Independent Contractor - Determining Which State for Tax Liability

[JR164]

I live in Maryland.  If I worked as an independent contractor for one week in 2020 for a company based in Texas that required the work to be physically performed in Oregon, which state do I owe tax.  I paid an estimated tax to Maryland, but wonder if this is correct.   Thank you to anyone who can answer this. 

[rjs · Accepted solution]

The income that you earned for working in Oregon is subject to Oregon tax. Since you live in Maryland, all your income is subject to Maryland tax, no matter where you earned it. The fact that the company is "based" in Texas does not affect where you have to pay tax.

You have to file two state tax returns, a Oregon nonresident tax return and a Maryland resident tax return. You have to pay Oregon tax on the income you earned in Oregon. You will get a credit on your Maryland tax return for part or all of the tax that you pay to Oregon. Prepare your Oregon nonresident tax return first, then your Maryland resident tax return, to make sure that the credit is calculated correctly.

The estimated tax that you paid to Maryland will be applied to the Maryland tax that you have to pay on whatever other income you had.

[Hal_Al]

The general rule is: your report all your income on your home state return, even the income earned out of state. You file a non-resident state return for the state you worked in and pay tax to that state. Your home state will give you a credit, or partial credit, for what you paid the non-resident state.

[MikeinSC]

Oregon does require you file if your income is above the minimum filing requirements which are based on filing status.

Go to the last chart on this page for those amounts:

https://www.oregon.gov/dor/programs/individuals/Pages/file-requirements.aspx#part