Discussion:Illinois tax preparers: Reporting consultant income when required to go out of state
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| Revision as of 22:31, 22 September 2009 JR1 (Talk | contribs) (They're not rece) ← Previous diff |
Current revision Jake (Talk | contribs) (The "services" a) |
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| {{ForumReplyPost|UserID=JR1|Date=September 22, 2009|Text=They're not received in the state, tho', Bruce. It's primarily Maine income, clearly (maybe you missed the part where he moved to Maine) so the issue is how to allocate, if so.}} | {{ForumReplyPost|UserID=JR1|Date=September 22, 2009|Text=They're not received in the state, tho', Bruce. It's primarily Maine income, clearly (maybe you missed the part where he moved to Maine) so the issue is how to allocate, if so.}} | ||
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| + | {{ForumReplyPost|UserID=Jake|Date=25 September 2009|Text=The "services" are received in Illinois - is that what they mean?. | ||
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| + | So if I get paid $5,000 for work I did in my Ohio office for a company in Illinois - all communications by phone, fax, e-mail - the state of Illinois says they can impose their income tax on me? I guess they can try. You can damn well bet I am not going to ask Illinois any questions. | ||
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| + | By the way - the way Ohio income tax on residents works is that you get a credit for the tax you paid to other states for income in those other states. Therefore you don't save anything by virtue of the fact that the other state might have a lower tax rate. | ||
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Current revision
Discussion Forum Index --> Basic Tax Questions --> Illinois tax preparers: Reporting consultant income when required to go out of state
Discussion Forum Index --> Tax Questions --> Illinois tax preparers: Reporting consultant income when required to go out of state
| 21 September 2009 | |
| Taxpayer asked me to review returns -- he received 1099-MISC for consulting services. The company that paid the fees was a Wisconsin company; most work was accomplished in his home office in Illinois and he did some expert witness work in court in Chicago, IL as well. That seems pretty clear that he should have claimed all Schedule C income as earned in IL.
For 2009 however, he is still consulting, but his residence is in Maine. Again, 95% of his work is done in home office (Maine), but sometimes he travels back to IL for meetings or for court depositions. Does IL require some sort of allocation of Schedule C income to IL for tax purposes? If he expands his consulting services to represent multiple corporate clients in multiple states and he is doing 95% of his court research at home office in Maine, do we need to be concerned about filing non-resident tax returns in all these other states, or would you advise claiming it all as Maine income? If you recommend filing multiple non-resident states, then how do you advise your clients to keep track of records so the tax return does not become a nightmare in recreating the income allocations? Thanks, there must be a tried and trusted way of dealing with this sort of client. | |
| September 21, 2009 | |
| Yes, I think you must allocate whenever the on-site services are more than de minimus in my opinion. I know that technically, every states wants everything, but tough. I'm practical. If he's somewhere for a few weeks, then we should probably allocate. Is there any way for them to know? No, since no payroll or biz registrations took place as a Sch. C. But do watch for opportunities to shift income from high tax states, like WI, to lower or no tax states.
The only tried and true method: Client, saddle up, keep your checkbook full. And give me your sales by state at the end of the year. (Obviously, if you have employees, payroll by state.) | |
| 21 September 2009 | |
| I would first check the Illinois dept of revenue for any de minimus regulations they may have in their nexus statutes. If none, allocate, most likely based on days in/out of the state. | |
| 22 September 2009 | |
| JR1 and Etax: Here's where it really gets muddy -- client gets paid $3,500 flat fee to do the consulting. Does 8 hours prepping at home in Maine. Has 3 hour meeting in Chicago. Spends 1 day in court in Washington, D.C. Is it assumed that he earned money in all 3 locations based on days in/out of the state? Or is the key to know each and every state's de minimus regulations? Probably a VERY good reason not to form an S-Corp if you're traveling all over the place to do your work. | |
| 22 September 2009 | |
| Illinois considers meeting and performing any services within the state to create nexus. For tax years ending on or after December 31, 2008, Illinois considers sales of services to be in the state of Illinois if the services are received in the state. Illinois uses one factor sales apportionment. So Illinois wants you to apportion the entire $3500 to Illinois and Maine should allow a credit. | |
| September 22, 2009 | |
| They're not received in the state, tho', Bruce. It's primarily Maine income, clearly (maybe you missed the part where he moved to Maine) so the issue is how to allocate, if so. | |
| 25 September 2009 | |
| The "services" are received in Illinois - is that what they mean?.
So if I get paid $5,000 for work I did in my Ohio office for a company in Illinois - all communications by phone, fax, e-mail - the state of Illinois says they can impose their income tax on me? I guess they can try. You can damn well bet I am not going to ask Illinois any questions. By the way - the way Ohio income tax on residents works is that you get a credit for the tax you paid to other states for income in those other states. Therefore you don't save anything by virtue of the fact that the other state might have a lower tax rate. | |
