Financial Problems And Taxes Working In The Oil Field Of North Dakota

In 2016, this was about my fourth year of working in Dickinson, North Dakota.  The oil boom was over in North Dakota by the end of 2015, but I continued to stay in Dickinson because I could make more money here, than I could back at my home in Idaho.  I have always planned on, and looked forward to, moving back to my home in Idaho once I have made enough money.

Just like most years in North Dakota, I had very little work and very little income in January 2016, February 2016, and December 2016.  Even if you plan on working in the Winter in North Dakota, so many projects get shut down due to the cold, and frozen ground, that there is a ripple effect of a slow down or shut down through other occupations.

In 2016, I was lucky to get a work project at the end of February, and later in the Spring, Summer, and Fall, I had two jobs at the same time.  Though I had very little income in January, February, and December of 2016, I still made about $47,000 that year.  This was much, much more money than I could have made in Idaho.

In Idaho, even though I have a B.S. in mechanical engineering, I would be very, very lucky to find a job paying even $30,000 per year.  There are a few large manufacturers of agricultural equipment that might have a job advertisement for an engineer that pays a fixed salary of $45,000 per year, but you would be required to do the work of two to three people, taking work home with you every week night, and working Saturday and Sunday too, for an employer who would act like they didn’t know any better, but would actually be thinking that  “they were getting their money’s worth”.

One of the reasons why engineers in places like Idaho and North Dakota, get treated like shit, get hired on a fixed yearly salary, have to do the work of two to three people, and take work home with them, is because there are so few job openings, that if you want to work as an engineer that bad, this is what you get stuck doing.

So for me, I feel a lot better getting paid for every hour that I work, especially when I end up making more money than I would have working as an engineer.

But let me get back to what I wanted to talk about, the financial problems and taxes.  I had no problem with my employers withholding from my paychecks, federal income taxes, North Dakota state income taxes, medicare, and social security.  In fact, I only claimed one withholding allowance on my employee tax withholding forms, when I could have claimed two withholding allowances.

Because I had two different jobs at the same time, each employer withheld tax money from my paychecks at the correct percentage for the money that I was being paid by that employer.  However, because of my combined income from two jobs, and making $47,000 overall, I ended up being in a higher tax bracket, the 25% tax bracket instead of the 15% tax bracket.  With just one withholding allowance, most people would have received a federal income tax refund for overpaying, but not me, I owed more money in federal income taxes.

What pushed me into owing more federal income taxes, was the “Obamacare Tax Penalty” of $850.  Let me get this straight, I worked two jobs at the same time, I had one income tax withholding allowance, and now I owe additional money in federal income taxes, because I did not have health insurance, and you want me to pay for other people’s health insurance?

This keeps getting worse.  I didn’t have hardly any income in December 2016, January 2017, February 2017, March 2017, and April 2017.  I didn’t have the money to pay all of my taxes in April, and the CPA who has done my taxes for years, customarily files an extension for me because he is busy, so I didn’t pay on time.

When I did finally pay my income taxes before the end of my income tax filing extension deadline, I owed additional federal income taxes, $1,700 in Idaho State income taxes, and $450 Idaho State income tax penalty.

From my paychecks, the State of North Dakota was receiving all of the state income taxes that they were owed, which I believe was 2% of my gross pay on each paycheck.  However, I didn’t have any withholding from my paychecks for the State of Idaho, where I claim residency, and their state income tax rate is about 7% I believe.

Why, why would I pay state income tax to both North Dakota, and to Idaho?  Because I work in North Dakota, I don’t care that they withhold about 2% from the gross pay on each of my paychecks.  I would rather North Dakota just take the 2%, rather than argue with the state of North Dakota about my residency, which I would probably lose this argument with them anyway.

I wrote a whole blog post titled “Losing Your Home In A Lawsuit Judgement”, where I explain that it is very important legally, to make sure that your home is counted under the law as “Your Primary Residence”, and not an investment property.  Legal proof for me that my home in Idaho is my “Primary Residence”, and not an investment property,  would be such things as me having an Idaho driver’s license, not renting out my home, not owning a second home elsewhere that I claim as my primary residence, having most of my vehicles registered in Idaho, and especially, claiming myself to be a resident of Idaho on my federal income tax return, which unfortunately means paying something like 7% of my income in taxes to the State of Idaho.

Here is what the amount of my income that I paid in Year 2016 taxes looks like:

  • Federal income tax                  16% (bracket was 25%, but 16% was the effective rate)
  • Soc. Sec. & Medicare                7.6%
  • Obamacare Penalty                  1.8%
  • North Dakota income tax          2%
  • Idaho income tax                        7%
  • Idaho income tax penalty          1%
  • Idaho property tax                     1.7%
  • Sales tax                                         6%
  • Tax preparation                          0.75%

Total of my income paid in taxes     43.85%

I wrote this blog post today, because I am considering what to do.  What can I do?  If I sold my house back in Idaho, I would have to pay 6% to a real estate company, and then pay capital gains tax on the amount of gain over what I originally purchased this house for, at about a 25% tax rate on the gain.  Or if I put all of the sale money into a house in Dickinson, I wouldn’t owe any capital gains taxes, but I would be putting this money into a depreciating property, as prices in Dickinson are still inflated.

I don’t want to sell my house in Idaho, I had planned on going home one day.  What would I do with all of my personal property, furniture, trailers, equipment, and vehicles?  I would be eaten alive in storage rental fees, if I didn’t have my own property.  Even if I could fit all of my furniture, personal belongings, tools, equipment, and maybe one vehicle into a storage unit for $250 per month, this equals $3,000 per year, this is the exact amount of money that I am trying not to pay to the state of Idaho in the first place.  Selling my home to avoid paying about $3,000 per year to the state of Idaho in income taxes and property taxes, would result in me paying $3,000 per year in rent for a storage unit.

How or why would I drag all of my property to Dickinson, and buy a home here?  There is a tremendous shortage of women, the local people are very unfriendly, the town is being transformed by all of the drug people and criminals that are currently moving here, and the economy may continue to decline in Dickinson.


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