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 am a college student and my residency is in NYC but I work in NJ. I heard that if I don’t make over a certain amount during a year, I do not have to file taxes. But I now also heard I would have to file taxes for NJ and NY. What do I do ..??
Hi Gisela,
Both are true and here is why.
If you make less than a certain amount, taxes will not be withheld from your paychecks. You will be able to see on the statement that your payroll department gives you each pay period. If you do not have taxes withheld on your paychecks, then it most likely means that you are making too little (you can also check with your pay roll department if you are unsure).
Also, if someone works in NJ but are a NY resident, then that person would be required to file a resident state tax return for NY and a non-resident state tax return for NJ. These would be in addition to that person filing their federal tax return.
While living overseas and in addition to filing my US federal return, do I need to file my Michigan return and report my rental income on it as well (I rent my house there). I am reporting that rental income on my federal return. I don’t live in Michigan anymore and don’t use my house there except for renting it out. Thanks.
Hi Sammy,
For each state, there is a different set of guidelines when it comes to residency. Since you are still renting out a house although not living in the country, I suggest checking the Michigan Government website page for further information.
I recieved unemployment from Indiana, moved to California in March and began working, had to come back to Indiana in July and just started working again. Do I need to file taxes in California even though I was only there for a short time?
Hi Sheena,
This will depend if you were considered a resident of California for tax purposes during that time and if you earned an income there which had taxes withheld from your paycheck. Keep in mind, this will be reported on the W-2 that is issued by your employer each year. I suggest checking your pay statements or contacting your pay roll department to see if they are withholding CA taxes.
Hi,
My wife and I are both living in Illinois. My employer has asked me to relocate to Florida starting January 1st, 2015. My wife cannot change her job and will have to remain in Illinois. Nonetheless, her employer is fairly flexible and she can work at least 1 week a month from Florida.
What is the impact on our tax situation? Can I move my residence down to Florida (as my job will be there) and my wife still officially have her residence in Illinois? This will of course have a positive impact on our tax returns as there is no state income tax in Florida and I am making substantially more money than my wife.
Is there a problem with the IRS if we are married (happily married and no plan to get divorced!) yet we officially live in two separate states. In practice, we will try to spend as much time together as possible (like I said, my wife can work from Florida one week an month and I can work about a week a month in Illinois and we will spend weekends together anyhow). We are planning on maintaining two residences, one in Illinois and one in Florida.
Thanks,
Jo
Hi Jo,
The IRS will most likely not have an issue with this.
As a general rule, you will always be taxed in the states in which you live and physically work. However, if you receive your W-2 and only one state is listed, then you are only responsible for filing a state return with that state. As you already know, the rules differ a bit for you since there is no Florida income tax. However, you will still be taxed as a resident of Illinois. Keep in mind that you can file a federal return as married filing jointly while filing state returns as married filing separately. This may cease the confusion until you are both living in the same state.
Hello..
I moved to Kentucky November of 2013 from Pa. I have my own small masonry business (which my seasonal work ended
in October of 2013,then i moved to Kentucky the next month). I commuted to Pa. for work jobs i had lined up throughout 2014 and stayed there…sometimes with relatives,sometimes in a motel,etc.I have done no work in Kentucky yet so all my income was work
i did in Pa. Where,and what must i file?….i do have a CPA who does my taxes (in Pa) but at this time he says he is unclear on how
for me to file…..just trying to get ahead of the ballgame before tax time comes….Thanks
Hi William,
Along with your federal tax return, you will most likely need to file a part year resident tax return for Pennsylvania and a part year resident tax return for Kentucky. I do suggest checking your residency with each state since each state follows their own set of guidelines when it comes to being a resident.