Locums and state tax deductions

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  • Avatar preparefordefeet 
    Status: Physician
    Posts: 3
    Joined: 01/20/2019

    Curious to know what other people/professionals do with this one. I work in 2 different states with locums, each having their own state estimated income tax. They all provide nonresident tax worksheets to determine the portion of my federal tax bill that is attributable to each state (based on how much $$ came from each gig). My problem is, when I have general business expenses (i.e. new state license, CME expenses, travel to an educational event, contributing to my i401k) I have NO clue how to attribute these business deductions to each state income.

    i.e. I am paid $60k in Georgia, 40k in North Carolina as and have 20k of general business expenses(let’s just say for arguments sake, 15k in my i401k and 5k in education and assume travel/lodging are paid by locums company).

    When I’m doing my Georgia taxes, can I claim the 20k deduction there (Making net business income 60k-20k = 40k in that state) as well as in NC (making it 40k-20k= 20k there)? This seems a little strange, as if I’m counting my deduction doubly, but if you balance my income from that particular state and my general business deductions on a state by state basis it appears that way to me.

    Or, are you supposed to proactively attribute these deductions to each business stream and pretend that since 3/5 my income comes from GA, that 3/5 of my business deductions are also attributed to Georgia (no basis in real fact) and 2/5 are attributable to NC?

    I can’t seem to find any rules on this subject from either state nor general tax practice. I know WCI often says if its a gray area he calls it in his favor, my taxes just seem mighty odd claiming I’m making 20k in a state I received 40k in.

    #244699 Reply
    jfoxcpacfp jfoxcpacfp 
    Status: Financial Advisor, Accountant, Small Business Owner
    Posts: 8113
    Joined: 01/09/2016

    Since both of those states impose taxes, you’ll most likely fill out the 1040 and complete an apportionment for % of work done in GA, % done in NC and % in your home state (and/or your software will ask what amount was earned in GA and what amount was earned in NC). Since you’re filling out a federal schedule C, the calculations will be handled from within (you won’t need to manually allocate). At least, without going through 40 state returns, that’s how I believe it typically works.

    Don’t forget that individual states’  power to levy income and other taxes pre-dates the US Constitution, which means that state laws are anything but uniform. The interaction between some states is not typical (CA and AZ is one example), so what I’ve provided is a general ROT. I don’t believe there are any exceptions imposed by GA/NC.

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~ ~ [email protected]

    #244703 Reply

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