Welcome to the TravelTax Blog

While you may have read my articles on various websites, or my posts on FB pages and other forums, from time to time I like to wax eloquent without fitting my thoughts into someone else’s prescripted format. Some of the entries may be long and a few will simply be rants. Whatever the case, you are guaranteed to find some nugget of tax knowledge fitting for your situation with a dash of sarcasm or philosophy.

Since our clients are primarily engaged in multistate assignments, cross border employment or posted abroad, they share a common connection of working on the road, exploring the world or just planting themselves in a foreign land ….. travelers and nomads at heart.

Be sure to visit our website http://www.traveltax.com

Thanks for reading!

Indiana and California drop their “reverse Credit” arrangement starting with the 2017 tax year

When one works in more than one state, both the home state and the work state will tax the income. The home state will then credit the taxpayer for the taxes paid to the work state on that income to avoid double tax on the same income.

Some border states have a reciprocity agreement where income earned in the border state is considered income earned in the home state so that only the home state will tax that income

For residents of AZ, CA, OR, IN and VA, when one lives in one of the listed states and works in the other, the credit goes in “reverse” . For example when a VA resident works in CA, the credit to relieve double taxation is allowed by CA, not the home state VA. IN and CA have dropped their reverse credit arrangement as of the 2017 tax year. For tax years 2017 and later, IN will allow a credit for taxes paid to CA against IN state tax obligations on the same income. (Note: IN and VA do not share this arrangement).

State Taxes for Strike Travelers Might Get Easier

On September 21, 2016, the U.S. House passed the Mobile Workforce State Income Tax Simplification Act of 2015, which would limit states’ authority to impose personal income taxes on nonresident employees for work performed in other states. If enacted, the bill would preclude an employee’s income earned in more than one state from being taxed in any state other than the employee’s state of residence and the state where the employee is present and performing employment duties for more than 30 days in the calendar year. The bill would also exempt employers from withholding and information reporting requirements for employees not subject to income tax under this law. The bill would allow employers to rely on the employee’s annual determination of the time expected to be spent working in a state, absent fraud or collusion.

The definition of “employee” would not include professional athletes and entertainers and prominent public figures performing for wages or other remuneration on a per-event basis.

The bill text is available at https://www.congress.gov/bill/114th-congress/house-bill/2315/text.

My comment: For most travelers this does not change the game, however those working strikes might be affected. If it passes the Senate and is signed into law I could see states like CA and NY take it to court.

One tidbit: Senator Lieberman of Connecticut introduced this bill a long time ago and it never got any traction. The purpose of the bill then was to contain border state NY from taking tax revenue from CT🙂

CRA Requiring Transcripts of US Returns for Foreign Tax Credit

CRA has decided that all claims for foreign tax credits should come as official notices vs copies of tax returns from other countries. Effective immediately, clients will require an official Notice of Assessment from a foreign country to claim FTC. For US credits, a copy of the 1040, state return and W2s was was. One problem – the IRS and state tax agencies do not issue Notices of Assessments and some transcripts are not available till the summer. We will see how this plays out. CRA is allowing proof of payment or receipt of refund along with a copy of the return

New Rules on IRA Rollovers that Fail the 60 Day Rule

The IRS is simplifying the procedure for getting a waiver of the 60 day rollover rule in cases where there was a problem with the process or an unexpected event. Often when rolling over amounts into another IRA, a taxpayer will receive a check which then must be sent to the new investment firm. Sometimes that process breaks down due to mail delays, unexpected events or other reasons. The new procedure is linked below

New rules for 60 day rollover limit