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.
Hi Tax Advisor,
I must express my Thanks to you for the great advise you provide on this page. Keep up the excellent work!
Let me explain my situation:
1. I work from home since last two years. On January 10, 2013, I moved from IL to SC. However, I continued my “Work From Home” employment from SC. My employer still had my IL residence address on file throughout the year 2013. Hence my employer withheld IL Tax for the entire year. In short, I stayed in IL only for 10 days in 2013, but all my tax was withheld with IL and not with SC.
2. My wife also moved from IL to SC on the same date with me. She got a transfer in her employment from IL to SC. She started working in SC (physical office), but her employer also continued to withhold only IL taxes for her. That means, she also stayed in IL only for 10 days but all her taxes were withheld with IL state only.
3. I started a second low-paying (part time) job in SC and worked for 5 months. My employer (of second job) withheld taxes in SC (naturally!) for the income earned in that job. This way I do have some taxes withheld with SC state too, not significant though!
How do I go ahead with filing the taxes? I’d prefer filing joint return since the residence for me and my wife has been same throughout the year.
Thanks in advance!
Hi MG,
Thanks for the compliment, it means so much!
Anyways, regarding your situation….
1. If IL taxes were withheld, I suggest filing a non-resident return for IL and a resident return for SC and be sure to report the income.
2. If your wife’s company is based out of IL, it might explain why they are withholding IL taxes, rather than SC taxes. If not, I suggest doing the same for your wife’s taxes (state non-resident return for IL and a resident return for SC).
3. When filing your resident state return for SC, be sure to include your second job’s income.
Also, I would suggest talking to your employer along with your wife’s employer regarding the state taxes being taken out. If both are SC companies, only SC taxes should be taken out (not IL taxes). If this is changed, you will only have to file your resident return for SC next year.
You can file married filing jointly. If filing on our website, our application gives you the option to add states which you earned income from (other than your resident state). It’s pretty straightforward.
Best of luck!
I rent a home in Illinois and work in Illinois, however I own a home in California that I rent out to tenants. Do I file taxes in both states?thank you
Hi,
Yes, you will file a resident return for Illinois and a non-resident return in California. As a non-resident, you will only be taxed on income earned from CA sources.
I live in Tennessee I’m thinking of taking a job in Virginia Tennessee doesn’t have state taxes so I’m a little confused about what I would pay next year Virginia has state taxes if I understand this right I wouldfile non resident for Virginia state taxand then my regular fed is that correctand would I still be able to use Tax Act or would I have to get a professional to do it thank you
Hi Cheryl,
Yes, you would file a non-resident return for Virginia. Your income from Virginia sources would be taxed. I am not sure how Tax Act works regarding non-resident returns. However, our website RapidTax.com allows you to do this while filing your taxes.
Hey, my wife and i lived and worked in MS from the beginning of the year until the first week of may that we moved to texas. I was deducted state taxes for my job up until that first week of may. I still work remotely for the same company but when i received my w-2 form it only shows all my income was earned in texas. What should i do? It doesnt even show the deductions me to ms state taxes at the beginning of the year. Thank in advance.
Hi Al,
You will have to file part year resident state return for MS. Texas does not have an income tax so you will not have to worry about filing a state return for the tax free state.
If your income is from a MS source, you should have been continued to be taxed MS taxes after your move. Non-residents are taxed only on income received in that state. I would check with your employer and ask why your W-2 form doesn’t show the MS taxes you had taken out until May, as it should.
I used to live in NJ and moved permanently to Texas during middle of 2013. My employer is continue to deduct taxes for NJ. Since Texas is non tax state, how do I file and get back the taxes i paid to NJ for the second half of 2013. Though i have update my Texas address through W4 form, my employer is still keeping NJ as my tax state and deducting the taxes for 2014. I live(own house) and work(mostly work from home) from Texas. Are there any issues if II don’t update the tax state to Texas.
Hi Milu,
If your income is from a NJ source (if your still working for that NJ company, while living in Texas) you still have to pay non-resident taxes. That means, the income received from NJ sources will be taxed. Your employer is correct to continue to take out NJ taxes. That means, when filing your taxes you will file a non-resident state return for NJ.