can suddenly do when governments ask them to....

 

[remotegeek]

Thanks so much for your timely replies! It was pretty much what I had guessed, but I didn't want to start really ruffling feathers if I didn't have to...

Remote Geek