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 lived and worked in pa until May 10, then moved to ohio for the remainder of the year. worked in both states. but i also have children involved which state do i file, and how do i claim the children. i supported my children fully til june 29th with them in my custody, then their father got them, he didnt start working til september to support them. i still partially supported them the remainder of the year as i haved them 1 weekend a month, all holiday vacations. and then living with my current bf, i am supporting him and his son and will be claiming his son on taxes. do i claim my kids thru pa and his son thru ohio? how do i file?
Hi Danny,
You will need to file a part-year resident state tax return for both Ohio and Pennsylvania. Both of these tax returns will allow you to report the duration of time that you were living and working in each state. When claiming any dependents, that will be done on your federal tax return so you will not need to worry about claiming your children on the state tax returns.
For the second half of your tax situation, it gets a little bit trickier. When parents are divorced, there is always one that is the ‘custodial parent for tax purposes‘. This has little to do with a court hearing and all to do with the IRS rule of whichever parent the child(ren) spent the majority of their nights throughout the year with. If the time was split evenly between both parents, then the custodial parent is the one with the highest adjusted gross income (AGI). Once you have figured out if you or your ex spouse can claim the dependent(s), then the dependent(s) can be claimed on that parent’s federal tax return.
I am working a 5 week contract in Maine, but have residency in TN.
My housing is given in an allowance, stated as non-taxable, through a 3rd party employment agency.
Should I be having Maine and other state taxes being withheld, even on this 35 day position?
Hi Carl,
When it comes to travelling to different states for work, it can get a bit tricky. Each state has their own guidelines for non-resident withholding. In the case of Maine, there is a specific threshold which allows you a certain amount of days to conduct business in the state as a non-resident before you are liable for state taxes. Once you hit that threshold, you are then responsible for taxes for the duration of your stay. You will need to refer the the Maine Government Website (or contact them directly) for specific guidelines since all states are slightly different.
My husband lives and works in Arizona. I moved to Texas in July 2010 and established Texas residency: bought a home, driver’s license, voter’s registration, vehicle registration, and my job is in Texas. We have been filed Married Filing Jointly with Federal IRS, and my husband has been filing Married Filing Separately in Arizona. We have received notification from Arizona that we owe back state taxes on my Texas income. The auditor at AZ DOR indicated that since Arizona is a community property state, 1/2 of my Texas income is taxable, and therefore we owe back taxes on it. Does this sound correct?. Should the tax preparation software have caught this?
Hi Patricia,
This is a rare situation, however it is one of the drawbacks to filing separate state tax returns when a community property state is involved. Ideally, the tax software should have made you aware of the special circumstance, depending on how intricate the software is. To put it simply, in a community property state, income earned by either spouse during marriage and all property bought with those earnings are considered community property that is owned equally by husband and wife. This is generally what filing a separate tax return as a married couple will avoid if you live outside of a community property state.
I live in PA and have rental property in Mississippi. Do I report the MS rental income on my PA resident return, and file a MS nonresident return?
Hi Mary,
That is exactly right. You will file a PA state resident tax return along with an MS non-resident tax return in order to report your rental income.
I am a military spouse and resident of AZ.
We currently live in Georgia .
I am working from home as an employee of a realty company in New Mexico and recently started to substitute teach here in Georgia .
Where and how should I file ? My employee packet for Georgia has me filling out a GA G-4 , so I assume thats to collect Taxes here in Georgia . Is that Correct? I am not sure who i pay them too
Hi Monica,
Seeing as you are living and physically working in Georgia, you will be liable for Georgia taxes (for both places of employment). You are only responsible for taxes in the state where you reside and the state where you physically earn an income. In your case, this state is Georgia. The GA G-4 form is similar to the federal W-4 Form in that it will provide your employer with an estimate of how much state tax to withhold from your paychecks throughout the year to cover taxes owed to the IRS and GA state. At the end of the year, you will receive a W-2 form. On this W-2 form, you will see your income earned and where taxes were withheld from. You will need to file a GA state tax return along with your federal tax return. Once you do this, you will either be issued a refund (if too much tax was withheld throughout the year) or a tax due amount (if too little tax was withheld throughout the year).