The Money Mustache Community
Learning, Sharing, and Teaching => Taxes => Topic started by: SmileAllDay on December 30, 2018, 11:30:30 AM
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Hello friends.
Long story short: I travel full-time but have my writing business incorporated in NY (where I used to live).
Now that I don't live there, and have everything else addressed to my wife's parents' home in Missouri, am I stupid to keep paying NYC taxes?
My old accountant and an accountant friend both said I should close out my NYC business and set up and new one in MO, ideally at the start of the year.
However, my current accountant has been slow to move and doesn't think I should. I'm not sure if she doesn't want to make the effort or if she knows something I don't.
Since I only hired her this summer, I don't want to stand on her toes. And if I'm going to press the issue, I'd like to have a better understanding.
Thank you so much in advance!
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New York is very aggressive about contesting moves out of state.
You mention that all of your mail is going to your wife's parents in MO. Which state(s) do you currently file personal income taxes returns in (or are you outside the USA for enough of the year to avoid personal tax residency)?
Is your writing business incorporated as an LLC electing S-corp status or something else?
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Hey there!
I pay NY taxes. Unfortunately, I'm in the US juuuust too long each year to be able to avoid it.
Yup, I'm S-Corp; Although I heard switching to LLC may be more advantageous after the recent changes to tax laws.
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Okay.
If you're going to be filing/paying personal income tax in New York, I don't think dissolving your current New York S-Corp and replacing it with either a MO S-corp or an LLC electing S-corp taxation is going to actually save you much on taxes.
With S-corp taxation, you're going to need to file in each state that you're a resident in, and each state your company has a "nexus" in, so if you're a tax resident in New York and your company is in MO my guess is that you'd end up filing personal tax returns in each state and end up owing a total of the higher of the taxes you'd have paid just filing in one state or the other.
But this is based on my own personal experiences owning pass through entities, not an accountant/tax attorney myself.
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A few questions:
When you visit the US (as it sounds like you are an expat), where do you go?
Where is your car registered?
Where are you registered to vote?
Do you own any property in NYC?
Basically, are you a resident for NYC/NY purposes? As my understanding is that they are fairly aggressive going after residents (or people with nexus to that locale). The potential tax savings would be if you could get away from being a resident of NYC/NY.
Though the other big question is what sort of writer are you? Do you only do transactional work (such as a newspaper reporter, where you are paid based upon a salary or what you produce)? Or are you collecting royalties (based upon existing IP, and that would bring up the question of who owns the IP and potentially transferring it).
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Thanks @maizeman for that info. It seems you have the same opinion as my accountant, which makes me feel better.
Pretty intense questions Grafter! I joke ;) My wife and I live out of a shared suitcase and own no property, no car, no stems, no seeds, no sticks.
I work as an advertising copywriter remotely with clients in NY and Cali, and am paid the standard way. I'd appreciate any light you could shed on my admittedly unusual situation!
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SmileAllDay - It sounds like you are mostly paying the tax due to the corp formation in NY. However, as a telecommuter, NY is fairly aggressive, and has taken the position that people that do work for NY companies remotely/out of state, are subject to NY tax for that work. See https://www.biglawinvestor.com/new-york-telecommuting-tax-penalty/
You can read a bit at the CA side of it (and while they are aggressive overall, less than NY for telecommuters): https://www.palmspringstaxandtrustlawyers.com/nonresidents-working-remotely-for-california-businesses/
Based upon your additional details, it seems like you could potentially save the NY tax on the CA source income if you moved the company to a different state (but would then have to most likely have some tax liability in the new state). So, the big issues for you to investigate is what state you are a resident of (and how to potentially become a resident of a different, low/no tax state) and potentially finding a low/no tax state for the corp. I would really suggest that you most likely talk to a state and local tax expert (and finding one may be difficult, especially as we have just started tax season).
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FWIW, it seems many here and elsewhere domicile in FL. It is supposed to be easy.
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Thanks so much for your advice, friends! I'll have another chat with my accountant. You guys rock!