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 in oregon for 3 months then moved to texas. How do I file state taxes? My company that is based out of oregon. They are taxing me on my W2 as if I were still a resident i think. On the W2 it says state wages still oregon
If your employer withheld state taxes for the wrong state. Under most circumstances, you’ll have to file a nonresident return to recover the incorrectly-withheld taxes. Notify your employer right away so it doesn’t happen again!
I moved to CA in 2015 from Indiana. Sold my home located in Indiana in 2016 for $210,000.
Do I have to file taxes for Indiana State. There is no other income from Indiana other than this.
Thanks
Since you did not earn any income in Indiana, you do not have to prepare an Indiana State return. If you received a 1099-S for the sale of your home, then you will be required to report this on your federal return.
I lived in CA and earned all of my income there during 2016. I moved to OR in August and earned no income while there for the remainder of the year. I own a home in OR and paid taxes on it that I’d like to deduct. I assume I file in both CA and OR, but what do I (or if I) claim for income in OR? Thank you!
Hello Dan,
You may file a California part year resident tax return and a part year resident tax return for Oregon. As indicated, you did not receive any income in Oregon but you may deduct state and local tax on your federal return for the taxes paid to your owned property.
I have been a resident of OH for over 20 years, but left behind in PA a single family home which has been a rental property all these years. If I were to sell this property there are federal capital gains tax to be paid, but in which state would I file the capital gains regarding a state return? I understand there is reciprocal agreement between OH and PA and PA has the lower state tax rate, but unsure how the state tax filing works. Thanking you in advance.
Hello Tom,
The Reciprocal Agreement between OH and PA applies to employee compensation, stating that you pay taxes to your state of residency. You may file a non resident state return to PA for earned income from selling this property.
Hello Tax Adviser,
I worked in Texas with Company A from January 2016 to end of March 2016, thereafter I transferred with Company A to New York and worked from March 2016 to July 2016 prior to leaving and gaining employment with another Company, Company B.
I do not have to file a state income tax return in Texas however should Company A provide me with two different W2’s since I earned income in Texas and New York? Wouldn’t this lessen the blow of any NY State income tax I have to pay between Company A and Company B?
Thank you!
From the situation that you have outlined, it is dependent on the information in boxes 15-20 on your W-2s, and how you company went about in taking out taxes from your payroll to pay to your state. The income earned in NY should be only indicate the amount that you earned while working in that state, rather than the entire income amount that you earned for the year. If this is how your employer prepared your W-2s you will just need to file a part-year resident tax form for NY State. reporting the specific amount of income you earned in NY and tax withheld.