If it is one thing I have learned being an Oilfield Wife (OFW), it is that I absolutely dread taxes. I dread seeing my husband’s pay stub and the amount of money we pay in taxes every two weeks. I dread filing taxes every spring. I dread filing taxes in multiple states because of rig relocation. I even dread saving receipts, documenting expenses, and calculating mileage every month. (And mind you this is for someone who is not self-employed like a lot of the Directional Drillers we know!) After a quick email chat with my accountant this morning, he confirmed an all too familiar suspicion of mine, something that I suddenly realized; I was sure a lot of oilfield families out there may not know!
The last few months I have noticed my husband’s checks were larger than normal. I researched every angle, the child support to the ex, 401k contributions, and even the fat chance our health care premiums had magically decreased. To no surprise nothing had changed. So then I jumped to the next obvious possibility, did he get a promotion and not know it!? Nope, nothing had change with the gross amount of money he was making. What I did discover though was this; there was NO state tax being held from his salary. That’s right ladies, his checks were bigger because he is now located in Nevada and Nevada is one of those beautiful states that does not “take out” state income tax!
Believe it or not this situation has happened to us before! I knew where the remainder of the conversation was going with our accountant before he even got there, and I am glad I did because the shock is not near as bad then second time around. Even though my husband isn’t pay a state income tax right now because he is in Nevada, Uncle Sam will definitely make that up come time to file.
I decided to research the issue, because well it was a concern and I wanted to be prepared, but let’s face it, workers in the oilfield are hoping from state to state chasing their rigs all over the country! Seven states in our great country actually lack an income tax altogether. States that do not “withhold” an income tax are: •Alaska•Florida•Nevada•South Dakota•Texas•Washington•Wyoming. With that said, if your Oilfield Man (OFM) is working in one of these areas and you are suddenly seeing a bigger pay check hit your account every two weeks, be cautiously optimistic.
I realize every company, every position, every rig varies, but if you ladies are anything like me, than you would rather be safe than sorry. So what does this all mean to you and your family if you find yourself in this situation like us? I will use our family as an example.
We live in Colorado, my husband worked in Colorado, but his rig got picked up and moved to Nevada. He is still working for the same company, same title, same income, just geographically in a different state. Because he is “earning his income” in another state, this means he will be paid accordingly to those state guidelines. Since he is in Nevada and they do not take out state income, than he will not see a state income tax from his checks the whole time he is there! Crazy I know! We as a family are in a hefty tax bracket, like a lot of us I’m sure, so as advised by our accountant, he said we can do one of two things. You can take the percentage of your gross income every month in according to your tax bracket and set it aside in savings every month. If you made $10,000 gross every month and your tax bracket was 5% for example, you would put about $500/ month in a savings because that is technically the amount of taxes you should be but are not paying. Then, come time to file, since you reside in a state that does take a state income tax, you will pay that state income tax you skipped out on every month. So if the above example was my family, we would pay the state of Colorado $6000 at the end of the year if my husband worked in Nevada for the entire year. The other option is, well, live it up spend that money, but be prepared to give rather than receive come tax time!
I don’t get it, of course it does not make sense, and obviously it is unfair in my eyes, but that’s the rules. Like I said before, the variation between companies, positions, pay compensations, is really endless, but always do your homework. As an OFW I have learned to become just as versed in laws and procedures in other states as the very state we live in. The four years my husband and I have been married, he has worked in North Dakota, South Dakota, Wyoming, Colorado, Utah, and Nevada! My greatest piece of advice, invest in a very good accountant who understands the industry and the rules for multiple states!
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