Do you carry the burden of dealing with multiple states on your tax return?
For most of us, filing a state tax return is just another step in filing a federal return. Your tax-filing software just transfers your information to your state’s return and you’re done within minutes.
But what if you moved to a different state during the tax year? What if you worked in a state other than the one where you lived? What if you worked in multiple states? Suddenly filing state taxes becomes a little trickier and it may involve filing taxes in two different states.
Basically there are three different types of state tax returns that you need to worry about:
- Resident
- Part-Year Resident
- Nonresident
As a general rule, you have to file a resident tax return in the state where you lived, a part-year resident return in any state you moved to/from, and a nonresident return in a state where you earned money but didn’t live.
Preparing your Resident Return
A resident return is the return you have to file in the state where you are a resident. This return will tax you on all of your income, regardless of the state where it was earned.
For most people this is very simple – the state where you are a resident is the one where you live and work. But for people whose lives involve multiple states, the first step to filing state taxes is figuring out where you are a resident.
Every state has different requirements for who qualifies as a resident for tax purposes. You need to visit the websites of the tax authorities of the states in question to figure out where you are a resident.
You should note that there are nine states without income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. If you are resident of one of these states, you don’t need to file a resident tax return.
Preparing your Part-Year Resident Return
A part-year resident return is for people who moved during the tax year. If you were a resident of one state for part of the year and then a resident of another state for part of the year, then you need to file a part-year resident return in the first state and a part-year resident return in the second state.
A part-year resident return taxes you on all of your income for the portion of the year that you were a resident of that state. Let’s say you started the year living in Illinois. Then in July you moved permanently to New York. You would then have to file a part-year tax return in Illinois that taxes you on all of your income you earned during the first six months of the year. Then you will have to file a part-year resident return in New York that taxes you on the income you earned during the last six months of the year.
Preparing your Non-resident Return
You need to file a nonresident return for any state (other than the state where you live) in which you earned money. This nonresident return will only tax you on the income you earned in that state.
Here’s an example. Let’s say you live in New Jersey, but you work in New York. You’ll need to file a resident return in NJ. You will also have to file a nonresident return in NY and pay taxes on the income you earned there.
Worried about being double-taxed? Don’t be. When you file your state returns, you will have the opportunity to claim a credit for the taxes that you’ve already paid to another state through withholding. The states will then settle accounts among themselves.
You may also have to file a nonresident return for any state that had taxes withheld from your paycheck. Normally you only have to file taxes in the state(s) where you were a resident and where you earned your income.
But sometimes payroll departments goof up and withhold taxes for a state you neither lived or worked in. This commonly occurs when you work for a company that is headquartered in a different state than where you work. You’ll need to file a return just so you can get that money back as a refund.
File all of your state tax returns with RapidTax!
It doesn’t matter where your company is located. If you didn’t live in a state, and you physically did not work there, you don’t have to file a return there just because the company paying you is based there, although you do if they accidentally withhold taxes for that state. If this happens, ask them to stop withholding taxes in that state so you have one less return to file!
Hopefully this information will give you some basic guidance when it comes to filing state taxes. Each state tends to have their own set of rules. It is always a good idea to do further research into your resident state and the state where you work. Whether you need to get caught up on a late tax return or file a current year return, prepare your state returns on RapidTax.
I got married in 2012, lived in IL for 8months and MD for 4 months. My husband is resident of MD. I worked in both states in 2012. We are trying to file jointly and the software does not allow this. Are you aware of any law, clause we cannot file jointly? Thanks.
Hi Sydney,
You can certainly file a joint federal return, but I’m not sure it makes sense to file a joint state return. You certainly can, but Maryland will tax all of your income for the entire year, which they are not really entitled to tax. Filing part-year resident returns in IL and MD will make sure you aren’t double taxed.
Tax Advisor – thanks for the responses – after reading the calif info, I would think that I am unambiguously a Mass resident, and my wife is technically a calif resident for the year but with intent to return back to Mass. Do you know if she filed separately in Calif if my Mass income would be considered community property income in CA even though it is clearly from Mass and Mass is not a community property state?
State tax question:
We moved from IN in 3/2012
When filing taxes for IN do I only report wages earned up until that point?
Example;
Total wages box: 12345.12 while employed in IN.
Then we received another W2 from new company in TN.
Obviously we paid no state tax to TN or IN on this W2
Hi Michelle,
You should be sure to file a part-year resident return in Indiana. This return will ask you to report ALL of your income for that period of the year that you were an IN resident. Once you move to TN, IN should no longer tax any of your income.
My federal return is fairly straight forward but I am totalIy confused what to do for states. I live and work in Massachusetts and at the beginning of the year my wife moved to our vacation home in California to care for her elderly parent. While she goes back and forth between states, she will end up with more than 6 months in California. I on the other hand will have only been in California for less than a month of vacation. I have a low mid 6 figure salary and my wife does not work at all and has no W-2 or other income except her share of joint investment income of about 15-20k. Couple questions, 1) do we need to file in California? 2) do we need to file joint in both states, 3) can we file joint for fed and separate for states? 4)as Massachusetts is not community property state, does my Mass income have to be reported in California…. 5) what is best strategy?
Hi Art,
I just want to preface this by saying that you might want to sit down with an accountant, but here are some quick answers to your questions.
1) This depends. You need to take a close look at California’s definition of residency. There’s a fun PDF doc you can peruse here – https://www.ftb.ca.gov/forms/2012/12_1031.pdf. My guess is that you are not a CA resident, but that your wife MIGHT be, given how much time she spent there.
2) No, you do not need to file jointly in both states.
3) Yes, you can file a joint federal returns and then separate state returns if you have to. This is a major headache though because on the state returns, you have to fill in the information as if you filed separate federal returns (even though you really didn’t).
4) I’m not entirely sure about this one (see: sitting down with accountant at top of comment) but if you are filing separate state returns (as if you filed separate federal returns) then I don’t think that CA should have the right to tax your income as long as you are unambiguously a MA resident.
5) The best thing to do is likely to try as hard as possible to prove your wife is not a CA resident, and from what you’ve described I think it’s possible that she isn’t. One of the big things here is intention. If her stay in CA is temporary, then it’s likely she not a resident. If her stay is indefinite, on the other hand, CA has ground on which to force her to file as a resident. But on the other hand if her spouse, principal residence, driver’s license, etc. are all MA you might be able to prove she’s still a MA resident. This would certainly be the easiest for you. In that case you file a joint MA resident return, end of headache. But if she is a resident of CA, she’ll have to file separately there. But then according to MA she may still qualify as a resident in MA, so you’ll then want to work to prove she’s not a resident in MA so she doesn’t have to file with you.
I work and live in NY. My husband got his first job in Arizona (Feb. to April) then he was back to NY. He got his second job in Minnesota (July to Present) even though his employer is in NJ. We are going to file as MFJ and want to know how to file for each state. Do I have to file for all state and how to determine his Residential state?
Hi AK,
You need to take a look at the definitions of residency for all the states your husband was in during the year. I suspect that he will be a NY resident, though if he spends enough time in MN he could end up being a resident there as well. If my hunch is correct and he is a NY resident, then you two can file a joint return in NY and he can file nonresident returns in AZ and MN.