Pls share your experience. Employer in ME deducted ME tax, I am NOT in ME. Refund?

[EricS]

In Nov 2004, I joined a company that has office in ME. I did so to file for LC from Maine as my pending 140/485 was going to be denied. I never moved there and continued on my project outside ME. Employer deducted ME state tax from my pay. I asked him not to do so but he did it anyway.
Long story short, now I got my W2 and went to a tax consultant to file my taxes, he said I should file as a non-resident of ME and get all the ME state tax money as refund. I went to another tax consultant and he is of the opinion that I should file as a resident and pay tax to ME even on rest of my income. Now that income (before Nov 2004) has nothing to do with ME. The previous employer was outside ME and so was I.


In short, the question is that if your employer is deducting state tax for a state where you do NOT live or work, then should you get that whole tax amount as a refund from that state?
or
You are considered a resident of that state and need to pay taxes to that state.

I am totally confused after getting conflicting advise from different tax consultants. Hopefully some of you would have gone thru this scenario, may be for some other state. Please share your experience what you did.

I know this matter is not directly related to immigration, but so many of us (H1 B->GC) may be facing this question as we work on projects away from our main offices. If some one know of a good discussion forum on tax matters, please refer it here.

Thanks,

 

[saigc]

In Nov 2004, I joined a company that has office in ME. I did so to file for LC from Maine as my pending 140/485 was going to be denied. I never moved there and continued on my project outside ME. Employer deducted ME state tax from my pay. I asked him not to do so but he did it anyway.
Long story short, now I got my W2 and went to a tax consultant to file my taxes, he said I should file as a non-resident of ME and get all the ME state tax money as refund. I went to another tax consultant and he is of the opinion that I should file as a resident and pay tax to ME even on rest of my income. Now that income (before Nov 2004) has nothing to do with ME. The previous employer was outside ME and so was I.


In short, the question is that if your employer is deducting state tax for a state where you do NOT live or work, then should you get that whole tax amount as a refund from that state?
or
You are considered a resident of that state and need to pay taxes to that state.

I am totally confused after getting conflicting advise from different tax consultants. Hopefully some of you would have gone thru this scenario, may be for some other state. Please share your experience what you did.

I know this matter is not directly related to immigration, but so many of us (H1 B->GC) may be facing this question as we work on projects away from our main offices. If some one know of a good discussion forum on tax matters, please refer it here.

Thanks,

as you never worked or lived in ME then you will get full refund of all tax paid to ME. file returns for federal, all states where you lived &/or worked and file for ME and request entire refund from ME and note the reason that the employer deducted those tax by mistake.

most likely ME state may ask you to provide additional proof that you never worked or lived in ME. either you provide or a letter from THAT employer will suffice. also its important for you that you should PAY appropriate state tax where you lived or worked in THAT period for THAT gross income.

 

[EricS]

Thanks Saigc for your reply. I am definitely going to claim the refund and support it with documentation as you recommended. I will also pay taxes on that ME income to the state where I was actually living and working.

Is there anyone who has filed for such refund, can you please share your experience. Specifically, was there any questioning from state revenue services where you filed return for refund?

 

[immiprtlbond]

similar plight

Hi Eric, I am actually in a similar plight as well. In 2004 My first employer was located in IL and he withheld IL state tax. Then I transferred to an employer in NJ and he withheld NJ state tax. But during all this time I was living and working in CA alone. So, I only owe state taxes for the state of CA, correct ?

Actually Saig's reply was quite beneficial. It atleast got me a start on. I was not getting any info after many days of searching on the net on this issue.
But I still don't have a correct take on this whole topic. Can some one fill me in or as you said Eric WOULD REALLY APPRECIATE a few good links on this rather obscure area ?

thanks once again
Jay

 

[subash1977]

Do you get all the money that was withheld as state tax from the state where the employer was when I file a non resident return for that state?

For whole of 2004 I worked in NC while my employer deducted NJ state tax.

Now I am told to file NJ non resident return and, then take the net they withheld (i.e. total state tax withheld by NJ - refund from NJ) and claim this net amount as credit when Filing for NC resident return.

Does this sound right? Urgent repky needed 14th is close by

 

[immiprtlbond]

Yes you do.

Yes you do get the entire amount that was withheld by your NJ employer in state taxes when you file the NJ non resident return.

But can you tell me which form to use for filing this NJ non resident return to claim the full refund ? I am thinking NJ-1040NR. Is this the correct form ?Please reply

Ok now as far as claiming this amount as credit on your NC return, I don't understand that. YOu mean to say you are gonna itemize your NC state tax filing ? I don't think you should claim it as credit as it's still part of your Adjusted gross income.

Also don't worry about the 14th. just file IRS FORM 4868 by the 15th and you will get automatic 4 month extension on federal as well as most state filings. I am sure it includes NJ. i read it recently on their state website.

later
Jay

 

[subash1977]

Yes for NJ nonresident you have to file 1040NR. But when you plug in the values.... you don't get all you money back from NJ state. Can you?

I am sure, because I have already filled the form and did the same for 2003. You only get a portion back depending on how much state tax was withheld....

I am interested in discussing this further, if you are too?

 

[EricS]

Yes for NJ nonresident you have to file 1040NR. But when you plug in the values.... you don't get all you money back from NJ state. Can you?

I am sure, because I have already filled the form and did the same for 2003. You only get a portion back depending on how much state tax was withheld....

I am interested in discussing this further, if you are too?

I know your question is for immiprtlbond. This is my experience regarding ME tax return.

In ME 1040, there is a worksheet 'C'. In this worksheet, you are supposed to put your number of days that you worked in ME during the year. When I put this value as zero, my total tax liability for ME becomes zero and I do get a full refund of all the state taxes withheld. Now I am supposed to pay tax on that income to the state where I lived and worked during that year.

See if you can find any such line or worksheet in NJ 1040 also.

 

[EricS]

Hi Eric, I am actually in a similar plight as well. In 2004 My first employer was located in IL and he withheld IL state tax. Then I transferred to an employer in NJ and he withheld NJ state tax. But during all this time I was living and working in CA alone. So, I only owe state taxes for the state of CA, correct ?

Yes, this is correct. Now you are supposed to file 3 state tax returns and the Federal tax return. You will show as a non resident of NJ and IL, claim refund, whatever you can get and then on CA return, you need to pay taxes on the whole income. If you are not getting the full tax withheld back from IL and NJ, you can claim that amount on CA return as tax paid to other states and it should lower your tax liability to CA by that amount.
Please remember, I do not have any particular knowledge on tax matters, I am just sharing my experience. Use this advise just as a guidance and do your own research before filing the returns.

 

[EricS]

It depends, though. There was recent news that somebody who telecommuted,, i.e., had a job in NYC and lived in the Midwest, had to pay employment taxes in NY.

Hi JoeF,
I have read so many of you posts and appriciate the help you are providing to many users of this forum.
Regarding the taxes, I think you are right, it depends on each and every case. Like the case where you say some one telecommuted to NY, there is still a relation to NY in terms of working. His office, where the work is being performed is in NY althoug he is doing it from Midwest.

Now to cases in this thread. In all these cases, I think the reason that the employer withheld the tax for the state where the employer is located is just for convinience. E.g. if the employer is in IL and in order for employer to withold the taxes for CA, the emplyer needs to register there in some way ( I do not know the details). I think this is what they are trying to avoid:
Registration in another state.
Extra work of depositing the other states taxes
and filing a return in that other state.

So they just withhold the taxes for the state where they (employer) are located. Please let us know if this understanding is correct.

 

[immiprtlbond]

I don't think it's quite that way, Eric. Although, I too am no expert in this matter. I think it's about convinience (and a bit too much at that) and not about any registration with other states etc..

For eg: all he has to do is to notify the payroll company(in my case PAYCHEX) of the state to withhold state taxes for a particular employee based on his/her work and residential address(Now in the case of this telecommuting example above, that would be tough decision). Then at the end of the year that particular state and the withheld amount will automatically show up on the W2.

Then why do they withhold taxes in their own state ? My guess is, if the consultant had 2 projects in the course of the year in 2 different states which state would he pick to deduct state taxes ? Since only 1 w2 can be issued by the employer and there's only room for 1 state in it.

If you ask me , He should pick the first state the employee lives or works in for the following reasons :
1. The employee continues on the same project for the rest of the year.
2. The employee finishes that project but get another project in the same state.
In either of the above cases, It'l help out the employee a lot of not having to file taxes in multiple states.
But if the employee works initially in a state and then moves to another state in the same year, then at the most he'l have to file only 1 extra return instead of filing 2 extra returns for the same scenario which happens if the employer also withhelds taxes in his company's state as well.

 

[immiprtlbond]

Now you are supposed to file 3 state tax returns and the Federal tax return. You will show as a non resident of NJ and IL, claim refund, whatever you can get and then on CA return, you need to pay taxes on the whole income. If you are not getting the full tax withheld back from IL and NJ, you can claim that amount on CA return

So ,Eric I have to file my CA taxes last after I am through with my other states, right ? that'l take long time since I have to wait to get both the employer's letters certifying that I never worked or lived in their states. I know the letter is required by IL to effect a refund. But does someone know if an Employer letter is required to be submitted along with the return to get full refund from the state of NJ ? Subhash, you might be knowing about this.
Please inform.

Also owing to all this waiting on Employer letters, My CA filing is getting delayed. Does anyone know the exact penalties + interest rate being charged on tax owed from apr 15 ?

Also I have another problem. None of my 2 W2's show the state where tax was withheld as CA. One shows IL , the other NJ. Now the state of CA says that if my W2 doesn't show the tax withheld state as CA, I cannot file short form 540NR (The equivalent of 1040EZ for federal) and should only file the long form 540NR ? Does anyone have a take on this ?

Thanks for all your support and I do appreciate any input.

regards,
Jay

 

[EricS]

So ,Eric I have to file my CA taxes last after I am through with my other states, right ?

Yes

that'l take long time since I have to wait to get both the employer's letters certifying that I never worked or lived in their states. I know the letter is required by IL to effect a refund. But does someone know if an Employer letter is required to be submitted along with the return to get full refund from the state of NJ ? Subhash, you might be knowing about this.
Please inform.

Also owing to all this waiting on Employer letters, My CA filing is getting delayed. Does anyone know the exact penalties + interest rate being charged on tax owed from apr 15 ?

I was thinking about it also, but then I realized that we can do one thing. You would have already calculated all of your state income tax returns. You are only waiting for the employer letters, right? So you should make estimated tax payment to CA and also get an extension to file tax return from CA. Lets say as per your calculation, you owe 5K to CA, you can make an estimated tax payment of 5.5K (just to be safe) to CA before April 15th. Now for other states, as you are getting a refund, there is no deadline of April 15th. Once you file your other state tax returns, then file for CA return. At this point, you will get whatever excess you paid to CA on estimate. This will save you from any panalities.

Also I have another problem. None of my 2 W2's show the state where tax was withheld as CA. One shows IL , the other NJ. Now the state of CA says that if my W2 doesn't show the tax withheld state as CA, I cannot file short form 540NR (The equivalent of 1040EZ for federal) and should only file the long form 540NR ? Does anyone have a take on this ?
Thanks for all your support and I do appreciate any input.
regards,
Jay

Same way, for Maine, I am also filing long form. It should not be that big a problem, just some more columns to fill.