Recieved MO Adjustment Notice for my telecommuting job from IA

[jschuman]

I lived and worked part time in MISSOURI as I went to school during the first half of 2018 and than permanently moved to IOWA to "telecommute" on a real full time job (Company in MO) for the remainder of the year. I filed as full resident Iowa and part time Missouri state tax returns and split the income up 7% (MO) and 93% (IA), but now Missouri has sent me a "Adjustment Notice" and changed my 7% Missouri income percentage to 100% percent thus reducing my refund from $2k to $200. Of course, the notice does not say why or what to send in to protest the change. Just completely guessing, but I'm pretty sure that the confession is that no where on the MO tax form did I say I was "telecommuting" from IA to MO as I worked.  What should I do, just protest by saying that the"vast major of my income came as I was telecommuting to MO while I lived in IA" or do I need to be more specific with numbers and dates?

[TomD8]

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[TomD8]

In order to answer your questions, it's necessary to clarify your legal residency status during 2018.

Was your domicile (your main, permanent home) in Missouri prior to your move to Iowa, or were you only living in Missouri temporarily for the purpose of attending school?

If you were only in Missouri temporarily for school, where was your domicile during that time?

Did you maintain a permanent place of residency in Missouri in 2018?  (A permanent place of residency would be (for example) an apartment you rented - as opposed to a college dorm.)  If yes, were you in Missouri more than 183 days in 2018?

[jschuman]

Thanks, Lived in Missouri entire life (Parents house and Apartment rental until 5/31/18) until moving to Iowa (Apartment rental) starting 5/25/18.  Started at company and working full time via telecommuting in Iowa around 6/7/18.

[TomD8]

OK.  Since you changed your domicile during the tax year, you should have filed as a part-year resident in each of the two states.

The income you earned prior to the move is taxable by MO; the income you earned after the move is taxable by IA.

You may have to file amended state returns to correct the situation.

This TT help question may be useful to you:  https://ttlc.intuit.com/community/state-taxes/help/how-do-i-file-a-part-year-state-return/00/26057

[jschuman]

Thanks, but that is exactly how I filed.  I Submitted the MO state form requesting a large refund because I moved and than I paid IA a large tax because I was telecommuting.  Now, MO has sent me the Adjustment Notice that they  "changed my tax percentage to 100% from 7%", hence reducing my MO refund by 2K.  So, somehow I need to respond to their notice in 60 days saying that the 7% figure was indeed correct.  Do I just write out the events, facts, timeline and submit that and should I include anything to support the move and telecommuting by including my signed lease?  Would just like to correct it with one letter at this point.

[TomD8]

In your original question you stated "I filed as full resident Iowa and part time Missouri state tax returns..."

Did MO explain why they changed your MO income percentage?

Did your MO employer mistakenly withhold MO taxes after your move to IA?

I would respond to the MO Adjustment Notice by advising them that you relocated to Iowa and became a domiciliary resident of IA on such-and-such a date (the date would be the date you began living in your new home in Iowa), and that the MO percentage of your income is based on the portion of your income that was earned while you were still a MO resident.  If they ask for proof of your Iowa residency, I would submit a copy of your lease if you're renting, and a copy of one or two utility bills.  An Iowa drivers license isn't good proof, because people often wait for months after a move to obtain a new license.  But they can't wait months to pay their electricity bill.

[jschuman]

Thanks, perfect.  I have a plan now.

I understand why they thought all income was MO income, just needed to know what to say so they would understand.  I'm guessing that I'm going to have the same issue next year since they have already taken MO this year.

[jschuman]

I have a follow up question, if I may ask.  How do I handle the occasional business trip I make to the office in MO from IA?  Let's say, I make a 1 day visit every month to the Missouri office instead of my daily telecommuting from Iowa, do I need to track those days and pay taxes to MO for those 12 days out of 365 days (ie 12/365 of my yeaarly pay) and submit a supporting statement each year?  I'm having a hard enough time getting MO to acknowledge I'm telecommuting and not working physically at the MO office the way it is.

[TomD8]

Since you're now a non-resident of MO, only your MO-source income is taxable by MO.  Income you earn for work actually performed in MO is MO-source income, so you should keep track of your days worked in MO.

You may or may not have to file a MO non-resident tax return.  That will depend on whether or not you meet MO's filing requirements for non-residents, which you can find here:  https://dor.mo.gov/personal/nonresident/

[jschuman]

I need more help with this issue.  I responded to the MO "Adjustment Notice" and basically stated I moved to IA in May and I daily telecommuted to my MO employer from IA, hence my income should be taxed as IA income instead of MO income and my original return was indeed correct (I also submitted several pages of stuff to verify my move and etc).  However, after several months without a response, I called MO and inquired about my objection to MO taxing my income as MO income.  They basically said I was incorrect and that the telecommuting income still gets taxed as MO income even though I live in IA, since it is a MO company.  What do I do now, just send in an amended return with more support information (basically my original return) and hope they accept the new return?  As it stands now, I double paid my state taxes to MO and IA on my income. 

[Critter]

Ok ... many states are changing their rules on telecommuters ... so if MO is saying all the income is MO based you should have filed a part year resident return for the year of the move ( and non resident in the following years)  to report the total MO income then you will get a credit for the MO taxes paid on the IA return so you are not double taxed.   Talk to your employer to find out why they are continuing to withhold MO taxes ... they should be able to site the MO rules on telecommuters.