Converse, TX asked in Tax Law for Oklahoma

Q: If I live in TX and telecommute for a company in OK as a 1099 contractor, am I responsible for OK income tax?

All work will be performed in TX without me ever traveling to OK. My understanding is that OK receives a copy of the 1099. If I am not responsible for OK taxes, I don't want to end up in a dispute with the OK taxing authority.

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1 Lawyer Answer
Reece B. Morrel Jr
Reece B. Morrel Jr
  • Tax Law Lawyer
  • Tulsa, OK
  • Licensed in Oklahoma

A: Congratulations, you have landed on a real "hot-button" topic - especially when Oklahoma is suffering from a budget crisis.

To be honest, I really need more facts to be able to advise you properly.

But let me give you something to consider. The statute-of-limitations starts to run when the tax return is filed. If a return is never filed, the statute-of-limitations never starts. So, if no return has been filed then the state of Oklahoma can assess tax, interest, penalties 3-years, 5-years, 10-years, 20+years from now because the statute-of-limitations has not run. Yikes!

So, let's say you file an Oklahoma return and it shows anywhere from $0 to a percentage of your income sourced in Oklahoma. After the statute-of-limitations runs, the Oklahoma Tax Commission cannot challenge your return unless the information contained in the return was fraudulent. Easy enough. Don't file a fraudulent return. (One of the reasons I need more facts.)

In other words, the OTC can't come back and assess you with more tax, interest, and penalties.

Yet, the downside risk is that now you are showing up on the OTC radar. A small blip, but a blip nonetheless.

Here is something else - what is your net profit on the project? If your gross revenue is $50,000, but your business expenses are $48,000, then the maximum amount of Oklahoma sourced income is only $2,000. Now it is starting to look like you may want to hurry up and file an Oklahoma return.

But, I still need more facts. For example, how big is the project? How many other 1099 contractors working on the project? Do you ever cross the Texas-Oklahoma border for any business reasons?

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