Gene E. Utterback, EA, RFC, ABA wrote:

- quote -

Surely you didn't mean that "allocation" both includes and excludes the
same thing (income earned elsewhere)?

I realize I'm picking a nit, but if we hope that anyone will follow
along with terms like "allocation" and "apportionment", we'd best make
them crystal clear and easy to remember.

- quote -

One of our esteemed co-moderators, in another Usenet newsgroup, recently
used some statistics from Google to demonstrate (rather convincingly, in
my opinion), what was the most common interpretation of some particular
language usage. I wasn't as sophisticated as him in terms of stating
the problem in a logical, reproducible way, but I did indeed base my
claim on some ad hoc search engine searches.

I also performed a cursory search of commercial tax databases,
webboards, annual desk reference materials for tax pros, etc, and do not
find state non-resident taxation described in terms of "allocation and
apportionment" at all, with one exception for Ohio (see highlight in
quote below).

The terminology is useful, because it puts a label on something that is
otherwise time-consuming to describe (and it falls off the tongue more
trippingly than "the California method"), but where oh where is it being
used in a wide-spread fashion (or at least "more and more commonly")
with regard to individual taxpayers?


[---quote from Ohio state tax guide-------]
"Rather, in determining Ohio taxable income for taxable years ending
after December 31, 2002 taxpayers claiming depreciation expensing under
IRC §179 must add to income, prior to

- quote -

5/6ths of the excess of the IRC §179 amount allowed over the amount
which would have been allowed based upon IRC §179 in effect on December
31, 2002 (namely, 24,000 for taxable years beginning in 2002 and (2)
$25,000 for taxable years beginning in 2003 and thereafter)."
[---end quote-------]

-Mark Bole

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

"Mark Bole" <makbo[at]pacbell.net> wrote in message
news:fWztl.9306$%54.3089[at]nlpi070.nbdc.sbc.com...
- quote -


- quote -

It may be more common, but that doesn't make it more informative or correct.

As it related to my response to the OP -
Some states only tax the income you earned in that state (these are
allocation type states)
WHILE
Other states first calculate the tax on your total income, from everywhere,
then apply a ratio of state income to total income to arrive at the state
tax liability (there are apportionment type states).

I'm not sure that ""Allocation and apportionment" as most commonly used has
to do with figuring out taxability by state of income for a multi-state
business" is completely accurate, because it is becoming more and more
common for it to apply to individual taxpayers. But it is essentially
correct in that it is used to determine tax liability when multiple states
are involved.

Gene E. Utterback, EA, RFC, ABA

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

Gene E. Utterback, EA, RFC, ABA wrote:

- quote -

Is the repetition of the word "allocation" above a typo? Confusing...


- quote -

"Allocation and apportionment" as most commonly used has to do with
figuring out taxability by state of income for a multi-state business:

"Allocation: The direct assignment of nonbusiness income to a particular
state. Apportionment: The proportionate assignment of business income to
various states, based on a formula which varies by state but typically
includes property, payroll and sales (3-factor formulary apportionment)."

....although the terms are used sporadically in other areas of tax law too.

I guess the terms could also apply to the method of figuring individual
state tax rate for non-residents, but I've never heard them used that
way before.

It is far more common to refer to the "California method" for this way
of calculating tax rate, for example it is referred to by that name in
some federal legislation, and of course by California itself, even
though 18 or more other states use the method as well. It has been
upheld in court as a legitimate method for calculating tax rate.

-Mark Bole

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

<removeps-groups[at]yahoo.com> wrote in message
news:ec401265-c145-4d9b-b9f1-4b3ebfa66782[at]q11g2000vbn.googlegroups.com...
- quote -

Apportionment.

Gene E. Utterback, EA, RFC, ABA

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

On Mar 7, 9:38 am, "Gene E. Utterback, EA, RFC, ABA"
<g...[at]alliancetax.com> wrote:

- quote -

I don't get this. What is CA? If you have 10k of CA source income,
it might be taxed at a higher rate because of your income in other
states -- the instructions have you calculate your net tax on all your
income as if you were a CA income, which can yield an effective tax
rate as high as 10.3% if you made millions of dollars in other states,
and then multiply this ratio by your CA source income. Is this an
example of "allocation" or "apportionment" in your terminology?

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

<removeps-groups[at]yahoo.com> wrote in message
news:6d2096b2-11c4-4672-a20b-e20c14bc4c95[at]d19g2000prh.googlegroups.com...
- quote -

Advising who? The employee (I assume) or the employer (I assume not).

- quote -

Another reply from the esteemed Mr. Bronstein says that when an employer
sends an employee into a state that this act alone is sufficient to create
the legal presence necessary to require that the employer calculate and
withhold - please note that I have paraphrased and extrapolated just a bit,
but I do believe that I have kept with the intent of his original response.

Without doing the research, I would tend to agree with this statement. I'd
also like to point out that it is essentially difference from what I said
(or meant to say if I was unclear) about an employer NOT being required to
withhold on a nonresident employee. If you live in state A but work at the
employer's site in state B, the employer has NOT automatically met the
physical presence test that would require them to withhold taxes for the
employee who lives in state A.

However, when the employer sends the employee, who lives in state A, into
state C, D, E, or F then I believe they HAVE met the legal parameters of
physical presence and the EMPLOYER is now legally responsible to do the
properly calculations and withhold taxes for each of those states. Though,
if the employer has no office in the employee's state of residence and the
employer never sends the employee to work in the employee's state or
residence, the employer still has no legal requirement to withhold taxes for
that state.

As a matter of practicality though, any employer with multi state
operations, and who complies with the law, should have no trouble doing the
right thing.

- quote -

It is ALWAYS up to the employee to do the right thing as it relates to his
personal return. Ignorance of the law is no excuse, though it is often used
as one.

- quote -

Correct.

- quote -

INCORRECT regading your withholding statement from the preceeding
paragraph - see your own observation from above. When an employer sends an
employee into multiple states to work, they report the wages and handle the
withholding for each state individually. Any paymaster with more than 2
good brain cells can run the calculations to account for the overlap - while
they may not hit it exactly, they can get pretty close.

If I make half of my money working in state A and half working in state B
then my employer should be reporting half of my wages as taxable to state A
and half as taxable to state B (it isn't really this simple, but for most
withholding calculations this will get you close enough to get started.)
The same goes for withholding. The real caveat here is that an employee who
has a tax liability to multiple states will likely NEVER be able to
correctly prepare their own return.

At the end of the day, the employee may wind up paying a bit more in tax
because he has to pay to multiple jurisdictions, but it won't be double or
triple taxation. Either they will get a credit on their resident return for
some or all of the taxes paid to the other states OR they will be able to
exclude the income earned in the other states from taxation by their home
state - the state treatment varies depending on the state.

Another related caveat to be mindful of whether the state is an "allocation"
state or an "apportionment" state. Allocation states usually exclude the
income earned elsewhere but allocation states include all of the income for
the initial tax calculation THEN allocate the tax based on the ratio of
income earned in the state to income earned everywhere. Apportionment is
more prominent in states with diverse tax brackets that look more like IRS
brackets. States where the brackets are close together and they max out the
rate early - Maryland for instance where you are in the top bracket with
just $3K in taxable income - are usually allocation states.

Sadly, while I hear your argument that employees might choose to work for
companies that are more honest, the reality is that companies that play by
the rules already know this and are either doing it right or (and frequently
AND) are paying better to account for it.

Not to mention the fact that in this economy, most people are happy to have
a job and will tolerate what they feel is wrong because it is better than
being unemployed.

In your situation, were this my client and I KNEW he worked in multiple
jurisdictions I'd have no choice but to do the returns correctly. Remember,
at the end of the day as a paid preparer you are legally obligated to
prepare an accurate return. If you don't you are guilty of fraud - and I
don't care a lick if this is for your mother, if you commit fraud you
deserve everything that will happen to you.

Gene E. Utterback, EA, RFC, ABA

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

Alan <sfcnm-mtm[at]yahoo.com> wrote:
- quote -

Your second sentence is basically what I meant. Your third sentence is
just good information. Thanks for the clarification.

Stu

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

Stuart A. Bronstein wrote:
- quote -

withholding rules for nonresidents. The employee is responsible
for filing as a nonresident where a filing requirement exists
whether taxes were withheld or not.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

"removeps-groups[at]yahoo.com" <removeps-groups[at]yahoo.com> wrote:

- quote -

Technically if a company sends an employee to another state, the
company has a presence in that state, and is required to comply with
their laws. So my guess would be that it is up to the employer, from a
legal standpoint.

Stu

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

On Mar 6, 10:13 am, "Gene E. Utterback, EA, RFC, ABA"
<g...[at]alliancetax.com> wrote:

- quote -

Not quite. I'm advising someone with their multi-state return, but
find that state taxes of the other state were not withheld. After
talking to many people whose company sends them out of state, I find
that state taxes of the other state are routinely not withheld. So is
it up to the employee to be honest and file tax returns in all the
states? None of the states involved in my example have reciprocal
agreements.

As an aside: If your main state is CA and your income is high enough
that you're in the 9.3% bracket, then filing a return in another state
is not a big deal because of credit for taxes paid to other states:
you file a return for the other state, withhold taxes which will
probably be less than 9.3%,subtract that amount from your CA taxes.
So in net you've just transferred some tax revenue from CA to the
other state, but have not caused yourself to pay more. However, if
your main state is IL (rate is 3%) and you work in CA for a while,
then you might end up owing $$ to CA if you file a CA return.

- quote -

That's good advice, but there's not much incentive for following it
because so many companies don't do it. If a company did start to do
it, they would have more legal costs, but worse they could end up
withholding more taxes on their employees (such as the TX company who
sends their employee to CA), and the employees might notice this and
prefer to work for a company that isn't so honest.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

<removeps-groups[at]yahoo.com> wrote in message
news:4831d56c-dc2b-4895-b1b3-8b5f71967fee[at]w1g2000prk.googlegroups.com...
- quote -

Great Question, but there is no short or quick answer and as usual - IT
DEPENDS.

You don't say what states are involved so with the caveat that such
information will make a difference, consider this.

The two states may have a reciprocal tax agreement in place that exempts w-2
wages from being taxed in the nonresident state. This is the case in the
Logic Free Zone (Maryland, DC, Virginia, West Virginia, Pennsylvania - BUT
NOT Delaware). There are also other states with similar issues - I think
Ohio, West Virginia and Kentucky may have such an agreement. But these
agreements seem to exist only in the East, I'm not aware of any on or near
the Left Coast.

Consider this and - your employer has one office in DC, you live in MD and
you are sent to repair a widget in DE -

1 - your employer has no requirement to withhold anything but DC tax. Since
they have no physical location in MD, you are on your own for estimated tax
payments; AND

2 - DE has no reciprocal agreement with MD so you have to pay tax to DE
because your income was sourced there. You do get to claim a credit on your
MD return for at least some of the tax you pay to DE, but maybe not all of
it.

My understanding is that the EMPLOYER is responsible for notifying you on
your W-2 of what income is taxable to which jurisdiction. But the reality
is that all but the largest companies are incapable of doing this and I'll
not even get into the issue that most are not even aware of the requirement.

I'll extrapolate from your post (which I've gotten rebuffed for doing
before) that you must be an employer. In 25+ years as a tax pro I've never
even heard of an employee even cared about anything other than was put on
their W-2, let alone had any idea that such a concept existed. And since
your question doesn't sound academic to me, I'd venture a guess that you're
at or near the top of the employer's food chain.

As a responsible member of management you need to get professional help to
make sure this issue is handled correctly. Doing it wrong will NOT save you
money once you get caught, though it could end up with you losing your
business and becoming personally responsible for the taxes you SHOULD have
withheld and paid.

Go to www.naea.org - the National Association of Enrolled Agents (tax
specialists) and look for an EA in your area. You may also check with your
states branch of the American Institute of Certified Pubic Accountants -
Here in Maryland we have MACPA, the Maryland Association of CPAs - and see
if they have a referral program in place. The best thing you can do it get
good solid professional guidance NOW.

Good luck,
Gene E. Utterback, EA, RFC, ABA

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

removeps-groups[at]yahoo.com wrote:
- quote -

usually no unless the employee is sent on an extended assignment.
I have limited experience in this area, but I have seen out of
state withholding for assignment periods of anywhere from 3 to 6
months. I can't recall ever seeing out of state withholding for
short durations. Here in New Mexico, the statute requires
withholding on nonresidents who work in-state for more than 15
days. I would venture to bet that this rule is violated more
often than not.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

On Mar 4, 5:31 pm, Alan <sfcnm-...[at]yahoo.com> wrote:

- quote -

This confirms what I thought, which is that is that a non-resident is
taxed on income earned from that state. However, when your company
sends you to another state, to a customer site, are they required to
withhold taxes in that other state? That's seems to be what the web
site says, but do companies actually do it?

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

removeps-groups[at]yahoo.com wrote:
- quote -


--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

Is there a resource on the web that talks about state tax issues for
an employee of one state who is sent to work at a customer site in
another state? The employer only withholds tax for the state the
employee is a resident of.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >