Let’s clear up some misconceptions about state income taxes

February 20th, 2020 → 6:00 am @ The Law Office of Lance R. Drury // No Comments

While many people tend to focus on their federal income tax returns, many people will also need to pay attention to their state income taxes as well since Missouri is not one of the nine states that do not have income tax.

It may not surprise you that there are some misconceptions regarding state income taxes out there, especially since few people really pay attention to them since federal income tax returns usually offer the big refunds. If you fall into this category, then you may benefit from clearing up some of the myths surrounding your state income taxes.

The most common misconceptions and misunderstandings

The information below should give you some answers regarding state income taxes:

• They are not unconstitutional. However, two states cannot tax you for the same income, according to a 2015 U.S. Supreme Court decision.
• If you don’t work in the state where your employer is located, you do not have to pay taxes in that state. Just because you work for a company based in another state, it does not mean you have to pay taxes in that state as well as in the state you live in.
• However, if you do work in one state and live in another, you may owe taxes on the income you earned in the state in which you worked, but not in the state in which you live.
• An audit will only catch mistakes that benefit the IRS. If you made a mistake that would have saved you money or increased your refund, you are responsible for finding it.

Hopefully, the above information clears up some incorrect information you may have heard about state income taxes. The federal income tax system is difficult enough to understand, especially with the changes recently made to the U.S. Tax Code. The situation can get even more complex if you only lived on Missouri for part of the year since you may need to file income tax returns in more than one state.

In order to reduce your stress and help make sure that your taxes, both federal and state, are done correctly, it may benefit you greatly to sit down and discuss your situation with a tax attorney. Doing so could help sort out your situation and give you peace of mind that you are filing correctly, which could help avoid any potential disputes with federal or state taxing authorities.

 

Tags: CPA, Financial Advice, retirement advice, retirement information, Tax Advice, Tax Information, Tax Tips