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Live and conduct all work in Michigan, but my Nebraska employer witheld NE state taxes.

I live full time in Michigan, but also teach as an adjunct instructor for a college in Nebraska (100% online, all work completed in Michigan). Michigan is taxing me for this income. Do I also file a NE state tax return and try to recoup the money that was withheld from my check? Will turbo tax walk me through this? 

 

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8 Replies
TomD8
Level 15

Live and conduct all work in Michigan, but my Nebraska employer witheld NE state taxes.

Nebraska is one of a handful of states with a "convenience of the employer rule" regarding remote work performed by a non-resident.  Here is Nebraska's law:

 

"If the nonresident's service is performed without Nebraska for his or her convenience, but the service is directly related to a business, trade, or profession carried on within Nebraska and except for the nonresident's convenience, the service could have been performed within Nebraska, the compensation for such services shall be Nebraska source income."

https://www.law.cornell.edu/regulations/nebraska/316-Neb-Admin-Code-ch-22-SS-003

 

If that law applies in your case, then your remote income is taxable by NE.  It is also taxable by MI, because your resident state can tax all your income regardless of its source.

 

You'll be able to claim a credit on your MI return for the taxes paid to NE on the dollars taxed by both states, so in effect you won't be double-taxed.

 

In TurboTax, be sure to complete the non-resident state return before the home state return, so that the program can calculate and apply the credit.

 

**Answers are correct to the best of my ability but do not constitute tax or legal advice.

Live and conduct all work in Michigan, but my Nebraska employer witheld NE state taxes.

Can I elaborate a little further in regards to the convenience law? The college does not provide me with a classroom, office, computer or any kind of supplies. Nor would they if I lived in Nebraska. This is a 100% virtual job and does not actually take place in Nebraska. In fact some of the students are over seas. My working in Michigan is not a matter of convenience for me, but just the nature of the job. Considering this, do I still fall under the convenience law?

TomD8
Level 15

Live and conduct all work in Michigan, but my Nebraska employer witheld NE state taxes.

@omahablue --

 

I can't do any more other than give you the wording of the applicable Nebraska law.  If you're unsure if the law applies to you, then you may want to contact the Nebraska Dept. of Revenue for guidance.  Here's a link with their contact information:

https://revenue.nebraska.gov/about/contact-us

**Answers are correct to the best of my ability but do not constitute tax or legal advice.

Live and conduct all work in Michigan, but my Nebraska employer witheld NE state taxes.

Thank you.

Live and conduct all work in Michigan, but my Nebraska employer witheld NE state taxes.

Just in case there is anyone else out there with further understanding or experience with Nebraska's "convenience" policy under chapter 22, do you have any thoughts? Please see comments above in this thread. I will try to call the Dept. of Revenue, but I feel like it's going to depend on who answers the phone on whether I'll get an answer to my question.

Thanks.

DMarkM1
Employee Tax Expert

Live and conduct all work in Michigan, but my Nebraska employer witheld NE state taxes.

It appears you will need to pay NE taxes.  Here is an extract from NE Code 316 Chap 21 which is guiding your employer. 

 

"001.02 Every employer paying any wages to a resident or nonresident individual must deduct and withhold for the Nebraska income tax if:

001.02A The employer is maintaining an office or transacting business in Nebraska;

001.02B The wages are taxable under the Nebraska Revenue Act; and

001.02C The wages are subject to withholding under the Internal Revenue Code (I.R.C.), as amended.

And here and extract from NE Code 316 Chap 22 for paying NE income taxes.

 

"002.02 Nonresident individuals. The Nebraska individual income tax is imposed for each taxable year on the income of every nonresident individual which is derived from sources within Nebraska."

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Live and conduct all work in Michigan, but my Nebraska employer witheld NE state taxes.

I think this is the clearest documentation I've seen. I called the Nebraska Dept. of Revenue earlier this week, twice, just to be sure. I got a different answer each time. One person said I needed to pay NE, the other said I didn't. Sheesh.

 

TurboTax didn't even give me an option on the NE return about paying taxes to another state. It's looking like I need to pay NE, and MI will hopefully give me a refund for this tax paid to NE.

LeticiaF1
Employee Tax Expert

Live and conduct all work in Michigan, but my Nebraska employer witheld NE state taxes.

Since Nebraska is your nonresident you should file Nebraska first.  Nebraska will not give you a credit for taxes paid to another state because you are a nonresident but it does have a different tax calculation for nonresidents. Michigan will give you credit for taxes paid to Nebraska. All of these calculations will be done automatically by the program.  

 

@omahablue 

 

 

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