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I will be moving from Texas (no state income tax) to New Mexico

(income tax). I will...
I will be moving from Texas (no state income tax) to New Mexico (income tax). I will move on September 15. My job is self employed consultant so jobs are done and moneys are paid on an ongoing basis.

Will I be liable for state income tax on money received for jobs done before the move even if paid later, or only for money received for jobs finished after the move?

Thank you.
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Answered in 1 minute by:
8/23/2013
Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16,592
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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MyVirtualCPA :

Thanks for asking your question! I'm sorry to hear about your tax issue and I'm going to try my best to help you understand or resolve it.

MyVirtualCPA :

No, you would not be liable for tax to NM on earnings earned during a period where you were not a resident of the state.

MyVirtualCPA :

Keep track of the post-move income and expenses so that you know exactly what you will be paying taxes on

Customer:

Thank you. That is good news.

MyVirtualCPA :

Glad I could help

Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
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Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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Steve,

Thanks for your positive rating. Please come back and visit MyVirtualCPA any time you have a tax, finance, or social security question. IT was a pleasure working with you today.
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jgordosea
jgordosea, Enrolled Agent
Category: Tax
Satisfied Customers: 3,161
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Another expert here, just wanting to be sure you understand it may not totally be good news.

 

 

It is not when the work was performed that will determine what is to be reported as a resident of New Mexico; but when it is paid. The only exception is if you use an accrual basis for accounting.

New Mexico residents have to pay state tax on all earnings, no matter where earned, during the time of being a resident.

 

You do not have earnings for tax purposes until you are paid.

So, whatever you are paid after you move to New Mexico is subject to state income tax.

 

You asked "Will I be liable for state income tax on money received for jobs done before the move even if paid later, or only for money received for jobs finished after the move?"

The answer is that you are liable for state tax on all that is paid after you move (even if the work was done before the move) since it is counted for tax purposes when it is paid. All that you are paid after you are a resident is what will have to be reported to the state.

 

Please ask if need more discussion or clarification.

Thank you.

jgordosea
jgordosea, Enrolled Agent
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I assumed you were a cash basis taxpayer, and would recognize income and expenses as you receive them - not when you perform the service.

I'm sorry for any confusion, or if I made a wrong assumption. Please respond to MyVirtualCPA if you have further questions about this regard.

Thanks!
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jgordosea
jgordosea
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