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,
My husband and I lived together in Washington state until September, when he moved to Arizona. I understand that my husband should file part year in Arizona (MFS), But, since Washington and Arizona are both community property states, should he only use his income to file (pro-rata) in Arizona or should he used our combined income?
Also, since Washington does not have have income tax and uses the sales tax deduction, can we use the full year deduction (since I was in WA full year), or should we prorate the sales tax deduction for federal taxes.
Further, my husband has some stock sales prior to moving to Arizona. Can the income from these sales be excluded from his Arizona income?
Since you husband was a resident of both Washington and Arizona he will have to file an Arizona (AZ) Part Year (PY) tax return. When filing his AZ PY return he should only include the income earned in Arizona.
If your husband decides to choose the MFS filing status on his federal return he will have to take the larger of the sales tax deduction or his state tax withholding on his AZ income.
Typically stock sales are reported in the home state (the state you live in at the end of the year). You can ask your tax preparer to allocate out the income from the sale if it was received in WA.
I was an Arizona resident for 2016, I lived and worked in Phoenix from Jan-March. Briefly I moved to Oklahoma city to open up a new branch of our office, my W-2 was an Oklahoma business. In Mid August I moved BACK to Arizona as originally planned.
I was supposed to EARN money this tax season, and now both states are saying I OWE them almost $300 each state.
I can’t imagine how this is possible, I am just really lost on how to resolve this. I also understand I can file a Arizona 309 credit, I’m not sure how substantial this will be?
Given you were only in Oklahoma temporarily, you could file a Full-Year Resident AZ return and a Non-Resident OK return. Then you could receive a Credit in AZ (AZ 309 credit) for taxes you paid to OK; to avoid getting double taxed, which seems to be the case. Unfortunately I cannot gauge how substantial this credit would be since we don’t have your W-2 or tax returns to assess. This is a type of question our customer service representatives could assist you with if you were to prepare your returns with us.
Hello,
I worked half the year in Georgia and then retired. After retiring I moved to Florida, and after moving to Florida withdrew some funds from a traditional ira. Do I have to claim the the ira withdrawal to Georgia even though I was a resident of Florida at the time of withdrawal ?
Withdrawals from traditional individual retirement accounts are generally taxable on the federal level.
Since you resided part of the year in GA, your IRA withdrawal will be taxable by GA. You may be exempted from paying taxes on this income if are 62 or older or disabled. Although, the IRA withdrawal was made at the time you lived in FL and that state has no income tax, you must GA requires you to pay taxes on that income.
I am a permanent resident of California and my parents still claim me as a dependent, but I go to school and worked in Iowa how do I file my tax return and what state do I use for residency
You will have to indicate California as your resident state and Iowa as your non-resident state.
I bought a house in Ohio on December 22nd, but didn’t move from Indiana until the 1st of the year due to my job. Do i have to file any Ohio taxes?
From the information you have given, you would not have to file an OH state return. You may be able to deduct the taxes you paid on the property on your federal return.