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Former MA employee now living in CT and telecommuting - state tax q

 
 
Jim Armstrong
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      11-29-2007, 08:56 PM
Hello all,

I've been reading up on the state tax procedures for non-resident
telecommuters, and figured I'd post our situation here and get some
guidance.

My girlfriend was a Massachusetts resident working for a Massachusetts
company. In September 2007 we moved to Connecticut and became CT
residents. She still works for the MA company, working 100% from her
CT home office except for the rare MA office visit when she is in town
to see her parents or whatever.

Her paychecks have been updated to reflect the new CT address, but MA
state tax (and no CT state tax) is still being withheld as it was when
she was a resident.

Now, we are trying to decide what the withholding should be to avoid
(or minimize) a nightmare come tax time. The way I see it, she is
earning her money while physically in CT, which means CT has a claim
on earnings. What about MA? Since it is a MA company, does MA have any
claim to earnings?

Does anyone with CT/MA tax clients/experience know the best way to
setup withholding and file returns? The company she works for is very
small and I'm pretty sure they do not have a CT tax ID. I'm assuming
they cannot withhold taxes for CT. (They do their payroll through ADP
- perhaps that would help? Not sure how that works...) Should she set
her MA withholding to zero and pay CT estimated tax? Leave it set to
MA withholding and file a return to get a credit?

I assume she will have to file in both states (definitely this year
since she was a part-year MA resident, but next year as well, when she
is 100% CT res?) but not sure what to do at this point. I plan to have
a professional help us file next year, but want to do anything we can
now to both understand the law and make it as easy as possible come
April.

Thanks in advance for any help!

-J

 
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Katie
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      12-01-2007, 12:11 AM
On Nov 29, 12:56 pm, Jim Armstrong <(E-Mail Removed)> wrote:
> Hello all,
>
> I've been reading up on the state tax procedures for non-resident
> telecommuters, and figured I'd post our situation here and get some
> guidance.
>
> My girlfriend was a Massachusetts resident working for a Massachusetts
> company. In September 2007 we moved to Connecticut and became CT
> residents. She still works for the MA company, working 100% from her
> CT home office except for the rare MA office visit when she is in town
> to see her parents or whatever.
>
> Her paychecks have been updated to reflect the new CT address, but MA
> state tax (and no CT state tax) is still being withheld as it was when
> she was a resident.
>
> Now, we are trying to decide what the withholding should be to avoid
> (or minimize) a nightmare come tax time. The way I see it, she is
> earning her money while physically in CT, which means CT has a claim
> on earnings. What about MA? Since it is a MA company, does MA have any
> claim to earnings?
>
> Does anyone with CT/MA tax clients/experience know the best way to
> setup withholding and file returns? The company she works for is very
> small and I'm pretty sure they do not have a CT tax ID. I'm assuming
> they cannot withhold taxes for CT. (They do their payroll through ADP
> - perhaps that would help? Not sure how that works...) Should she set
> her MA withholding to zero and pay CT estimated tax? Leave it set to
> MA withholding and file a return to get a credit?
>
> I assume she will have to file in both states (definitely this year
> since she was a part-year MA resident, but next year as well, when she
> is 100% CT res?) but not sure what to do at this point. I plan to have
> a professional help us file next year, but want to do anything we can
> now to both understand the law and make it as easy as possible come
> April.
>
> Thanks in advance for any help!
>
> -J



Yes, she'll be subject to CT tax on her earnings after the move there,
and MA can tax only her earnings (after the move) when she is in the
MA office. MA has a regulation that says a nonresident does not have
MA source income from a business, including employment, if the
nonresident's presence is MA is "casual, isolated and
inconsequential" ( Mass. Regs. Code 830 CMR 62.5A.1(3)(h). So MA
might not even tax her earnings for the little bit of time she spent
in her employer's MA office after the move, depending on the facts.

She'll have a part-year resident return to file in MA, and a part-year
resident return in CT. She'll be under withheld in CT and
overwithheld in MA.

Going forward, she should have the employer withhold CT tax rather
than MA. However, as you suggest, the employer may not be registered
in CT and may not want to do so. It really should, because it has an
employee working there, but presumably your GF wants to maintain good
relations with the company, so she may want to just make estimated tax
payments to CT to cover her liability in 2008. (She could still make
estimated tax payments for 2007, too, at least one or two; that would
stop the running of the underpayment penalty calculation.)

In any event, shut down the MA withholding. She may have a little tax
liability to MA as a nonresident but it doesn't sound as though it
will be much.

Katie in San Diego

The foregoing is intended for educational purposes only and does not
constitute legal or professional advice. Nothing contained herein is
intended to be used, or can be used, to avoid penalties that may be
imposed under federal or any state law.

 
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