Knowing When To Pay Personal Income Tax To Multiple States
By trycmcw at 22 February, 2012, 12:00 am
For the majority of Americans, only two types of personal income tax will be a concern: that which is paid to the Federal government, and that which is paid to the state where they work. But for people who work in multiple states, or commonly have relations within multiple states, that situation gets a bit more complicated.
Understanding The Theory Of Payment
The entire goal behind the personal income tax is to ensure that states receive a cut of profits made inside their borders. These profits can then be used to help the state provide services which further benefit businesses within their borders. In that sense, it’s a mutually beneficial and logical relationship. When it was first implemented it was also a simple relationship because people rarely worked in more than one place. They lived where they produced, for the most part, which meant that it was easy to know where they owed.
But today’s worker may be required to travel. Planes and cars make it easier than ever to work in multiple locations at once, which in turn means owing personal income tax in multiple locations. This complex situation can make it quite difficult to file accurately, and even more difficult to get an accurate understanding of what kind of refund might be expected.
State Vs. Federal
Regardless of where you live or how many different locations you may work, you’ll always owe the Federal government a filing. Most people will get a refund, but they will still be required to file. At the state level, it’s a very different question. If you don’t have any kind of relationship there, you aren’t generally required to submit a single form. But the definition of relationship can be a complex one. Living in an area is one such situation; working or receiving rent from a particular place can be yet another.
General Guidelines
Typically, if you have had any kind of substantial activity in a particular state, it’s wise to submit a return there. You cannot be penalized for filing if it isn’t required, but you certainly can be penalized for failing to submit personal income tax documents as required.
Remember, you don’t have to file from within the state. Tax locations in Virginia can cover people who live in Maryland, Pennsylvania, even California. If you received proceeds of any form, make sure the location where you earned it, or the location where it was provided to you (i.e. from rent, etc) is covered in your forms, and you’re more likely to be successfully covered on all fronts.
Author is a freelance copywriter. For more information and to locate tax locations in Virginia, please visit Liberty Tax.
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