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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22749
Experience:  Taxes, Immigration, Labor Relations
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I am an independent contractor/consultant and normally work

Customer Question

I am an independent contractor/consultant and normally work on a 1099 basis. A recruiting company has contacted me about a short-term project for an organization headquartered in Portland, OR. I will travel for two weeks to Portland to learn the company's process and then spend the remainder of the 4 months traveling the US and Canada. The recruiting company is not set up to do 1099 so they want to sign a consultant agreement and pay me on a W-2. When I read the consultant agreement the location of work was listed as Portland, OR. Since I am on a W-2 I asked if they would take out OR state income tax and their response was yes. I have a home office in Florida and do not want to get into a situation that I have to pay or file a state income tax. They spoke with their HR location and came up with a scheme for me to pay state taxes for 2 weeks and then they would change my location of work. I am not comfortable with this set-up and am seeking advice on how to best handle.
Submitted: 5 years ago.
Category: Tax
Expert:  Lev replied 5 years ago.

Unfortunately - that is not a mater of choice.

If your would have your actual work location in OR - OR state income tax withholding is required.

If the company would employ you if Florida - they are required to register in this state and remit employment taxes to the state. Yes - there are no income tax in Florida - but there still SUTA payments. If the company doesn't have any nexus in FL - that will be additional overhead.

 

If your income from OR sources is less than certain amount - you do not need to file OR tax return, but the tax return is required if you are due a refund from withholding.

Your non-resident OR tax return may cost you about $100. You may want to negotiate the compensation this matter.

 

If your actual work location is not in Oregon or you work in multiple locations - the company should indicate your actual work location and withhold taxes for that state if needed.

 

Customer: replied 5 years ago.
I guess I don't understand. I have frequently worked on a 1099 basis in other states that do have state income tax (ex NC and PA) but when my accountant filed my taxes I was not required to pay or file an income tax or any other kind of tax for either state. I am an independent contractor and not able to claim unemployment when my contract ends nor does this company offer me any benefits. Their only use is as a billing agent between myself and the person who I will be doing work for. That work will actually be in 5 different states (two w/o state taxes) and Canada. Thanks.
Expert:  Lev replied 5 years ago.

I just took extract from your statement above:

I have frequently worked ...in other states ...I was not required to pay or file an income tax ...for either state.

 

If you are working in the state - the income is considered from sources in this state - and in general - if the state has income tax - your income is subject of such tax regardless if it is paid to you on 1099 base (self-employment contractor) or W2 base( employee).

If you inform your accountant that you worked in the specific state - he/she would tell you about such requirements.

 

As there is no any records where did you actually work - neither NC nor PA DOR are looking for you. Generally without knowing the situation - it looks as all work was done in your FL location.

That is my view on your situation.

 

For an employee - the situation is different - the company should register in the state it has employees and is obligated to pay FUTA and SUTA taxes.

They also are required to track your work locations, withhold and remit employment taxes and report that on W2 form.

There is no room to escape from state tax liability as it is in self-employment case.

Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22749
Experience: Taxes, Immigration, Labor Relations
Lev and 7 other Tax Specialists are ready to help you
Customer: replied 5 years ago.
Thanks for your assistance. I have a call in to my accountant for additional information since I am still having trouble understanding the details.
Expert:  Lev replied 5 years ago.

Please feel free if you need any clarification either now or later.

 

I understand your frustration - but your demand puts additional pressure on your potential employer and they may reconsider your employment.

 

You may ask for additional compensation to cover state tax liability - but by asking not to report your actual work place - you are pushing them into the tax avoidance practice.

 

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