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.
Thanks, Tax Advisor. I would not be doing any work for any Massachusetts entity (what the tax site refers to as “Massachusetts source income); all of my income will be from a Florida corporation, although I would physically be sitting at a computer located in a home in Massachusetts.
I will ask a MA tax advisor. It does seem complicated! Here’s what I was able to glean from the MA site:
Massachusetts tax law distinguishes between residents and nonresidents. Residents are generally taxed on all of their income; nonresidents are only taxed on their Massachusetts source income. As a Massachusetts resident or part-year resident, you are required to file an income tax return if your gross income from all sources (received inside and/or outside of Massachusetts) exceeds the filing requirement threshold of $8,000. As a nonresident, you are required to file an income tax return with Massachusetts if your Massachusetts source income exceeds the smaller of $8,000 or your prorated personal exemption (the amount of your personal exemption multiplied by the ratio of your Massachusetts income to your total income).
How do I determine my residency status?
Massachusetts tax law defines residency status as follows:
You are a Full-year Resident if your legal residence (domicile) was in Massachusetts for the entire taxable year or if you maintained a permanent place of abode in Massachusetts and spent in the aggregate more than 183 days of the taxable year in Massachusetts, including days spent partially in and partially out of Massachusetts. Note: A day in Massachusetts while on active duty in the United States Armed Forces is not counted. If you fit this description, you should file Form 1, Massachusetts Resident Income Tax Return. For more information, please see TIR 95-7.
You are a nonresident if you are not a resident or inhabitant of Massachusetts as defined above. If you received Massachusetts source income during the taxable year (e.g., from a job in Massachusetts), you must report such income by filing Form 1-NR/PY, Massachusetts Nonresident/Part-year Resident Income Tax Return.
You are a Part-year Resident if you moved to Massachusetts during the taxable year and became a resident, or you terminated your status as a Massachusetts resident during the taxable year to establish a residence outside the state. Part-year residents must file Form 1-NR/PY, Massachusetts Nonresident/Part-year Resident Income Tax Return.
If you were both a Massachusetts resident for part of the year and a nonresident with Massachusetts source income for another part of the year, you must file Form 1-NR/PY and complete Schedule R/NR to calculate the portion of income earned while a part-year resident and the portion of income earned while a nonresident.
Married couples who do not have the same period of residency during the tax year cannot file a joint return.
A more in-depth explanation is available in the Residency Status section of a Guide to Taxes.
I maintain my homestead in Florida, earn all my wages from a Florida corporation, and am a telecommuter, meaning I can work from anywhere. My Massachusetts resident beau wants me to marry him and live at his Mass residence more than 183 (six months) of the year. From looking at the Mass tax website, it looks like I would have to pay Mass income tax on my Florida-earned income if I stay in Mass more than 183 aggregate days, whereas if I live in Mass for less than six months out of the year, I get the benefit of not having to pay taxes because Florida has no income tax. My beau loves snow, but I don’t want to have to pay for it! Should I ask a Massachusetts tax advisor, or can you help? Thank you!
Hi Snowbird,
It probably would be a good idea for you to talk to a Massachusetts tax adviser, but unfortunately I think if you do any work in Massachusetts you will probably be liable for MA income tax. It sounds like you’ve already investigated the rules governing residency. If you are considered a MA resident, then you will have to pay tax on ALL of your income. This will likely be a lot of money, considering that in FL you owe nothing. Now technically, even if you don’t qualify as a resident, you should still pay taxes as a nonresident on all the income you earn while in MA (how MA will know that you are working there when you are basically working from home is another matter – I’m just telling you what you will technically be obligated to do). So basically, even if you lived there for 182 days, you would still have to file as a nonresident for the income you earned during those 182 days. This is far preferable to being taxed as a resident there, but also worse than getting off tax-free in Florida.
I have the same problem I am a resident of Florida but work in Ohio ten months out of the year.What tax law am I breaking?I pay my tax in Ohio and no tax breaks for the house that I live in Ohio.I am confused.
Hello Jim,
Since Florida does not have state income tax, you will only be taxed mainly from your non-resident state for any income earned in Ohio as well as any property you have located in Ohio.
Seeking update on message sent on 7/23/13 @ 11:53 A.M. Thank you.
Hi Fred,
We only do personal income taxes here. If you want more information about property taxes, etc. I suggest you check with the state tax authority.
Hi! This is my first time to do tax because i never worked before. I lived in New Jersey then transferred all my address to Georgia last year because I got married. But now, I came back in New Jersey and found a work in Bronx, New York. All my ID’s address are in Georgia but when I applied in my work in NY, I put my jersey address since i’m currently staying here. So now I’m confuse which one to put. does it mean I have three states to file? Please help!
Hi Joyce,
You need to figure out where you are a resident (either Georgia or New Jersey). If you are still a resident of Georgia, then you will have to file a resident return in GA and a nonresident return in New York. If it turns out you are now a resident of New Jersey, you will have to file a part-year resident return in GA, a part-year resident return in NJ, and a nonresident return in NY.
If your permanent residence is California, and you have rental property in Nevada (non-tax state), will the income from the rental property be taxed in California?
Hi Al,
If you are a resident of California, CA taxes ALL your income, no matter where it comes from or where it was earned.