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.
Hello,
I live and work in NC, working remotely from my home for a consulting company out of NJ with clients in NYC. I am a W-2 employee, and recently I have received 2 x payments in which the employer has withheld NJ state taxes instead of the correct NC state tax. I don’t get a warm feeling from the partners ( company owners) that they know what they are doing, nor their Indian based offshore staff really understand my concern ( NJ tax is substantially more than NC, there are even more tax line items in which additional types of NJ taxes are taken out than what one would see or expect in NC).
What should I do. I have asked them to correct it, only to get a dance around that they will have their payroll people look at it?
If they don’t fix it, is there a way I can contact the IRS, explain which state I really only live and work in and that I don’t even step foot in NJ, and then have them adjust, and allow me to file with my state without the employer doing anything? Basically, Assume that the employer in this case either doesnt know what to do or wont do anything to fix it.
Thanks,
Raanan
Hi RJ,
If they are taking out NJ taxes and based in NJ, that is correct. If you work in New Jersey and live in another state, you need to pay taxes on the income earned from sources in that state (unless you live in Pennsylvania). You’ll have to file a resident return for NC and a non-resident return for NJ. As a non-resident of NJ, you’ll only be taxed on income earned there.
On your resident return, you’ll list all sources of income, including what you earned out of state (in NJ). On your non-resident return for NJ, you’ll list only income you made from that state. In most cases, your resident state, will allow you to claim a tax credit for taxes you paid to your non-resident state (NJ).
Hi. My name is Jesus. My question is, if I moved from another state to Arizona, do I get money back from what I spent to get here on my taxes? If so, what form do I need? Thank you.
Hi Jesus,
If you moved to start a new job, or to seek work in the new city, you may be able to deduct the cost of your moving expenses from your income (as long as your employer didn’t already reimburse you). These expenses also include the costs involved for packing and shipping your goods along with your travel and lodging costs.
I would suggest looking at “Form 3903, Moving Expenses”, to see if you can.
Also, if you moved during the tax year, when you file your taxes, be sure to file part-year resident state returns for Arizona and the other state you lived in.
We are SC residents. My husband’s new job requires him to travel so he ended the year working in GA. The company takes out SC taxes. Does he need to file a GA return since nothing was paid there?
It depends. If your husband’s company takes out GA taxes, he will file state returns; a resident return for SC and a non-resident return for GA. Non-residents are only taxes on the income they earned from sources in that state. If only SC taxes are taken out, only a resident return for SC is needed.
Hi Advisor,
Me and my wife live in NY. I had couple of questions regarding tax return:
1. My wife’s company is located in CT but she works at the client location in NJ. Her company is withholding CT state tax. Is it correct, or should they withhold NJ state tax?
2. I’m working in NY and resident of NY, so my state tax filing is pretty straightforward. Me and my wife have been withholding tax under the category “”Married but withholding at a higher rate”. I just wanted to know which way is better for us to file the tax returns – Joint or Individual?
Thanks!
Hi there,
1. If your wife’s company is located in CT, then it’s most likely correct that they are withholding CT tax.
2. I would suggest filing a joint federal tax return and separate state tax returns. Considering your wife works in a different state than where the two of you live, it would be a bit complicated to file your state returns together.
Also, to help when filing state taxes…When your wife files her state return, she will file a resident return for NY and a non-resident return for CT. Non-residents are only taxed on the income received from sources in that state.
Hello,
We own a house in PA, however we moved to VA in June. My husband and I both worked in PA until then and now both currenlty work in VA. Our PA home is up for sale and we are renting in VA. What specifics do I need to know to file? Where do we file, and how are my home taxes/interest effected?
Thanks!
Hi Adrienne,
Great question. Filing taxes can get confusing, especially if you moved during the year! Anyways, if you moved during 2013 (I’m assuming you did), then when filing your taxes this year for 2013, you will file a couple state returns (along with your federal, of course).
File a part-year resident return for both PA and VA. Part year returns are usually filled out based on your total income for both states and then your tax liability is pro-rated based on how much income is made in each state.
PA has a flat rate income tax of 3.07% on individual income while VA’s income tax is 2% on first $3000 of income, 3% on income between $3,001 and $5,000 , 5% on income between $5,001 and $17,000 and ultimately, 5.75% on income above $17,000. Which basically means you’ll end up paying more in income taxes now that you work (and live) on your income aver $5000.
Next year when filing your 2014 taxes, you will most likely file a nonresident return for PA (reporting income earned on your house sold, etc) and a resident return for VA. In the years following you selling your PA house, you’ll simply file a resident return for VA (and federal return). In either case, you can do so online with RapidTax and our team of tax experts are available for any questions you may have while filing.
Best of luck!