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 am a NH resident but work in ME. I worked for 6-mos in CT on a temporary assignment. I continued to have ME taxes taken out. How can I recoup this money from ME at tax time.
Hi Dave,
Considering you live in NH, you will have to fill out a resident return for NH (which you may already know). You will have to file a nonresident return for the state(s) you work in. This means, you will have to file a nonresident return for ME and CT, if the 1099s are from those two states. A nonresident return only taxes you on the money you earned in that state.
We actually have an article about this on our website. This article will help give an in-depth answer to your question. Here is the link; http://www.rapidtax.com/blog/state-income-tax-living-in-one-state-working-in-another/
Hello,
My wife and I are getting ready to build a house in WI. Our principal residence is in IL. We also own a small condo in IL that is presently occupied by our daughter and she pays the assessments. When the house is completed, we intend to sell the house in IL. My wife will move full time to the WI property and I will move into the IL condo to finish my working career. That is expected to be 10 – 12 years. We expect to see each other once or twice a month in either location. I think I would prefer to maintain my principal residence in IL because I believe the income taxes are substantially lower and I would like to vote in IL. My wife is likely to get a WI driver’s license and do other things to make it clear that this is her permanent residence. At tax time, where do we file? Does the answer differ if she is working or not working? Thanks.
Hi Rich,
If your residency is in IL and you are working in IL you will just need to file taxes for IL. However, if you or your wife are living in one state and working in another state you would have to file a resident return in the state where you live and a nonresident return in the state where you work. We actually have an article about this specific topic. It will help answer some of your questions. Here is the link; http://www.rapidtax.com/blog/state-income-tax-living-in-one-state-working-in-another/
Also, don’t forget, the year that you move residency from WI to IL you will most likely have to fill out a part-year resident return. This is for people who moved during the tax year. This means, you need to file a part-year resident return in the first state and a part-year resident return in the second state.
Hope that helps!
Hi
I currently live in CT but will be moving to MA nexy year. I have no earned income. All my income is from investments(either interest or dividends) or from withdrawals from my IRA. Will I need to file CT return next year or only MA? THANKS
Hi Judy,
It will depend on the CT Department of Revenue regulations with their state taxes. Here is the link to their website concerning this topic; http://www.ct.gov/drs/cwp/view.asp?A=1512&Q=269554
Hope that helps!
Hi,
I work in RI but live in CT. Currently I am having both taxes taken out of my paycheck (turns out they are much higher in RI!). Is there a rough percentage of the RI taxes I can assume to be getting refunded? Can I plan on getting all of the RI taxes back during taxtime if it’s filed properly? Or is it usually closer to 50%? Thanks!!
Hi Cassandra,
You will most likely owe something in Rhode Island. It’s possible you could get everything back but I think it’s very unlikely, especially if you’re earning a decent amount of money. I can’t say what percentage you should expect to get back because I have no idea about how much is being withheld, what your financial situation is, etc. I suggest visiting a local tax agent if you want a really accurate picture of how much you’ll be getting back from each state.
P.S MOVED TO NC NOV 1ST