I live in Texas but work in Oklahoma, and I just started this job two months ago. They’re taking out Oklahoma state income tax, but since I live in Texas, I’m wondering if I should change my Oklahoma W4 to exempt. Should I be paying Oklahoma state tax even though I live in Texas? They’re taking out $200-300 every paycheck. If I claim exempt on my W4 for Oklahoma, will I get in trouble later? Just feels like I shouldn’t be paying Oklahoma tax since I’m not a resident.
On top of that, I’ve got questions about per diem. Under the old company, per diem wasn’t taxed, but since the new company took over, they’re taxing it. We’re supposed to get $35 a day, but they changed it to an annual rate and divided it by 26, so I get $327 per week. I don’t understand why they’re taxing it now. Isn’t per diem under the federal rate supposed to be tax-free? The federal rate is $68 a day in OKC for FY24 and goes up to $80 next year. Since we’re below that rate, why is it getting taxed?
One more question… I’m starting a side business selling apparel and need to buy some embroidery and screen printing machines. From what I read, tax code 162a says business expenses can be written off. If I buy these machines through my LLC, can I write them off as a business expense? What about the cost of materials, like hats and shirts? And if I start another business that needs a truck, can I also write that off if I buy it under the LLC? Just want to be clear on what I can write off as business expenses.
Any advice would be appreciated, especially if anyone here works in this field or knows someone who does!
Since you’re working in Oklahoma, you’re required to pay Oklahoma state income tax. Changing your W4 to exempt wouldn’t be right because you’re not actually exempt.
Devon said:
Since you’re working in Oklahoma, you’re required to pay Oklahoma state income tax. Changing your W4 to exempt wouldn’t be right because you’re not actually exempt.
If I did switch it to exempt, would I get hit with penalties later?
@Timber
If this is your first year filing in Oklahoma, you might not face an estimated tax penalty as long as you pay in full by April 15. But claiming exempt when you don’t qualify is against the rules in most places.
You’ll be taxed in Oklahoma since you’re working there. Texas doesn’t have an income tax. If you ever move to a state with an income tax, you’ll likely get a credit for Oklahoma taxes paid. As for the per diem, it sounds like they’re “grossing it up.” This means they list it as income at $45, then tax it down to $35 so your net pay equals what you were promised.
@Lennox
The new setup for per diem started a few weeks ago. Before that, it was just listed as “per diem untaxed.” Now it’s “per diem taxable,” and they annualized it, so it shows as $327 per week. We work 13-14 hour days, so we’re in a high tax bracket. Is that why it’s now being taxed?
@Timber
They’ve been messing up the per diem too… some people aren’t getting it, others got it once or twice, and for some, they tried back paying it but shorted them. It’s a mess.
To answer your question about the business expenses…
> Starting an apparel business and buying machines—are those write-offs?
Yes, but only if you’re actually operating a business. If you’re making sales, then you have a real business with profits and expenses. Without that, it won’t qualify.
>What about buying a truck and using it for business only?
Yes, if the truck is only for business, then it reduces your profit. But big items like trucks or machinery need to be spread out over several years, a process called depreciation.
@YAS
So if I buy the machines to start the business, can I claim them even if I don’t show profits right away? I’d probably just have expenses for a while unless sales go really well.
Timber said: @YAS
So if I buy the machines to start the business, can I claim them even if I don’t show profits right away? I’d probably just have expenses for a while unless sales go really well.
Here’s a quick rundown:
Startup costs (like machines) can be deducted in the first year of actual business activity, up to a certain limit.
Anything over that limit has to be spread out over 15 years.
Smaller items under $2,500 can be deducted as regular expenses.
So for smaller businesses, you can usually write off most things. Bigger expenses need a bit more planning.