# City and State Taxes



## SuperG (Nov 15, 2015)

I'm hoping someone in a similar driving area will be able to help answer my question.

I live in the Kansas City Area Metro. My accountant has told me that I will need to provide what portion of the fare was earned in Kansas, Missouri, and Kansas City, MO.
(Kansas City, MO charges a 1% city tax)

For example:
Fare that goes from Olathe, KS to North Kansas City, MO.

In order for me to accurately pay the correct taxes to each city/state, I need to determine how much of the fare was earned in Kansas, how much of the fare was earned in Missouri, and how much of the fare that was earned in Missouri was earned in Kansas City, Missouri.

I have asked Uber if they can provide the fare breakdown and they've just told me to contact my accountant to determine how to figure it out.

I was going to look at each trip detail and then put it into google maps and try to determine it that way, but the trip details on the partner website has been down for a week.

Does anyone else have any experience with this?

Thanks for all your help!


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## UberTaxPro (Oct 3, 2014)

SuperG said:


> I'm hoping someone in a similar driving area will be able to help answer my question.
> 
> I live in the Kansas City Area Metro. My accountant has told me that I will need to provide what portion of the fare was earned in Kansas, Missouri, and Kansas City, MO.
> (Kansas City, MO charges a 1% city tax)
> ...


are you driving rideshare only? if so I would not worry about it. It's uber's responsibility. They set rates and collect all the money. This might help you https://uberpeople.net/threads/sales-tax.40861/


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## SuperG (Nov 15, 2015)

UberTaxPro said:


> are you driving rideshare only? if so I would not worry about it. It's uber's responsibility. They set rates and collect all the money. This might help you https://uberpeople.net/threads/sales-tax.40861/


I'm not worried about the sales tax. I'm worried about the state and city income tax. Thankfully I've only been driving with Uber for a few months so I won't get hit too hard, but I'm having a hard time getting a good answer from Uber. I would think they would need to report where the money was earned.


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## RideshareTaxAdvisor (Nov 13, 2015)

You may want to check with your accountant to be sure you understand what he or she is asking. With cities that impose a *LOCAL TAX* you complete the LOCAL Income tax return for that city. Let me give you some background information. The FEDERAL INCOME TAX is imposed in all areas. So typically tax payers complete their FEDERAL TAX RETURN and the information from the *FEDERAL INCOME TAX RETURN* flows to the *STATE INCOME TAX RETURN*. What this means for you is that your FEDERAL ADJUSTED GROSS INCOME from your Federal 1040 series form goes directly online LINE 1 of your 20XX (where xx= the last two digits of your taxable year) Form MO-1040 series form and your State income tax rate is calculated from there. This leads you to your state level TAXABLE INCOME (TXI) on Line 10 of the State Form MO-1040. And your state tax is calculated off of your state TXI. Since you are a 1099-MISC Independent Contractor you will receive your 1099-MISC from Uber. Your tax preparer will use that information to complete a Form 1040 Schedule C (Sch C). The information from the Sch C flows to the form 1040. For the Local Tax your tax preparer should complete Form RD-108/108B. On line 2 of this form the tax preparer will mark that you are not a resident of Kansas City MO (*ONLY* if this is applicable. Otherwise it will go unmarked).

So you must file form RD-108/108B if you fall into one of the two categories below

Every *resident* individual who derives income from an unincorporated business, association, profession, or other business activity.
Every *nonresident* individual who derives income from an unincorporated business, association, profession, or other *business activity within the city*
There are attachments to the Form RD-108/108B (Schedule C,Y,Z). The Schedule C and Schedule Y is the forms that your preparer will complete for the following reason:


*Nonresident* individuals who derive profits from any unincorporated business, partnership, or association provided that the business activity consists of conducting business or performing services *both within and outside the city.* 
Information from the Sch C will flow to the form Sch Y. *Line 24 of Schedule Y is where you do the allocation for earning "elsewhere" vs in "KCMO."* So either you can talk to your to see if you can use a FORMULA to calculate estimates if getting exact data is not practical. See below:

_*"Unless prohibited by statute or by rule, a member may use the taxpayer's estimates in the preparation of a tax return if it is not practical to obtain exact data and if the member determines that the estimates are reasonable based on the facts and circumstances known to the member. The taxpayer's estimates should be presented in a manner that does not imply greater accuracy than exists."*_

So is it truly PRACTICAL to try to determine the amount of earning that you earned inside the city of KCMO and outside of KCMO? Maybe you and your preparer can determine that. As long as the preparer or you can justify the numbers used than it will stand with the IRS.

So landing this plane. Yes you could do it your way and try to determine how much of the fare based on miles traveled inside KCMO, which in my opinion is not very practical. It can be very tedious. Or you and your preparer can use estimates based on the total days driven and what percentage of your business actually took place INSIDE of KCMO. And use that percentage to answer the allocation amounts on line 24 of Schedule Y.

Lets use the example of a person using his personal car for business and pleasure. A tax preparer would use *REASONABLE* estimates to determine how much of your car is used for business versus how much is use for pleasure. Its the same thing here. In my professional opinion it is not *PRACTICAL *to try to determine how many miles you traveled inside of city limits. It can range from Less than .5 miles upward depending on the total miles of any given trip. So again I would suggest dong a percentage of your business that occurred inside the city limits of KCMO.

I know this was a very in depth answer but hopefully I shed some light on the question to help you have a better understanding of whats going on. My question for you would be are you a resident or non resident of Kansas City MO? This will determine if you need to do the allocation. Or if you wish to play it safe. STAY AWAY FROM THE ALLOCATION and just let them tax you on ALL earned income. How bad can the 1% tax be.


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## SuperG (Nov 15, 2015)

RideshareTaxAdvisor said:


> You may want to check with your accountant to be sure you understand what he or she is asking. With cities that impose a *LOCAL TAX* you complete the LOCAL Income tax return for that city. Let me give you some background information. The FEDERAL INCOME TAX is imposed in all areas. So typically tax payers complete their FEDERAL TAX RETURN and the information from the *FEDERAL INCOME TAX RETURN* flows to the *STATE INCOME TAX RETURN*. What this means for you is that your FEDERAL ADJUSTED GROSS INCOME from your Federal 1040 series form goes directly online LINE 1 of your 20XX (where xx= the last two digits of your taxable year) Form MO-1040 series form and your State income tax rate is calculated from there. This leads you to your state level TAXABLE INCOME (TXI) on Line 10 of the State Form MO-1040. And your state tax is calculated off of your state TXI. Since you are a 1099-MISC Independent Contractor you will receive your 1099-MISC from Uber. Your tax preparer will use that information to complete a Form 1040 Schedule C (Sch C). The information from the Sch C flows to the form 1040. For the Local Tax your tax preparer should complete Form RD-108/108B. On line 2 of this form the tax preparer will mark that you are not a resident of Kansas City MO (*ONLY* if this is applicable. Otherwise it will go unmarked).
> 
> So you must file form RD-108/108B if you fall into one of the two categories below
> 
> ...


Thanks for your very thorough reply.

I live in a Olathe, KS. It's 15-20 miles from Kansas City, MO. To make things easy I may just go ahead and pay the 1% city tax on all earnings from MO. I will still need to differenate from KS and MO income though. My accountant told me I would need to pay MO tax on income I earned from driving in MO.


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## UberTaxPro (Oct 3, 2014)

SuperG said:


> I'm not worried about the sales tax. I'm worried about the state and city income tax. Thankfully I've only been driving with Uber for a few months so I won't get hit too hard, but I'm having a hard time getting a good answer from Uber. I would think they would need to report where the money was earned.


 I would calculate/estimate the mileage for KS and MO by looking at my Uber trip records for the year and come up with a % for each state and then use that % consistently. I see the rates are $1.00 per mile in MO and KS. Are you making positive income after subtracting your mileage at 57.5 cents and other deductible business expenses? At $1.00 mile rates I doubt you'll have any income to report at all!


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## RideshareTaxAdvisor (Nov 13, 2015)

UberTaxPro said:


> I would calculate/estimate the mileage for KS and MO by looking at my Uber trip records for the year and come up with a % for each state and then use that % consistently. I see the rates are $1.00 per mile in MO and KS. Are you making positive income after subtracting your mileage at 57.5 cents and other deductible business expenses? At $1.00 mile rates I doubt you'll have any income to report at all!


I agree with UberTaxPro. What ever you do *consistency* is key. So what ever %'age you and your tax professional use, be sure to use it all the time and make sure its documented somewhere so that in later years you will use the same method. That way if any questions ever arise you can show how you came up with the %'age and that you consistently used the same method year after year.


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