Live & work in SC, company is based in MA. W-2 shows income taxed by SC. SC return asks for any out-of-state income. Does this qualify as out of state income?

[shaylingerfelt]

Am a resident & work in SC, company I work for is based in MA. W-2 shows income taxed by SC. SC return asks for any out-of-state income. Does this qualify as out of state income?

Also, received additional income (1099-MISC) from AZ based company that was not taxed by SC.  Does this qualify as out of state income?

[DanielV01 · Accepted solution]

It depends.  Basically, out of state income would be income for services performed outside of South Carolina.  Your W-2, which was work performed in SC, is not out-of-state income.  It does not matter that the company is based in MA, but that the work was performed in SC.

Your 1099-MISC does not have tax taken out of it.  You must calculate all of your expenses against that self-employment on a Schedule C.  Then you pay the taxes:  self-employment taxes, federal taxes, and state taxes.   This is why South Carolina did not withhold taxes, but the income is taxable to South Carolina.

The same standard for out-of-state income also applies to the self-employment:  if it (or any portion) was earned outside of South Carolina, then that amount is taxable to that state in particular.  The question on the South Carolina return is to determine if it is going to give a credit for the taxes paid to the other state on this income.  However, just like the MA W-2:  just because the company who contracted you is in AZ does not make it out-of-state income.  What makes any of it out-of-state income is if you performed the work in a state other than South Carolina.