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 in Arizona but I receive a paycheck from a company in Ohio for being a consultant. I do not live or physically work in Ohio but the check I receive has Ohio state taxes taken out. My question is, am I liable for Ohio School District Taxes if I do not physically live or work in Ohio?
Thank you for any advice
Matthew
Hi Matthew,
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.
Hello.
My boyfriend is thinking about coming to stay with me at my house this summer in New Jersey but he lives in Tennessee. He wants to work up here for about three months, so what should we do? I am pretty confused with all of this haha thank you!
Hi Lois,
Every state has different requirements for who qualifies as a resident for tax purposes. You will first need to check with the state of New Jersey tax authority website to see if your boyfriend will be considered a resident for tax purposes for the short time that he will be staying with you. If New Jersey does consider him to be a resident for those three months, he will file a part-year resident return for New Jersey. If he is not considered a resident of NJ for tax purposes, he will need to file a nonresident tax return for New Jersey. This nonresident return will only tax you on the income you earned in that state.
Hi,
Asking this question on behalf of my girlfriend. So I’ve lived in NYC for over 2 years now, and she just moved up to NY with me in January. She continued to work for the same company she did in FL until about 3-4 weeks ago when she started a new job. Well the new job is in CT. So…in reading other postings, I understand that she’ll need to fill out a normal resident return for NY and then a non-resident return for CT (as well as a city return because we’re in Queens, one of the NYC boroughs..ugh!), but my question is what about the fact that the company she ACTUALLY works for is in RI. Long story short, she was hired to work on a temp project for a year or so at said company based in CT (with the potential to eventually be hired on with them), but through a staffing agency that is headquartered in RI. So while she physically works in CT for one company, she is technically employed and paid by another company in RI.
All that make sense?? So does she just need to monitor and make sure that the company she technically works for (the staffing agency in RI) is accurately deducting taxes under CT (the state she’s working in)? If so, how would she go about doing that?
And what’s the whole credit piece I’m reading? I’m not sure I understand that wholeheartedly. Any info/input would be GREATLY appreciated on all of this. As you might assume, it’s quite the complicated matter for those of us who didn’t study tax law in college. 🙂 Thank you so much.
-Cody
Hi Cody,
As a general rule, you will be taxed in the state that you live and the state that you physically work and earn an income. You should not be taxed in a state if your company is based there but you don’t work there. The exception is if you own the company, in which it’s an entirely different tax situation altogether and you could very well be taxed in that state as well. Therefore, you’re girlfriend should only be taxed in Connecticut since it seems like she will be working there for the tax year. If Rhode Island is withholding taxes as well, she should contact her employer (someone in Human Resources or the Payroll department).
The paragraph of this article mentioning claiming a credit refers to being double-taxed by two states.
Hello
I have been working overseas for the past 28 years, diligently filing my Federal income tax returns.
In year 2013 i invested in some hotel properties in California and North Carolina which generated some depreciation and modest profit sharing, less than $10k annually per hotel.
I received K-1 statements for each hotel.
Do I still need to file non-resident State income tax returns for California and North Carolina?
Thank you for any advice/guidance
John
Hi John,
An overseas property owner’s overall tax liability may be different than that of a US resident. This will depend upon your resident country’s tax treaty with the United States, if any. I would suggest doing a bit of research online and possibly contacting your overseas residency office to get a better understanding of their specific rules and regulations.
Hello. My question is, will I need to file a Georgia return in this situation. I don’t know how residency is defined. My husband resides in TN, but I spend most of my time in GA getting my house ready to sell. I’m not employed. Will I need to file a GA return on a withdrawal from my IRA?
Hi Teri,
I would take a look at the residency rules and regulations for Georgia and Tennessee since each state is slightly different.