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Lev
Lev, Tax Advisor
Category: Tax
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Experience:  Taxes, Immigration, Labor Relations
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I am a self-employed software developer. One of my clients

Customer Question

I am a self-employed software developer. One of my clients is located in Mississippi. I do travel there for meetings and to do some of the work. About half of the work is done from my home in Indiana. Are all the earnings reported on the MS return? Or just the earnings that were earned while physically present in Mississippi? It is MS source income, but since some of the work is done elsewhere, I am confused.
Submitted: 4 years ago.
Category: Tax
Expert:  Lev replied 4 years ago.
Because you are not a resident of Mississippi - only income from Mississippi sources is taxable for that state.
If you work 50% in Mississippi and 50% in Indiana - only 50% of compensation is considered from Mississippi sources and is taxable for that state. You need to file Mississippi tax return as nonresident and determine your tax liability based on part of your income which is from Mississippi sources.

Because you are a resident of Indiana - all your income regardless of its source is taxable for that state. You need to file your Indiana tax return as a resident and determine your tax liability based on your total income.
Because some of your income is taxable for both Mississippi (based on the source of income) and Indiana (based on your residency) - you will claim a credit for taxes paid to other states on your Indiana tax return (your home state).

Let me know if you need any help.
Customer: replied 4 years ago.
So just because the 1099 is from Mississippi, it doesn't mean it is mississippi source income? That is the wording that I keep getting hung up on.

I figured that the 1099 info is being reported to Mississippi, and they would be looking for it to be reported in it's entirety on the non resident return.

Thanks for your help. I will use you for all my tax questions.
Expert:  Lev replied 4 years ago.

So just because the 1099 is from Mississippi, it doesn't mean it is Mississippi source income?

That is correct - "the 1099 is from Mississippi" - means that payer is located in Mississippi and that doesn't determine the source of income.

If you were an employee - W2 form would show in which states you worked, but as a self-employed - that is your responsibility to keep track of places where the work was performed.

 

See for instance - http://www.mstc.state.ms.us/info/faqs/IndividualIncomeFAQs.html

How should my income be reported to Mississippi if I am a resident of another state but I work in Mississippi and other states?
You must include all income on your Mississippi non-resident return. If you perform services partly in and partly out of the state, only the wages you are paid for the services performed in Mississippi are subject to Mississippi income tax. The W-2 forms issued to you from your employer(s) should indicate the state in which the wages were paid, along with the wages you earned in that state.

see also instructions page 6 - http://www.mstc.state.ms.us/nactp/indiv/2009/indiv_80100097.pdf

Line 36 - Business Income or Loss (Line 35 on NR Return)

Enter your profit or loss if you owned a business or practiced a profession. If you had more than one business, or if you and your spouse had separate businesses, complete a Schedule C for each business. If the Mississippi net profit or loss amount varies from the Federal Schedule C net profit or loss, then provide a reconciliation. If you enter the federal amount on this line, but there is a difference between Mississippi and federal amounts, enter the adjustment on Schedule N. The federal Schedule C must be attached to your return.

 

Let me know if you need any help.

 



Edited by LEV on 4/1/2010 at 2:12 PM EST

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