Two State Tax Returns: Live in One State, Work in Another

August 26, 2011 by Jan Roberg
Filed under: Missouri Tax Tips, State Taxes 

Photo by Jimmy Emerson on Flickr.com

I get a lot of questions from people about working in one state and living in another. That’s pretty common here in Saint Louis where we have lots of folks living in Illinois that come over the river to work here and vice versa. Today I’m going to talk about doing your tax return when you have two states to deal with.

First, the technical words you need to know:

The state you live in is called your resident state. There will probably be a check box or something like that in your computer program. If you live in Illinois, then your resident state is Illinois.

The state you work in (but don’t live in) is called the non-resident state. In this example, Missouri is the non-resident state.

Tax liability: This is not your refund or the amount of money that was withheld on your W2. Tax liability is a number computed when you prepare the state tax return. It will say “tax liability” on your state income tax form. This is the dollar amount the state says that you owe them for taxes before they take into account what you’ve already paid through your withholding or estimated payments.

That’s not so hard, right? Next, you need to make sure you do your tax returns in the right order:

Always do the federal return first. Make sure that it’s done and that it’s right before you start your state returns. If you finish, and then go back in to make changes to the federal, you’ll have to go back and double check everything on the state returns and that can be a pain in the back, so finish the federal first.

Next, do the non-resident state—that’s the state you work in. That one’s easiest. You only pay tax in that state for the wages you earn in that state. Usually, when preparing a non-resident state return, there will be a check box that says “non-resident” somewhere in your software. Be sure to check it. You’ll want to make note of your “tax liability” for the non-resident state. You’ll need that number for your resident state return.

After you’ve finished the non-resident state, then you can prepare your resident state return. You resident state is going to tax all of your income (including the wages you earned in the other state.) The resident state will include your wages, interest, dividends, stock trades, retirement income, and basically everything else that’s taxable.

Things to know about the resident state return:

Even though you pay tax on all of the income you earn to your resident state, you will get a credit for taxes paid to another state. For example: using our Illinois/Missouri return again—since you paid income tax to Missouri for the wages you earned while working there, Illinois will give you a credit for those taxes paid so you won’t end up having to pay twice for working in another state.

The form you need to complete will have different names depending on the state, but it will basically be called a Credit for Taxes Paid to Another State. Sometimes it will be listed as an NR Credit. Depending on which software you use, you might have to dig for it. Some software programs are really easy and it will just pop up automatically when it recognizes that you have multiple states.

Remember the tax liability number I told you to remember? Well that’s going to go on your NR Credit form. Some software is really good at automatically plugging it in for you. In some other programs, you’ll have to manually enter it. The important thing is that you know that number needs to be there and that you know to look for it.

I’m getting a really big refund from my resident state, can that be right? Most likely not. When you see an unusually large state refund, it’s always a good idea to take a closer look. Check to make sure that the income numbers match up to the federal return and that the Credit for Taxes paid to another state was computed properly. It’s rare to get a big refund to your resident state unless you’ve had some other income that had withholding. The credit for taxes paid to another state usually will almost never be more than what you would have paid for taxes in your own state.

I’m showing that I owe a whole lot of money to my home state, can that be right? Maybe yes, but maybe no. The first thing you want to check is that you’ve taken your credit for taxes paid to another state. That’s the most common problem when you owe a lot. Other factors could be working in a no-tax state while you’re living in a taxing state. For example, let’s say you live in Louisianna but work across the border in Texas. You won’t pay taxes in Texas so there’ll be no credit for taxes paid there. In a case like that, you’ll definitely owe. Also, you could have a big difference because the states have different tax rates. For example: Missouri’s tax rate used to be twice as much as Illinois. If you lived in Missouri and worked in Illinois (opposite of our example earlier), you’d still owe Missouri about as much again as what you paid Illinois. (Now the rates are much closer, but people who live in Missouri and work in Illinois will still wind up owing extra for their Missouri taxes.)

What if I live in a reciprocal state? Some states have arrangements with their neighboring states to share tax information and tax revenues. In a situation like that, you’ll just pay taxes in your home state. The states will actually sort out who gets how much of your tax money. Usually, it’s simply a matter of checking the “reciprocal state” button in the software.
For most people, if your federal return is fairly simple, preparing two states is not that difficult. Use a good software program, follow these directions, and you should be fine.

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Comments

149 Comments on Two State Tax Returns: Live in One State, Work in Another

  1. Seth Swanson on Sat, 4th Feb 2012 9:18 am
  2. Hi ive just read the page about two state tax returns and I fully understand it however i am having a problem with my return. i am doing the basic form on TurboTax and although i live in Illinois, I work in missouri. I realize Misouri has slightly higher state taxes however i owe illinois $500 for some reason. i cant figure out the problem. im pretty sure TurboTax applied the credit for taxes from Missouri and illinois still said that I owed 500. this doesnt make sense to me because last year i made about 15,000 less (about the only difference) but didnt owe a dime to Illinois?! I did my taxes in the federal, nonresident, resident order so i dont think that is my problem. Could this be right or should i start over? Something may be wrong but I cant figure out what. Maybe i should contact TurboTax via web or phone? your help would be greatly appreciated, even if you could just point me in the right direction. This has been the most easily understood and thorough page i have come across for my issue. Thanks, Seth US

  3. Admin Roberg on Sat, 4th Feb 2012 2:22 pm
  4. Ah Seth,
    Gee thanks. You’re making me blush. Okay, back to business.
    Here’s one possible problem: Illinois changed it’s tax rates–so before, when your Missouri taxes easily covered Illinois tax, it’s not as easy anymore. Instead of being 6% in Missouri to 3% in Illinois, now it’s 5% in Illinois. Illinois doesn’t get all of the same deductions that Missouri does so that could be where the problem is.
    Another area that could be causing the 500 difference is capital gains or investment income. If you received money from a 401(k) or sold some stock–those things are all taxable to Illinois, but there’s usually no state withholding. So that would be another thing to look at.
    If neither of those issues are solving the problem, I’d try the free Turbo Tax hotline. Those people really are trained and usually good at what they do. If that doesn’t help, I can look at your return (but I charge a fee.) I always like to go for the free options first.
    Good luck and thanks for the positive feedback.

  5. Kim on Sun, 12th Feb 2012 4:02 am
  6. I am getting ready to file my taxes for the first time after moving to a new state, but remaining at my job in my previous state. I now live in Indiana, but work in Illinois where I just moved from. I lived at my home in Illinois (which I still own) for 10.5 months last year. I moved to Indiana (where I bought my current home) and lived here for 1.5 months last year. Trying to figure out how this will work to file my taxes for 2011.

    I also work from home, still doing my job from Illinois, from my Indiana house. This is very confusing to me. Is there an easy way to figure this for filing my taxes on my own on Turbo tax? Any assistance would be greatly appreciated.

  7. Admin Roberg on Sun, 12th Feb 2012 3:57 pm
  8. Hey Kim,
    Your type of return is one of the worst kind. You might need some professional help, but let me give you the easy fixes first.

    In a perfect situation–you would have 2 part year returns and your Indiana would be a part year return with a credit for taxes paid to another state. But it won’t work. There’s too many issues there for the software to handle.

    So–option one: file an Indiana resident tax return showing a credit for taxes paid to Illinois. And an Illinois non-resident tax return. This isn’t cheating, everybody is getting their fair share of the money.

    Option two: file a part year Indiana return for the 1.5 months you lived there, and a part year Illinois return for the 10.5 months you lived there. You’ll apportion your income and pay tax to Indiana but you should get a refund from Illinois if you’ve been withholding properly. Once again, it’s not cheating, everybody will get their fair share of tax money.

    If you get much of a difference in the numbers, I’d go with whichever gives you the most money back (or pays in the least amount.) I’m guessing the answers should be fairly close but it’s not always that way.

    Basically, because both Indiana and Illinois have income tax–either option should turn out fine. If you had been in a non-tax state–then there would be a different issue and you’d have a problem, but I think you can handle this okay by yourself. Good luck.

  9. Admin Roberg on Sun, 12th Feb 2012 3:58 pm
  10. PS to Kim:
    Did you have to say Turbo Tax?

  11. Jonathan on Thu, 16th Feb 2012 3:11 am
  12. Hey there,

    My name is Jon, and I live in RI. Last year I made about $40,000 as a teacher last year, and $6,000 through an outreach program in RI. I used the H&R Block computer program and it says I am being taxed on almost $24,000 more than what I made in RI. Now it says I owe RI almost $900 dollars. Do you think I may have done something wrong? Your time and help are greatly appreciated. Thank you so much.

    - Jon

  13. Admin Roberg on Fri, 17th Feb 2012 3:16 am
  14. Hey Jonathan,
    So you live and work in Rhode Island. You made $46,000 between teaching and outreach. But on your Rhode Island tax return it says you made $70,000? Am I understanding your question? Is there another state or more income involved elsewhere? Sorry, I need some more information.

  15. Karen on Tue, 21st Feb 2012 2:38 pm
  16. I have lived in Illinois and worked in Missouri my whole life. This is the first year that I will have to pay Illinois $780. I am assuming from the tax increase last year. How can I avoid this happening next year. Should I have more MO taxes taken out or do IL-W-4 for Illinois and if so how much?

  17. Admin Roberg on Thu, 23rd Feb 2012 3:22 am
  18. Hey Karen,
    You and a whole bunch of other people wound up owing this year. First, it won’t do you any good to withhold more in Missouri–you’ll just get a refund of the overpayment and still have to pay Illinois.
    If your employer will withhold for Illinois, that would be great–but many employer’s won’t.
    Most likely, you’ll need to make estimated tax payments to Illinois every quarter. I’d guess $200. You can probably get preprinted payment coupons out of your computer software. If not, they have them here: http://www.revenue.state.il.us/taxforms/incmcurrentyear/individual/il-1040-es.pdf

  19. JC on Sun, 26th Feb 2012 1:04 am
  20. First, thanks for all of the useful info! :)
    I have been working on my tax return and had a lot of consulting work through the past year. With my income and my husbands, we are $4000 over the 139,500 limit, which throws us into a much higher tax bracket. In your opinion, would it be worth it to go through and try to file married filing separately so that we are each in a lower bracket? Thanks for any advice/info you can provide.
    JC

  21. Admin Roberg on Sun, 26th Feb 2012 4:06 am
  22. @ Jacquelyn,
    My gut reaction is no! Don’t do that. But just to be safe–just try running the numbers both ways and see which works better. If you’re doing your taxes yourself–usually there’s a button you can switch to split your returns and see what happens. Usually, Married filing jointly is better than Married filing separately for tax purpsoes–but sometimes the difference isn’t much on the federal but it can be a big difference in the states. Try it and see.

  23. Karthik on Sun, 1st Apr 2012 10:00 am
  24. hello

    I live in Illinois and work in the St.Louis City. I pay 1% St.Louis city TAX. is it possible to take credit for the City tax i pay in my Illinois return.

  25. Admin Roberg on Wed, 4th Apr 2012 9:36 pm
  26. Hi Karthik,
    No but you can take credit for it on the schedule A of your federal return.

  27. Rebecca on Sat, 7th Apr 2012 12:16 am
  28. My husband and I live in Missouri and he works in KS. There were no taxes to Missouri taken out of his check. Im not sure if we qualify for the credit for taxes paid to another state. My gut tells me no, but it makes a huge difference between owing or not in MO.

  29. Admin Roberg on Sun, 8th Apr 2012 2:17 am
  30. Hey Rebecca,
    You will file a Kansas non-resident return and a Missouri resident return. After you prepare the Kansas tax return, you will use the tax liability to Kansas as the number you put on the Missouri credit for taxes paid to another state. You’ll owe much less to Missouri if you take the credit and YES! you should.

  31. Roscoe on Tue, 10th Jul 2012 7:09 pm
  32. Howdy. I live in IL and work in MO as well. Appears I owe due to the recent tax hike in IL unfortunately. Let me ask this. The city of St Louis, MO also levies a 1% earning tax against my income. Comes right out of my check. Can this be used as a credit against my IL tax burden? Thx.

  33. Admin Roberg on Wed, 11th Jul 2012 8:39 pm
  34. Howdy Roscoe,
    You know, that’s a really good question because if you do it in my tax software you only get the credit for your Missouri taxes. But, if you read the instructions on the Illinois website it says that you can use city taxes as a credit against your Illinois tax. Here’s the link, you’ll want to scroll down to page 4: http://www.revenue.state.il.us/TaxForms/IncmCurrentYear/Individual/Schedule-CR.pdf

    So, if you’re doing it on your own–you might have to manually input the city tax to get the credit. I’d complete a St Louis city tax return (even though you’re not required to file if you’ve paid your 1%) because you’re going to want to attach it to your Illinois return to prove you paid the city tax. (Or at least have a copy handy if you efile so you can mail it if they ask for it.)

    Thanks. That was a really good question and I learned something. Now I’ve got to go back and look at some returns to see if I can get some folks some money back!

  35. Kevin on Sat, 8th Sep 2012 2:18 am
  36. My company is in Illinois, and I am a salesman with all customers I work with in Indiana. I reside in Indiana, and work from a home office. The only time I would be in IL is for company training meetings a few times per year, and I perform no other job functions in Illinois. My employer has an Indiana State ID and currently that is the only state that taxes are being withheld from. Would I need to also file a return with Illinois as well in this case?

  37. Admin Roberg on Sat, 8th Sep 2012 11:37 am
  38. Hi Kevin,
    In your case, I would only file an Indiana tax return. It’s not like you really work in Illinois, you just occassionally take a business trip to Illinois. If everyone who took business trips to other states had to file those state tax returns I’d be pulling my hair out just trying to file my own. (My husband’s been traveling a lot this year.) You’re fine just the way you are.

  39. Kevin on Tue, 25th Sep 2012 4:47 pm
  40. Hi,
    Thanks for you information on this subject. I live in MN and work 4 days a week typically in IL. I am a W2 employee.
    Let’s assume for simplicity that a work 4 days a week each and every week in IL for 52 weeks of the year.
    Should my apportionment factor for IL be 4/5ths of my income or 4/7ths? Is there flexibility to choose? If MN ha a lower rate then I’d want to apportion more income to MN for example.

    Many thanks

    Kevin

  41. Admin Roberg on Tue, 25th Sep 2012 5:19 pm
  42. Hi Kevin,
    It’s actually even easier than that. You will file a Minnesota tax return as a resident. You will also file an Illinois tax return as a non resident. Your employer will apportion your income if there is any apportionment that needs to be done.

    You will pay the Illinois tax on the income you earn in Illinois and take a credit for it against your Minnesota state income tax. Minnesota gets to tax your income no matter where you earn it because that’s where you live.

    Any income you earn from dividends, or interest will be Minnesota income.

    I hope that helps.

  43. Brenda on Mon, 22nd Oct 2012 3:31 pm
  44. I live in Indiana with my employer in Illinois. Up until January 15th, 2012, they withheld both Illinois and Indiana state tax. This year they stopped. Did a law change or am I going to be in big trouble this year?

  45. Admin Roberg on Wed, 24th Oct 2012 9:14 pm
  46. Hi Brenda,
    I don’t think you’ll be in trouble. What will have to do is that you will file as an Indiana resident and an Illinois non-resident. There is no reciprocity between those two states so you will claim a credit in Indiana for taxes that you paid to Illinois.
    I hope they withheld Illinois taxes. If they didn’t withhold anything, you’ll wind up having to pay.
    The only law that changed is that Illinois taxes are now higher. It might be that the higher taxes will cover all of your Indiana tax. I really can’t tell without looking at it, that’s just a guess.

  47. Michelle on Mon, 5th Nov 2012 1:22 pm
  48. I live in NC but work in IL. I have been making estimated payments to IL and have have no states taxes withheld. Will I have to file a state return for NC since I’m already paying my home state estimated payments?

  49. Admin Roberg on Mon, 5th Nov 2012 5:27 pm
  50. Hi Michelle,
    You live in North Carolina and work in Illinois, right? And you have had no state taxes withheld but you are paying esitmated taxes, right?

    You will still have to file tax returns for both Illinois and North Carolina, because you live in one state and work in another.

    Now, it’s not unheard of to live that far away from your job. (I have a friend who lived in New Mexico and worked in Vermont–what a commute!) But, it is a little unusual, so I’m going to ask you some questions, okay?

    First–are you physically working in Illinois? Or are you living in NC and getting paid by an Illinois company? If you are not setting foot in Illinois, then no Illinois taxes.

    But let’s say you travel to Illinois to work, and go home occasionally because you really do work in Illinois and live in North Carolina–is this a temporary situation? Or is it long term? I ask because you may qualify for some deductions if this is temporary.

    Why isn’t your company withholding state taxes? Are they withholding federal? That doesn’t make sense.It happens, just thought I’d ask. They’re things that make me go “Hmmmm—I wonder if there’s something there to reduce her taxes.” (I know, you were just thinking I’m nosey–I’m that too, but really it’s all about reducing your taxes.)

    But bottom line–if you live in one state and work in another, you will file tax returns for both states. Because you live in North Carolina and work In Illinois, you will get a credit on you NC taxes for the taxes that you paid to Illinois.

  51. Pat Dill on Sat, 17th Nov 2012 10:39 am
  52. Your information here is very helpful! I have a question on two sets of living expenses for two states at the same time.
    I have living expenses in MN and IL.
    I am a resident of MN.
    Jan – Sep: I worked as a W2 employee in MN
    Jul – Dec: I am working as a W2 employee in IL
    (Jul-Sep, overlap – I worked 40 hours/week in IL AND worked 40 hours/week remotely for the MN job)
    (Oct – Dec: I work solely at the IL job, but am still a resident of MN.)
    I drive back to MN approximately every three weeks (in MN for 2-3 days).
    I pay rent on my townhome in MN, and pay hotel lodging (and food, etc.) in IL.
    What kind of deductions can I take for having living expenses in two states?

    Thanks!
    Pat

  53. Admin Roberg on Sat, 17th Nov 2012 3:02 pm
  54. Hi Pat,
    You will file as a Minnesota resident and an Illinois non-resident.
    Is your work in Illinois temporary? Are you expected to be done with your Illinois job within one year? If yes, then you may deduct your temporary living arrangement expenses which would include:
    rent, utilities, travel, and meals whild traveling in Illinois. You may not deduct any living expenses for Minnesota.
    You’ll do this on form 2106 and it gets reported on your Schedule A. Your expenses need to be more than 2% of your income to be counted, but it sounds to me like you’ll easily hit that mark–unless your employer reimburses you for your living expenses–then you can’t claim them.

  55. Julia Wahlton on Fri, 4th Jan 2013 2:40 pm
  56. We just moved to Illinois from Florida in September. I work in St. Louis. In Florida we didn’t have income tax so this is all new to me! I’ve always done our taxes but am a bit leery to do this this year with the moving expenses, income tax for 3 months and the living in Illinois and working in St. Louis deal. Any advice?

  57. Admin Roberg on Sun, 6th Jan 2013 4:39 pm
  58. Hi Julia,
    The easy answer is to call me and have me do your taxes.
    But, basically, you will be filing a part year return for Illinois and a non-resident return for Missouri.

  59. Marc on Fri, 11th Jan 2013 3:07 pm
  60. I work for a company whose office is in IL, but I work from my home office in GA. For several years I have only been getting GA taxes withheld. I would file a federal tax return and a GA tax return, and have never had any issues. However, mid year I took another position within the company and in doing so my withholding taxes changed. I am now being withheld IL taxes but no longer GA taxes, but still work from my home office in GA. Based on the previous discussions, will I just file a non-residential IL form and a residential GA form. Since IL is less in taxes I would then pay the difference at the end of the year for GA? Would this flag me for audits?

    Thanks,
    Marc

  61. Admin Roberg on Sat, 12th Jan 2013 9:28 am
  62. Hi Marc,
    I had almost the exact same problem (but I didn’t work in Georgia.) You’re absolutely right, file the non-resident Illinois return but really you should show that you didn’t earn the money in Illinois and they should refund it completely. And you should pay Georgia.
    If you chose to pay Illinois taxes, I don’t mind. I like Illinois. I live right across the river. But technically, all of the state tax should go to Georgia and not Illinois.
    Also, contact your company and have them fix the withholding.

  63. Nathan Smith on Thu, 17th Jan 2013 10:25 am
  64. For part of the year, I tele-commuted as a software consultant working for an Illinois company (in Granite City, IL). In July of 2012, I moved from Memphis, TN (which has no state income tax) to Chicago so that I would be closer to where I worked. However because the company was based in IL, I had State taxes withdrawn for the entire year I was employed. In filling out my IL State taxes, am I suppose to report the total income for the entire year, or just that portion of my income that I earned once I actually moved to Illniois and took up residency. Thank you for your info

  65. Admin Roberg on Thu, 17th Jan 2013 7:40 pm
  66. Hi Nathan,
    You will file a part year return for the state of Illinois and on there you will show how much income was earned in Illinois versus what was earned in Tennessee–so you should receive a refund for the extra tax that was withheld.

  67. Julia on Tue, 29th Jan 2013 2:59 pm
  68. Wow thanks for the great info! I had no idea what was going on with these two state taxes. I am also really glad you are still responding to questions here in 2013!

    First off, I am wondering what the rates are for IL vs MO for this year?

    I also live in IL and work in MO. I’m am single, with no dependents, and this is only my 2nd year filing taxes since I graduated from college and got a “real job.” I’m not even sure if I filed mine right last year.

    In 2011, since I had started my job in Sept, I only made about $15K. I ended up owing IL about $700.
    In 2012, I made about $57K, and when I tried to do my taxes online with H&R block, it said I owe IL almost $3000! Does this seem right to you?

    My federal return was only in the $2600 range so after everything I would still end up owing $400. I’m worried about this.

  69. Jan Roberg on Wed, 30th Jan 2013 8:22 pm
  70. Hey Julia,
    Sorry but I have tuition to pay for my daughter in college. I don’t do your taxes in this column. If you want me to crunch numbers please call and make an appointment. Sorry.

  71. Jackie on Thu, 31st Jan 2013 3:14 am
  72. Dear Jan, I live in Missouri and work in Illinois. From your column, my understanding is I have to file separate returns for my resident state and non-resident state. And, I will probably be owing Missouri because of the tax rates.
    Here’s my question: How does living in St. Louis City and paying the additional St. Louis earning tax factor into the equation? Will I get my money back and if so, will it appear on the Missouri state form or what additional forms do I need?
    Thanks in advance for your help. I really appreciate your post, and the subsequent discussion is very informative and helpful!

  73. Jan Roberg on Thu, 31st Jan 2013 9:42 pm
  74. Hi Jackie,
    The St Louis City tax won’t help you–it helps Illinois residents who work in St. Louis City because it counts as an offset against their Illinois state tax returns. Sorry.

    For Missouri you will file the MO 1040 and the CR for taxes paid to another state. You will attach a copy of the Illinois return to MO (efile is easier) along with the copy of the federal.

  75. barbara on Sat, 2nd Feb 2013 5:11 pm
  76. I have a w-2 from tx and i live in ark. Worked in okl. How would i fill. Thanks

  77. Jan Roberg on Sun, 3rd Feb 2013 1:04 pm
  78. Hi Barbara,
    File as an Arkansas resident and Okalhoma non-resident for your Oklahoma income. Texas has no state income tax–nothing to do there.

  79. Lee on Mon, 4th Feb 2013 12:53 am
  80. I work in Illinois and live in Missouri. Do I need to file an Illinois state return if I didn’t pay taxes to Illinois at all? My pay stub only shows it took out federal income, medicare, social security and MO income tax.

  81. Marty on Mon, 4th Feb 2013 7:55 am
  82. Hi Jan,

    I live in Illinois with my spouse. He works in Illinois and I work in Missouri. My situation seems different from the others posted as I always owe state taxes to Missouri but we sometimes get a small refund from Illinois.
    For instance, this year I owe Missouri $291 but Illinois is refunding us $81. I’m wondering why Illinois allows for the 1% earnings tax to be used when figuring my credit for taxes paid to other states but Missouri does not allow a credit or for it to be figured in with their state income taxes? I’ve paid almost $500 in local income tax this year and if it counted for something surely it would offset the $291 I owe. Is there any way to file a tax return with the city for a possible refund? I’ve visited the city website and it seems they require one to work outside of city for part of the year in order to get a refund. I worked in the city all year but thought they might have a non-resident tax form I could take advantage of.
    Thanks for any assistance you can provide.

  83. Jan Roberg on Mon, 4th Feb 2013 9:56 pm
  84. Hi Lee,
    Technically you should file an Illinois tax return and pay tax on your Illinois income. Generally, your company should withhold tax for the state that you work in.

  85. John Petterchak on Tue, 5th Feb 2013 11:02 am
  86. Hi Barbara,

    I am currently a resident of Illinois but am in the process of buying a home in Missouri to be near my son and grandchildren. My wife and I plan on keeping both houses and splitting our time between them (25% Missouri and 75% Illinois.) We are both on Social Security and receive pensions from the State of Illinois. (Currently, said pensions are not subject to the Illinois income tax.) We also have some interest income earned from banks and credit unions in Illinois. Will we have to file a Missouri State Income Tax return? Thanks, John

  87. Jan Roberg on Tue, 5th Feb 2013 7:26 pm
  88. Hi Marty,
    Your St Louis tax doesn’t count as a deduction for your Missouri tax return because Missouri doesn’t let you deduct Missouri state (or local) income tax as a deduction. Your Missouri and your St Louis taxes count as taxes paid to another state, that’s why you get to deduct it in Illinois.
    Since you worked in St. Louis, even though you don’t live there, you’ll not get a refund. Sorry.

  89. Jan Roberg on Tue, 5th Feb 2013 9:36 pm
  90. Hi John,
    You are Illinois residents and Missouri non-residents. Missouri is your vacation home. You won’t need to file in Missouri unless you have earnings there. Your pensions and social security income are attributed to Illinois.

  91. Robin on Tue, 12th Feb 2013 10:27 pm
  92. My husband and I are both Illinois residents. I work in Illinois and he works in Indiana. For years, we have claimed all of his wages on IL Schedule CR column B because he has no other income besides that earned from his Indiana employment. In 2011, IL rejected our Schedule CR, saying that we could not use the wages from his Indiana employment because, “You may not include compensation paid in Illinois in Column B of you Schedule CR.” The wages we listed in column B were only his, and they were only from Indiana employment. Illinois Dept. of Revenue has requested a letter from his employer addressing the correct wages and withholding for both Indiana and Illinois, but the employer refuses because they feel there is nothing to correct beyond what is listed on the IN and IL W-s already provided to us. HELP!!! We have no idea what to do now!

  93. Nancy on Wed, 13th Feb 2013 11:27 pm
  94. I live and work in Wisconsin for a global company that has offices all over the US. I have worked for this company for 14 years but recently changed roles and my new boss is based out of the Cincinnati OH office. Much to my surprise I got 2 W2′s from my employer this year because they have been deducting OH state taxes and Cincinnati local taxes in addition to my WIsconsin taxes! I contacted HR and they fixed my location in SAP but told me to consult a tax adviser to make sure I am not getting taxed in both locations. Now what do I do?? It seems to me I am paying the price for my employers mistake; how do I ensure I am not paying too much in tax? How do I get Cincinnati local and OH State taxes refunded?

  95. Nicki on Thu, 14th Feb 2013 10:57 am
  96. Hi,

    We reside in Texas but my husband worked in California and Wisconsin last year.
    Some of the people he works with told him they received back the full amount of taxes they paid into other state taxes. These people live in states without state taxes also. Can this be true? For year of 2011 we paid VA, KS and wound up paying CA even more than was withheld.

    Thank you

  97. Jan Roberg on Thu, 14th Feb 2013 9:25 pm
  98. Hi Robin,
    It sounds kind of crazy. So lets see–I think you did your return right. Illinois is being funky about it. So the question is, what is Illinois missing to make them act funky about it. And your employer is refusing to help you out. Geez!

    It seems to me that you should have a W2 for your husband that has Indiana income and Indiana withholding. You should also have an Indiana non-resident tax return. The combination of those two things should give you the proof you need for Illinois.

    If that doesn’t settle them down, call me.

  99. David Harding on Sun, 17th Feb 2013 2:09 pm
  100. Ok, here it is, and its weird to me! I have worked in Missouri and lived in Oklahoma for twenty plus years. Tyson foods always held out Missouri state tax, and I rarely ever got much of it back, but still had to pay Oklahoma. So recently, jb hunt took over tysons livehaul and I was terminated from tysons, and hired by jb hunt. My job is the same job, in the same location, except, now, my new employer is not doing a withholding for Missouri tax, but is doing a withholding for Oklahoma. So, jb hunt is based in Lowell Arkansas, and as a truck driver, I get in my truck in Missouri, and my work day involves Oklahoma, Arkansas and Missouri.
    What is wrong with this picture? As a truck driver, I feel the past years of paying Missouri should never have happened at all

  101. Jan Roberg on Sun, 17th Feb 2013 7:32 pm
  102. Hi Nancy,
    Been there done that! It’s a little bit of a surprise finding out you moved to Ohio isn’t it? (Mine was Kansas City, surprise!)
    What you do is file an Ohio non-resident return showing no income earned in Ohio. What you’re doing is essentially asking them to refund the tax withheld by your employer for Ohio that shouldn’t have been withheld in the first place.

  103. Jan Roberg on Sun, 17th Feb 2013 7:33 pm
  104. Sorry Nikki,
    But your husband will have to pay taxes for the states that he worked in. That’s just the way it is.

  105. Jan Roberg on Sun, 17th Feb 2013 7:41 pm
  106. Hi David,
    Bottom line–you were working in Missouri so you should have been taxed in Missouri. It sounds to me like Tyson did it right.
    Your new company should be withholding for Missouri since you go to work in Missouri. So why aren’t they withholding for Missouri? Are they licensed to do business there? That’s always the first question that pops up. You can’t withhold state tax if you’re not licensed to do business there.
    If they’re properly licensed–then do they realize that you work in Missouri? That your work site is Missouri?
    You’ll only get an answer from your human resources department. But if you start your route in Missouri and end it there–that’s where you work.

  107. Ning Shen on Thu, 21st Feb 2013 10:34 pm
  108. Wow. Thanks for the useful info.
    My husband and I live in IL, along with our children. My husband worked in IL for the first quarter of 2012 and after that worked for a different company in GA for the second half of 2012. I’m a housewife. My children and I live in our house in IL for whole year of 2012 while my husband lived in a rental apt. in GA.
    How would we file our state tax return? Which is the resident state and non-resident state? Is it based on him because he is the taxpayer for the family? Can we get tax credit from one of the states?

    Thanks
    Ning

  109. Ning Shen on Fri, 22nd Feb 2013 1:47 pm
  110. Sorry. I have an additional question. Which address we should use for both IL and GA state returns?
    Thanks so much.
    Ning

  111. Mike on Tue, 26th Feb 2013 3:08 pm
  112. I recently retired and now I live in NY 6 months and FL 6 months. I have a NY State Pension and work as a Sales Rep for 2 companies. I earned money in NY and one company uses my FL address on W-2. I also earned money in NY and a different company uses my NY address on 1099 Misc. My State Pension uses my NY address, but no State taxes are withheld. What is the proper course of action? Thank you

  113. Lynelle on Fri, 1st Mar 2013 10:36 am
  114. Hi,
    My husband and I are residents of Minnesota and I am employed full time in Minnesota. My husband was employed in California from September 2011-July 2012. He rented an apartment while employed, from October 2011-July 2012. He has since found employment in Minnesota and has been employed here since August 2012.

    Last year I filled state returns in both Minnesota and California (NR). This year I plan to file in both states again but was wondering if on my federal return I can claim any of his living or travel expenses on our itemized deductions. Can I also amend last years to include his living expenses from September 2011-December 2011?

    Would any travel to and from our primary residence in Minnesota be included?

    I really appreciate what I have read about this topic to other readers.

  115. A Barnes on Sat, 2nd Mar 2013 1:01 pm
  116. Ok, so We live in Illinois (have a mortgage/residency), but my husband just took a job on contract (6mo contract to direct hire)..he is renting a house down in NC. He is getting per diem as long as he maintains primary residency in IL. So my question is….how will that work on our taxes? Will we be paying to both states on his income? We file married-jointly. I live in IL and work in IL. I would like to be down three with him….but I also do not know how it would work if I get employment in NC? Would that make me a NC resident or would I too remain an IL resident working in NC? Mainly, I know we would file federal taxes first, but which state do we start with and how do I get the credit amount to the other state? Thank you and sorry for the confusing living situation and tax situation…

  117. Jan Roberg on Sun, 3rd Mar 2013 4:38 pm
  118. Hi Ning,
    I think that for this year you should file as an Illinois resident and a Georgia non-resident. Maybe next year you would be you as Illinois resident and our husband as a Georgia resident if you keep this situation up. But for this year, do the Illinois resident and claim a tax credit for taxes paid to Georgia on your Illinois return.

  119. Jan Roberg on Sun, 3rd Mar 2013 4:41 pm
  120. Hi Ning,
    Efile them! Or if you are mailing them, use the address on the return instructions.

  121. Guy Bursell on Mon, 4th Mar 2013 6:00 pm
  122. Hi, I live in Indiana. I spent 127 days last year performing consulting work for my company in IL. I understand that I need to file a non-resident IL return as well as my resident IN return. However, I’m finding that I am going to be paying an extra $1,500 in state taxes! Can this really be right? Thanks.

  123. Jan Roberg on Thu, 7th Mar 2013 9:17 pm
  124. Hi Mike,
    It seems to me that if possible, you would like to be a Florida resident and a NY non-resident. If you can really be considered to be a Florida resident–that’s best because your pension income is taxed to the state you live in.
    But if you can’t be considered as a Florida resident full time–then the next best scenario is for you to be a part year resident for each one. That way your pension is only taxed in New York for half of the year. (Also interest, dividends, and capital gains are all taxed to the state you reside in.)

    So you see where I’m going here. The less time you can be considered a NY resident, the less tax that you pay.

  125. Jan Roberg on Thu, 7th Mar 2013 9:29 pm
  126. Hi Lynelle,
    If your husband was employed on a temporary basis–which it sounds like he was, then you will be able to deduct his temporary living arrangements, the travel between his home and his work, and you can also claim his meals.
    You’ll want to file a form 2106-for employee business expenses.

  127. Jan Roberg on Thu, 7th Mar 2013 9:45 pm
  128. Hi A Barnes,
    So right now you are Illinois residents and NC non-residents. If he winds up with a permanent job in NC then he will be a NC resident. (Yes, some couples have different state residencies.)
    If you move to NC, then you will become a NC resident also.

  129. Jan Roberg on Thu, 7th Mar 2013 9:54 pm
  130. Hi Eileen,
    So you rolled over your 401(k) to a ROTH IRA in 2010 but never reported it on a form 8606? So my first question is: did you already pay the tax then? Because if you didn’t do the 8606 where you could postpone the tax payment, then you probably paid the whole thing in 2010.
    Now if you cashed out the 401(k) and didn’t do the 8606 but didn’t pay the tax–then you’ll need to fix that. (I’m surprised the IRS hasn’t already come after you.)
    I’m thinking that you might not want to be doing your own return. Either you already paid–or you need to be amending prior year returns.

  131. Jan Roberg on Sun, 10th Mar 2013 4:19 pm
  132. Hi Gary,
    It’s possible, but my gut reaction is no.
    First thing to check–you are filing as an Illinois non-resident. Make sure that you are only paying tax in Illinois on the amount of money you earned in Illinois.

    Second thing to check–the credit to Indiana for the tax you paid to Illinois. Use the amount of your tax liability–not your withholding, to figure the credit.

    Good software should do this automatically–but make sure you’ve input all your numbers correctly.

    It’s possible that you really owe that much. Do you normally owe that to the state though? I’m guessing the answer is no. If those two suggestions don’t help, try taking your completed returns to H&R Block and have them do one of their free reviews that they advertise on TV. It will at least give you a second pair of eyes to tell you if it’s right or not.

  133. Brian on Tue, 12th Mar 2013 8:58 pm
  134. I’m having to file late State Income Tax returns.
    I lived in Missouri but worked in Kansas.
    As a result all the earnings and taxes are related to Kansas W-2. Also I ended up with a tax liability each time in Kansas, typically less than $500.00.

    However I have a problem, and I’m not sure if I’m doing this correct, specially based on all the excellent information you’ve posted here. If you don’t mind please read below what I’m doing, something seems odd, but its what happens each time.

    I’m using Form 1040 Long Form

    Line 24 : I enter my taxable income
    Line 25 : I enter the calculated tax from the instructions.
    Line 26 : I enter the Kansas Tax Liability because its the lower number on MO-CR from line 10 on the MO-CR
    Line 27 : 1005
    Line 28 : I subtract Line 26 from Line 25
    Line 29 : always zero
    Line 30 : same as line 28
    Line 31 : same as line 30

    Line 32 : I enter taxes withheld in Kansas

    In every case Line is always greater than Line 31 which indicates an over payment.

    How is this possible ?

    I never owe Missouri anything, in fact they would owe me. But how can they
    owe me a refund when I never worked in Missouri, I just lived there.

    Any help or comments would be greatly appreciated.
    In each years case I did the Federal First, Kansas second with the schedule S since I was a non-resident but its always 100%, no split taxes, followed by doing Missouri last.

    What is odd is that it asks for my Tax Liability on Line 10 of the MO-CR form, not the taxes withheld in clear print. When I put the liability in its always going to be the smaller amount and it gets put on Line 26 page 2 of the 1040 Long Form for Missouri. The difference is always less than the amount withholding tax paid in Kansas.

    thanks for reading, hope I explained it correctly.

  135. Susan S on Wed, 13th Mar 2013 12:04 pm
  136. I live in Illinois but worked in Missouri 6 months and only made $14,695. How do I go about getting a refund ?

  137. Tiffany on Sun, 17th Mar 2013 11:26 am
  138. Hi Miss. Roberg,

    I have lived and worked in KS all my life, until Sept 2012. I continue to work in KS, but am now renting an apartment across the state line in MO. (I do not own a house in either state.) I changed my address through the post office, and notified my employer, but they are only taking out KS state taxes. Additionally, I have not changed my driver’s license or vehicle registration from KS to MO as I have every intention of moving back within the next few months here in 2013. I utilized an online tax prep program, where it listed me as a resident of KS and a part-year resident of MO. It currently shows that all of the KS state taxes I paid will be refunded to me, and I won’t have to pay any taxes at all to MO. This doesn’t seem right since it basically says I wouldn’t have paid any state taxes in 2012. Could you give me some direction?

    Thank you!!

  139. Greg on Mon, 18th Mar 2013 4:58 pm
  140. Hi. Question for you on dual state filing. I reside in Missouri and my main job is in Missouri. However, I have a part time job in Kansas. When filing, my state taxes (after the federal form is filled out), will I file first in Kansas, then Missouri? Or in Missouri first? Tax software seems to indicate to file in Missouri first.

  141. Jan Roberg on Wed, 20th Mar 2013 9:10 pm
  142. Hi Susan,
    You will file as an Illinois resident and a Missouri non-resident. You will claim a credit in Illinois for taxes paid to Missouri. Your Missouri return will not include your Illinois income.
    I don’t know if you’ll get a refund or not. Don’t expect a refund from Missouri unless you withheld more than you owe.

  143. Jan Roberg on Wed, 20th Mar 2013 9:28 pm
  144. Hi Greg,
    You live in Missouri and Kansas is just where you have a second job–file the Kansas first, then the Missouri.

  145. Greg on Fri, 22nd Mar 2013 8:43 am
  146. Jan,

    Thanks very much for your prompst response. Much appreciated!

  147. Art G on Wed, 27th Mar 2013 6:18 pm
  148. Hello, for 2013 I am a business consultant (sole proprietor) living in West Virginia and I currently have one customer in Maryland (I go to this location in MD about 75% of the time and telecommute from WV the other 25%). This will end up being 99% of my income for the year…about 50k. I know WV and MD have a reciprocal agreement but how does business income apply? When and where do I file? Do I have to file/pay monthly with WV or just pay MD a non resident tax on April 15, 2014? Thanks.

  149. Linds on Mon, 1st Apr 2013 9:29 pm
  150. Hi, I don’t think this has been asked yet (if so, I apologize in advance!) :

    I lived part year in Illinois (January through September 2012) but moved to Missouri in Sept. to be closer to my job. I worked in MO for all of 2012. When completing the IL Schedule NR as a part-year resident, what is the correct way to respond to filling in column B (Illinois portion) when it asks for wages, salaries, tips, etc.? Do I enter $0.00 because the income was never from Illinois, do I enter the portion I received from my job in Missouri from only January through September, or do I enter everything I received from the Missouri job for the whole year?

    I look forward to hearing your input. Many thanks in advance!

  151. Scott Dethlefsen on Wed, 3rd Apr 2013 8:25 pm
  152. Hi. I am looking to find some answers for my son who joined the military in May 2012. Prior to he lived and worked in Minnesota. He has been in basic training and advanced training in California. His W2 from the military has had Minnesota withholding only. No California taxes have been withheld. Is this accurate for military personnel? Does he file a California State tax return? The W2 lists a California address for him.
    Thanks for your input and advice.

  153. Jan Roberg on Sat, 15th Jun 2013 8:56 pm
  154. Hi Art,
    As a sole proprietor you’re filing a personal income tax return. You have reciprocity so you will just file a West Virginia state income tax return.
    If you find that you owe tax to West Virginia you’ll want to make estimated tax payments. You’ll pay those quarterly.

  155. Jan Roberg on Sat, 15th Jun 2013 9:23 pm
  156. Hi Linds,
    You’re going to put the income you earned in Missouri while you lived in Illinois in the income earned in Illinois. Only enter the income you earned from January through September because after that, the income will be taxed to Missouri.

  157. Karen on Fri, 21st Jun 2013 1:51 pm
  158. Hello – I work from home for a company based in California. We were stationed in Mississippi for 3 years & then Okinawa the past 2.5 years. The company I work for incorporated in Mississippi in order to process my payroll and I paid taxes in Mississippi the last 5.5 years. We just got orders to North Carolina and I will continue to work from home. My husband is active duty military and I believe the law now allows my legal residence to be the same as his home state of record – which is Oklahoma. That is where I hold a legal driver’s licence. I need to know where I will owe taxes now? North Carolina or Oklahoma? I need to change my address with my payroll service and the company where I work will most likely need to incorporate in the appropriate state. Any advice is greatly apprecaited as I am at a loss. Thank you in advance.

  159. Jan Roberg on Mon, 1st Jul 2013 8:56 pm
  160. Hi Karen,
    because you are a military spouse, you are protected under the Military Spouse Residency Relief Act (MSRRA). (It’s a good thing there’s no letter Y in there or the acronym would sound like misery.)
    Basically, you have the choice of claiming your husband’s domicile (Oklahoma) or claiming the state you are residing in as your residence.
    Generally, North Carolina tax rates are higher than Oklahoma rates, but you might want to run some sample returns using your personal information to see how they turn out.
    You mentioned that you might want to incorporate. Depending upon what type of work you do, incorporating might not be your best strategy. Meet with a local tax specialist to see if that’s really what’s best for you. (My knee jerk reaction is that you’re probably in a personal service category and the corporate tax rate is 35%, but I’m guessing you’d do an S corp to avoid that.)

  161. Jan Roberg on Tue, 16th Jul 2013 8:43 pm
  162. Hi Scott,
    When a person joins the military, the state they are living in when they enlist is the home of record. Your son has Minnesota withholding because it will be his home of record and that will be the state he pays his taxes to.

  163. Tish on Wed, 31st Jul 2013 2:05 pm
  164. My husband and I both live in IL. I work in IL and he works in MO. We have always filed our IL state taxes with a credit using both Stl taxes withheld and MO state taxes withheld. For the 2012 tax year, we received a letter my the IL DOR stating we owe taxes in the amount of $1200. They said we cannot use the state and local withhold amount from W2′s, instead we must use MO’s income tax amount. Is this correct? Do I only claim our MO tax liability amount from MO 1040, or am I able to claim the payroll withheld amount? They have accepted 2012′s return as I have always prepared, but are making the changes to our 2011.
    I know you have answered many similar questions, but it has never been clarified if the withhold or tax liability is the correct number to use.

    Thanks so much for all you help.

  165. Jan Roberg on Sat, 3rd Aug 2013 9:36 pm
  166. Hi Tish,
    The letter from IL is correct when is says you must use the actual tax liability, not the amount withheld on your W2s. Now, the City of St. Louis taxes withheld on your W2s is almost always the exact amount that you pay (you don’t even need to file a return unless it’s different.) But your Missouri state tax return liability amount is the number you use as the Missouri state taxes paid when claiming the credit on your Illinois return.
    If you used the W2 amount on your 2012 return, you may as well file an amended return now and get that out of the way. Otherwise you’ll just get a letter from them later.

  167. Devon on Tue, 17th Sep 2013 5:48 pm
  168. Hi Jan …I have a similar issue. I live and work in South Carolina at present but I just recently accepted a position in North Carolina. I am going to rent an apartment and temporarily live and work in North Carolina for 6 months while my wife and son remain here in South Carolina at our home. My wife works in SC by the way.

    My question is centered around my W4. At present, living here in SC I claimed 2 on Fed and 2 for SC. Should this be done differently now with my new circumstances described above?

  169. Jan Roberg on Sun, 22nd Sep 2013 10:20 am
  170. Hi Devon,
    I’m thinking that if claiming 2 exemptions has been working for you in the past, it’s a good idea to continue that when you move to North Carolina.

    Now, that said, you may be able to claim some serious deductions from living in NC–but since it might not be a big deduction, I figure you’re better off continuing claiming the way you claimed before.

    But here’s what I want you do do–keep track of all of your out of pocket expenses for you temporary job in NC. Your rent, your meals, your mileage. Anything that your company is not reimbursing you for during this temporary employment may be a deductible expense.

    Those expenses would go on a form 2106 and are subject to being reduced by 2% of your adjusted gross income (lots of rules, but you want to claim the deduction if you qualify.)

  171. Jim on Fri, 18th Oct 2013 9:13 am
  172. Hi Jan,

    I am thinking about taking a position at a company in Illinois. I have my permanent residence in Indiana and have no plans to sell it. In fact my wife will stay there almost full time and I will come home on weekends and vacations. I am going to rent an apartment near where I work and have the option to stay in Illinois or have the apartment in the saint Louis area. How would I have to pay taxes in either scenario?

  173. Jan Roberg on Sun, 20th Oct 2013 4:42 pm
  174. Hi Jim,
    On behalf of Missouri, I invite you to come live in St. Louis. But here’s some things to think about.
    1. You are an Indiana resident and an Illinois non-resident. No matter where you get that apartment, that’s how you should file your taxes.

    2. But be careful of the St. Louis thing–if you get an apartment in St. Louis City, and you list St Louis City as your address, your company will be obligated to withhold city of St. Louis earnings taxes from your paycheck. So you want to make sure that your company knows you are an Indiana resident.

    3. If you are living in Missouri for over 6 months–Missouri is going to want to claim you as a resident even if you maintain a residence in Indiana–so if you’re going to be here for awhile, be prepared to pay Missouri taxes.

    That said, it probably won’t hurt you as your income will be from Illinois. You see, even though the Illinois tax rate is only 5% and Missouri’s is 6%–Missouri allows more deductions, so many people are finding the Missouri taxes to be lower than Illinois anyway.

    If you become a Missouri resident, your wife is still an Indiana resident–it’s a little funky, but you’ll just file a split residency return. (Not as unusual as you might think.)

    At the end of the day, the primary taxes will be going to Illinois. Indiana and Missouri both would give you a credit for the Illinois taxes and I think you’d pay little or nothing in either Missouri or Illinois. It all depends upon your deductions, so you’d want to run the numbers.

    I think for you, the more important issue will be the commute–do you want to cross the river every day going to and from work? For me, that would drive me crazy. (My total commute now is less than the length of the bridge.) For some people though, that commute is like therapy. It’s hard working at a job away from your family. Do whatever will be the least stressful for you.

  175. Catherine on Wed, 29th Jan 2014 7:03 pm
  176. I lived part year in NY and MA. For the whole year i worked in MA. My turbo tax is telling I do not owe NY anything nor do they owe me. i fear this can not be right and that I should owe them something. When it asked for the income for NY I put 0 because I didn’t earn in that state. Was the wrong? Should i put what my W2 says for the MA income? I am very concerned about this. Can you please provide me with any insight?

  177. Jan Roberg on Wed, 29th Jan 2014 8:45 pm
  178. Hi Catherine,
    You’ve got one of the most complicated situations. You lived in both states, but worked in one. And it can mess things up.

    First question. Where do you live right now? Do you live in New York? or Do you live in Massachusetts?

    If your address is Massachusetts and you have no New York income, I would just file a Massachusetts tax return and forget about New York. New York taxes are generally higher than Massachusetts, but if your taxable income was at $11,300 or less, your credit for tax paid to Massachusetts would wipe out your New York income tax anyway. (Taxable income means your income minus any deductions that you’re allowed to take.)

    Now if you live in New York now, (or your taxable income is much higher than $11,300) then you really need to file a New York tax return.

    Technically, even though you worked in Massachusetts, the money you earned in Massachusetts while you lived in New York is attributed to New York. You take a credit for the tax you paid to Mass, but your Mass income is taxable to New York for the time that you are a resident there.

    Bottomline, if your New York taxable income is $11,300 or less, you should not have a balance due there because of the credit for taxes paid to Massachusetts. If your income is higher–there should be some tax.

    I hope that helps–it’s a pretty geeky topic. (It’s the kind of question my husband would ask when he’s having trouble sleeping!)

  179. Catherine on Thu, 30th Jan 2014 7:12 pm
  180. This helps so much Jan THANK YOU. My income for the year was roughly $31,000. I am now living in MA, when I file for both states with Turbo tax it still says I owe nothing to NY. Which still really concerns me. For the first 8 months I was in NY and feel there would be something I owe. It asked for what income I made in NY and I entered 0 because technically I did not earn anything that state. Would you recommend entering in my MA income? If I do process this return as is, and I get audited is there anything I should be concerned about?

    Thank you again Jan-Extremely helpful.

  181. Jan Roberg on Thu, 30th Jan 2014 9:38 pm
  182. Hi Catherine,
    Technically, your New York income is $20,667. I get that by taking $31,000 and dividing that by 12 months which = 2583.33. Then multiply that by 8 months that you lived in New York: = 20,667.

    Try plugging that in and see what happens.

    But you’re going to want a credit for the tax you paid to Massachusetts for that time period as well.

  183. scott on Sun, 9th Feb 2014 10:56 am
  184. My wife owns a home in Indiana and works there. I rent an apartment and work in Illinois. I am a rsident of Illinois and she is a resident of Indiana. How do we file on the federal and state level? Thank you for your help.

  185. Jan Roberg on Sun, 9th Feb 2014 4:15 pm
  186. Hi Scott,
    Well, you could file separately, but it may be better for you to file jointly and have you be a non-resident of Indiana and her be a non-resident of Illinois. I’d run it both ways, but I’m thinking that filing jointly with the split residencies might be your best option.

  187. carly on Wed, 12th Feb 2014 7:00 pm
  188. hi, i live in MA and work in RI, after the ‘tax credit to another state’ it seems the they are deducting THE $1109 i paid/due to RI from what I owe MA (saying i only owe 647 to MA when i had 2372. taken out of my check total for the year ) so they are planning returning 1600+ to me from the state of MA. Does this make sense? i used both the turbotax free and hr block online free just to cross reference and they came out relatively the same, Turbo tax even imported my w2 from ADP payroll with a control # on my w2.. Last year i went to an HR Block preparer and i received 1900+ back from MA. i want to file again (online myself) but im afraid in the upcoming years MA will be after me for some 4 grand from these 2 years…. not certain it seems correct, any suggestions?

  189. Jan Roberg on Wed, 12th Feb 2014 8:56 pm
  190. Hi Carly,
    That sounds right to me. You should get a credit on your Massachusetts return for the tax that you pay to Rhode Island.

  191. Terri M on Wed, 19th Feb 2014 5:15 pm
  192. My daughter lives in Missouri, but earned $1000 working for Fellowship of Christian Athletes (Missouri based) in Texas this past summer doing an internship for college. She received a W-2 from FCA with Federal taxes withheld and no state tax withheld. W-2 has TX in state box but states on form TX has no state income tax. Does she owe Missouri tax that income? I’m not sure how to enter it on the tax program. I use OLT online taxes.

  193. Jan Roberg on Sat, 22nd Feb 2014 5:50 am
  194. Hi Terri,
    Yes, your daughter will owe tax to Missouri on that income. Basically, when you do your daughter’s tax return, you’re going to put her down as a Missouri resident. (Usually that’s on one of the early input screens. I’m sorry I’m not familiar with OLT.)

    Once she’s recognized as a Missouri resident, then the program should add the Texas income to the Missouri form.

  195. Diana on Wed, 26th Feb 2014 10:43 am
  196. IL resident working in IN, should IN Local tax be withheld? IN State tax was withheld but not IN Local. What is the normal for this?

  197. Jan Roberg on Thu, 27th Feb 2014 6:17 am
  198. Hi Diana,
    Normal–is if you work in a city that has a city tax, then the employer withholds the city tax for you. That’s normal. Does it always happen? No. So if you worked in a city with a city tax, and your employer didn’t withhold, you could still be hit with the tax. But make doubly sure you really worked in the “city” before you pay the tax. There might be a good reason your employer didn’t withhold.

    Example: there’s a large corporation here in St. Louis. Half of the campus is officially in the city of St Louis, hence, St Louis city tax. The other half is on the county side. Half the employees pay city tax, the other half don’t, depending upon which building they work in. It’s really weird, but I’m finally getting used to it.

    I’m just telling you that in case there’s some funky thing like that going on with your paycheck also.

  199. Ning Zhu on Wed, 5th Mar 2014 2:12 pm
  200. Hi Jan, Thank you very much for the great info. I have a similar, but slightly different scenario. My husband and I have a home in IL and last year my husband worked in GA and rent an apt. there for the whole of 2013, but he’s thinking of finding a job back in IL. My sons and I have stayed at our IL home for whole year of 2013 and we have not attempted to sell our IL house.
    Should we file IL resident and GA non-resident or a different way, and in our case, can my husband’s expenses (rental, utility, etc.) be deductible?

  201. Jan Roberg on Sun, 9th Mar 2014 8:59 pm
  202. Hi Ning,
    If your husband has been living and working in Georgia for the entire year–then he should file as a Georgia resident. If he was working in Georgia at a temporary job for less than a year, he can claim his living expenses as an employee business expense.

    My best guess is that you’re filing as an Illinois resident and Georgia non-resident and your husband is a Georgia resident and Illinois non-resident. This isn’t as crazy as it sounds–lots of families are in situations like that.

  203. Ning Zhu on Sun, 9th Mar 2014 9:54 pm
  204. Hi Jan,
    Thank you very much for the quick response. Do you mean we need file joint or separate returns? My husband use the IL address for all of his accounts, such as W2, Pay check, Medical, etc. even though he works in GA. If we file that he is a GA resident, wouldn’t we be paying taxes to both states? Sorry, this is only our second year filing taxes in this situation.

  205. Ning Zhu on Mon, 10th Mar 2014 1:28 pm
  206. Hi Jan,
    I forgot to mention that I’m a housewife, and do not make any income. My husband still has a IL driver license. Sorry for the confusion.

  207. Jason on Mon, 10th Mar 2014 10:43 pm
  208. Hello I just wanna ask about filing taxes basically ..i live and work in Illinois but my company is located at Indiana …my 1099 misc form is in Indiana ..so my question is what state do i need to file?thanks you

  209. Jan Roberg on Sun, 16th Mar 2014 8:04 am
  210. Hi Ning Zhu,
    You would only pay the amount of tax that you owe to that state. If there is no other income than your husband’s Georgia W2, then only file the Georgia return.

  211. Ning Zhu on Sun, 16th Mar 2014 9:45 am
  212. Jan,
    Thank you so much for your help.

  213. Jan Roberg on Sun, 23rd Mar 2014 7:44 pm
  214. Hi Jason,
    You live and work in Illinois so you definitely have an Illinois return. Now the issue is Indiana. You said that your company is in Indiana–do you own the company? Or is the company that you did work for in Indiana?

    If you own a company in Indiana–even if you don’t work there–you need to file an Indiana return. But I’m thinking you mean that the company that issued you the 1099 is located in Indiana. If that’s the case–since you live and work in Illinois–you still only file an Illinois return.

  215. Alex on Tue, 25th Mar 2014 9:53 am
  216. Hi Jan,
    I live in NJ but work in PA. It looks like my employer correctly took out NJ taxes (my W2 says NJ with a state wage and state income box number filled in). They also took out PA SUI.

    I also got one where box 15 has PA is filled in, and the only other boxes completed are box 18 for local wages and box 20 locality name (upper merion).

    How should I file (and in what state?) in order to only be taxed in 1 state?

    Any help would be appreciated!

  217. Kelly on Fri, 28th Mar 2014 9:49 pm
  218. Hi Jan,
    I lived in IL through April 2013 and MO for the remainder of the year. I worked in MO the entire year. For the IL return, I understand to put only the income earned while I lived in IL as IL income. I’m a little confused then on how to complete the MO return. Am I supposed to report ALL income to MO and file a MO-CR for the tax I owe to IL, even though it was on MO source income? Thanks for your help!

  219. Tess on Sun, 30th Mar 2014 2:31 am
  220. Jan,
    Usuallly my husband and I do our own taxes, but time is running out and I’m not sure how we will tackle them this year. So, here is our problem:
    January 2013 we moved to illinois (rented a house) I lived there while my husband was still working in Kansas until March when our house sold in Kansas. I worked in kansas from Jan 1-4th and then Jan 22 to current in Missouri
    March-Decemeber- my husband stayed home, i worked in missouri, we lived in a rented home in Illinois
    December 2013- purchased a house in MO (closed on December 4th), Our lease for the Illinois home is not up so we still have items there
    Which will we file as our resident vs no resident state and which do we start with first?

  221. ackmondual on Thu, 3rd Apr 2014 3:44 am
  222. Jan, to keep it brief, I have 3 questions I’d like to ask…
    1) I worked in IL for 6 months, and eventually moved out of an Extended Stay motel and rented an apartment. However, my company is headquartered in VA. I take it I should be filing in IL and NOT VA?

    2) My W2 from that company, #17 (State Income Tax) is blank. Is this right? Should I have them double check this?

    3) I’m trying to fill out the IL-1040-schedule-NR form, and do not know what how to fill out “Column B Illinois Portion” despite the instructions. Some of them tell you to copy line-by-line from the respective spots on the federal-1040 (e.g. #8 on IL-1040-schedule-NR is what was used on the federal-1040 line #10). I’m still not clear on how to get the specific values for Column B. Any suggestions for more info?

    Thanks ahead of time!

  223. William on Fri, 4th Apr 2014 9:19 pm
  224. Hi there,
    Here’s my question about filing for two states. I live in Kansas and work in Missouri. On my w-2, under box 16 is blank for Kansas but my state wages shows only for Missouri. Under box 17 for state income tax shows totals from both states. When filing under Kansas while using hr block basic software, it asks to enter taxable wages for Kansas in which is blank, I will owe Kansas over a thousand dollars. If I use Missouri taxable wages earned Will owe very little. Did my job make a mistake on my w-2? It seems like I’m not getting credited for being a Kansan working out of state.
    thanks.

  225. jennifer on Sun, 6th Apr 2014 6:43 pm
  226. My husband and I live in Missouri. I work in Kansas and he works in Missouri. I am part-time make very little. I realize that Missouri gives credit to taxes paid to another state but can Kansas tax my husbands income along with mine? This always confuses me. I do not see how Kansas can tax his income if he did not earn it in Kansas. I am not sure how to do this.

  227. Guru on Sun, 6th Apr 2014 7:55 pm
  228. Hello.. Thanks for the very helpful info. I have couple of questions. I live in KS and work in MO (Kansas CIty, MO) so my employer withholds for MO.. I am filing my 2013 returns now and see that this time my KS tax < (is less than) my MO with holdings < (is less than) my actual Missouri tax. And software is showing that I owe the difference (MO actual tax – MO with holdings) to MO and $0 to KS.
    1. I understand there is no reciprocal agreement b/w 2 states so does that mean I can take the Credit from MO only for KS tax amount and I will not get any refund from KS/MO?
    2. My employer doesn't withhold any amount for Kansas City, MO city tax (which is 1%) and my employer's address in W-2 is of New Jersey so it doesn't talk about any thing related to Kansas City. So do I still need to pay Kansas City, MO tax?

  229. marina lin on Sun, 6th Apr 2014 11:55 pm
  230. Here is a very complicated arrangement for you. My husband lives and works in new mexico all year in the past three years while I live and work in NC. We usually file fed tax returns married/ jointly, then file separate state tax returns with a mock fed return (married but file separately)created respectively for the purpose. It went well until we got mail from NM tax office this year saying we got it all wrong. (they did not offer solution) I consulted an AARP tax preparer who said NM is a community state. So we have to file NM state tax return with me in it too claiming non-resident status. We use turbo tax software for preparation; I checked the detail and found out the state tax return did not separate the total incomes, doesn’t this mean NC resident pay tax into NM? Same is true when I tested for NC tax return. Thanks a million.

  231. Grant on Thu, 10th Apr 2014 9:04 pm
  232. I am a full time resident in North Carolina. I sold a house in Colorado. To what state do I have to pay taxes on my capital gains of the sale. Thank you.

  233. Beth on Mon, 14th Apr 2014 4:25 pm
  234. Hello!
    I live in indiana and worked in Indiana for majority of the year. In September I changed employers and now I work in illinois. I have already filed my federal and Indiana state tax returns. I am working in the IL-1040 and the Schedule-NR right now. My question is do I include my wages that I earned from my Indiana job on the IL-1040? I am very confused about that.
    Thanks,

    Beth

  235. Steve on Fri, 25th Apr 2014 4:16 pm
  236. Hi Jan,

    I got married in February 2013, so this is the first year filing jointly. I lived in Virginia until the wedding and my current wife lived in Washington, DC. After the wedding we moved to Maryland together. I work in VA, she works in DC, and her work made a mistake on her W-2 and only witheld DC taxes for the whole year, neglecting to account for her time in MD. We realized this late in the game and ended up filing an extension for our DC and MD taxes, while filing the federal and VA taxes on time. Her work says that they cannot give her a corrected W-2 at this point and say that we just need to file in DC and Maryland. We tried to get help from H&R Block, who said that they need a corrected W-2 to file the MD and DC returns.

    How should we file our DC and MD taxes? Is it necessary to get a corrected W-2 before this is even possible? Thanks very much for helping with our complicated tax year!

  237. Jan Roberg on Sun, 25th May 2014 5:07 pm
  238. Hi Alex,
    The only way to be only taxed in one state is to live and work in the same state. Your situation is that you live in New Jersey and work in Pennsylvania–so you are taxed as a Pennsylvania non-resident and a New Jersey resident.

    So, your W2 is correct, your company is withholding for both states. You will receive a credit in New Jersey for the taxes that you pay to Pennsylvania, but technically you are taxed in both states. Sorry.

  239. Jan Roberg on Mon, 26th May 2014 9:17 am
  240. Hi Kelly,
    You’ve got a common problem for folks along the Illinois/Missouri border. Technically, what you “should” do is file a part year return for each state, claiming a credit in Illinois for the taxes you paid to Missouri for that time period. TECHNICALLY!

    But your computer software won’t handle it, and neither will the state tax software when you file it.

    Since you have a Missouri address, and all of your income was earned in Missouir–just file a Missouri resident return. Forget Illinois. The next effect would most likely be the same anyway. It will make your life easier, and it will make the lives of the Illinois and Missouri department of revenue people’s live’s easier too.

  241. Jan Roberg on Mon, 26th May 2014 3:02 pm
  242. Hi Tess,
    For your situation, you will need to file as an Illinois resident and a Missouri and Kansas non-resident. You will do the federal return first. Then the Missouri and Kansas. You will prepare the Illinois return last, claiming a credit for the tax that you pay to Kansas and Missouri.

  243. Jan Roberg on Mon, 26th May 2014 4:26 pm
  244. Hi Ackmondual,
    1. You need to file state taxes based upon where you live and/or where you work. The state that your company is headquartered in usually does not matter in determining which state you file your taxes in. So, I know you worked in Illinois, but I do not know your other state of residence.

    2. If your company left the state income tax blank, I’m guessing that they didn’t withhold any state income tax for you. Is your resident state a no tax state like Texas? That would be the situation. But do check with them to make sure they haven’t just left off your Illinois tax by accident.

    3. If you’re using tax software, usually it will carry the figures over for you. You’ll just need to indicate that you earned the wages in Illinois. Bottom line, the dollar amount from the W2 that you received the the work you did in Illinois is what will go on line 5 column B–that’s probably the only thing that will go on your Illinois NR return for income.

  245. Jan Roberg on Mon, 26th May 2014 4:54 pm
  246. Hi William,
    It sounds to me like you earned all of your income in Missouri, so yes, there should be wages in the Missouri box but not in the Kansas box. And–it also sounds like your company withheld Kansas tax for you as well. That’s a good thing.

    You didn’t earn wages in Kansas, but you had Kansas taxes withheld–this is good.

    Before preparing your Kansas return, you need to file a Missouri return–then you’re going to claim a credit for taxes paid to Missouri (based upon what’s on the tax return, not the withholding on the W2) on your Kansas tax return. That should solve the $1000 balance due.

  247. Jan Roberg on Mon, 26th May 2014 5:12 pm
  248. Hi Jennifer,
    I’m guessing that you’re preparing the Kansas return and it’s starting off counting your husband’s income. But you’re right, Kansas won’t tax him. It should only tax your income, you are filing as a non-resident. Since your husband did not earn any income in Kansas, none of his income will be taxed. If you have a big tax bill for Kansas–there’s a mistake.

  249. Jan Roberg on Mon, 26th May 2014 5:17 pm
  250. Hi Guru,
    Generally, the credit for taxes paid to another state are only for as much as the tax would be in that state. So in your case, it looks like the Missouri taxes are higher than the Kansas tax so your credit is only good for as much as your Kansas tax. So yes, a zero balance makes sense.

    Even though your employer is located in New Jersey, your office where you work is located in Kansas City so yes, you need to pay the Kansas City city tax. Sorry.

  251. Jan Roberg on Mon, 26th May 2014 5:36 pm
  252. Hi Marina Lin,
    Oh my, you do have a head scratcher. New Mexico is a community property state and North Carolina is not.

    I had a question similar to this for a different community property state and they were fine–it was okay to file separately and separate the income because they lived in two different states.

    New Mexico is not like that. New Mexico has very specific rules about how to file–even when the spouses live in two different states.

    It’s probably a good idea to get some professional help in New Mexico to make sure you get it right.

  253. Jan Roberg on Sun, 1st Jun 2014 9:37 am
  254. Hi Grant,
    You live in NC but you sold a property in Colorado. You would pay tax on the gain to the state of Colorado, and take a credit on your NC return for the taxes you paid to CO.

  255. Eric on Wed, 25th Jun 2014 4:19 pm
  256. Every year I fight with Missouri because they are always trying to tax my wife’s income. My wife and I live in Illinois. She works in Illinois. I work in Missouri. It has been an ongoing battle because we file joint returns both federal, and state (MO and IL). Every year Missouri says we owe more than what I figure because they are always taxing my wife’s income. I know that you won’t be able to help me because even the automated software and calculating PDF forms won’t allow for this provision. You will say “you need to seek out the assistance of a tax professional.”
    Thanks!

  257. Jan Roberg on Sun, 6th Jul 2014 7:37 am
  258. Hi Eric,
    You’re absolutely right, I am going to say you need to seek out the assistance of a tax professional. If you’ve had the same problem for years–you’re doing something wrong.

    I have two guesses, the first is that you’re missing this important form: http://dor.mo.gov/forms/MO-NRI_2013.pdf

    But I really can’t believe you’re missing that.

    My second guess is that you are not attaching the copy of your Illinois return to your Missouri return. If you’re e-filing, the software should do it for you, but in reality I’ve had trouble with that attachment myself.

    This is not actually a third guess, but something that may be triggering the other two things–if you’re using tax software, check your very beginning screens where you put your name and address stuff. Does it have a “resident state” box? Some software programs auto fill that–others leave it blank. Your software may be making a Missouri resident assumption-and that could be triggering the problem.

    Bottom line, your wife’s income is not taxable in Missouri.

  259. Jc on Mon, 7th Jul 2014 7:54 pm
  260. Hi, my husband is a sole proprietor in MN. (Living and working 100% of the time in MN) We just got a letter from the state of California for tax year 2012. He worked for a company that has its home base in California. He was hired by a employee of that California company living and working MN. He worked for them for about 120 hours. The state of California is saying he needs to pay income taxes to them. He never worked in California and he paid taxes to MN on all money he made. Does he owe money to California?

  261. Colleen on Sat, 12th Jul 2014 10:00 am
  262. Hi. Quick question. I currently reside in Illinois where I own my home. My company is transferring me more than 100 miles away to a Wisconsin location because they are closing the facility in Illinois. Because of this, I will need to rent something during the week, then plan to come home on weekends. What state would I be considered a residence of? Wisconsin or Illinois? Will my rental housing in Wisconsin be tax deductible. They are providing a small relocation package. Will that be considered income?

  263. Jan Roberg on Sun, 13th Jul 2014 7:11 am
  264. Hi Colleen,
    So you are going to do the long term commute? Right? You’re going to rent something in Wisconsin to live in while you are working, but then come home on the weekends to Illinois right? And this is going to be a “forever” type situation?

    I say forever because your plan in Illinois has closed down so this isn’t a temporary job. That makes all the difference here.

    So as things stand–your resident state is still Illinois, and your non-resident state is Wisconsin.

    You will pay taxes to Illinois, as your home state and then you will take a credit for taxes paid to Wisconsin against your Illinois taxes.

    Because your situation does not appear to be temporary, then your Wisconsin residence is not tax deductible. Neither is your mileage to the Wisconsin location. (You might be able to claim the mileage if you can persuade your company to require you to have a home office and work from home some days–don’t possible for everyone, just a thought.)

    The relocation package may or may not be considered income depending upon how the company handles it. If they reimburse you for moving costs, or pay the movers directly, then it’s not taxable to you. If they pay you a lump sum “relocation fee” that may be taxable. Of course, you’d be writing off the moving expenses as job expenses on your tax return–but depending upon how things work out, that might not be a good deduction so you are much better off if your company pays actual expenses rather than just handing over a check to you.

  265. Jan Roberg on Sun, 13th Jul 2014 8:46 am
  266. Hi JC,
    California is very aggressive in its tax collection policies, but your husband never set foot there. Clearly, it looks like the employer filed something saying your husband did work in California.
    I would have him write a letter and attach a copy of the tax return showing he lives and works, and performs the service he provided, in the state of Minnesota.
    As much as California’s rules are different from everybody else’s, I’m pretty sure they’re not going to tax you on income you earned living and working in Minnesota.

    Here’s the link to the California Department of Revenue website to back me up: https://www.ftb.ca.gov/individuals/fileRtn/Nonresidents_PartYear_Residents.shtml#BusinessIncome

    They only tax you on the income you earn within the state of California.

  267. Laura Appleton on Sat, 19th Jul 2014 8:29 pm
  268. I live in Memphis, Tn and am thinking about taking a job for a company in Maryland. In this position I will work remotely from my home in TN. I will probably work in Maryland for 12 to 15 days per year. How will the state income tax work. Will I have to pay Maryland state tax on my whole income?

  269. Jan Roberg on Sun, 10th Aug 2014 11:17 am
  270. Hi Beth,
    There is an order to how to prepare multi-state tax returns. First you prepare your federal return, then you do the state that you don’t live in, which in your case is Illinois. Then you prepare the state you do live in, which is Indiana.

    Illinois will look at the whole federal income, but they will only tax you on the Illinois income. Indiana will give you a credit for the tax that you pay to Illinois–not that you pay with your return, but all the tax. What you’re looking for is the tax liability.

  271. Jan Roberg on Sun, 10th Aug 2014 11:21 am
  272. Hi Steve,
    congratulations on your marriage.

    Here’s what I’m seeing–your wife’s employer did not make a mistake on the W2–they made a mistake by not withholding. That’s different.

    You see, if there was a mistake on the W2–they’d fix that. They can’t correct it because they just didn’t withhold. H&R Block says they can’t file because they think there’s a mistake on the W2–but that’s not the case. So go ahead and file–but there’s probably going to be a balance due because of no withholding.

    Sorry. I’m thinking that’s not what you wanted to hear.

  273. Jan Roberg on Sun, 10th Aug 2014 11:26 am
  274. Hi Laura,
    You live in Memphis and work in Memphis so you would only be subject to Tennessee income tax (if Tennessee had a state income tax.)

    Now, you’ve got the couple of days you will spend in Maryland. Usually, since that’s such as small amount of time, it probably won’t even be recorded as you being in Maryland. That’s more like a couple of short business trips. (If I had to prepare a state tax return for every state my husband did a business trip to in a year, I’d be pulling my hair out!)

    At the worst, if your company does decide to tax you for the time you spend in Maryland you would only pay tax to Maryland on the income that you earn while you are in the state, not in Tennessee.

  275. Jake on Fri, 15th Aug 2014 2:39 pm
  276. Hi. Last year, I lived in Missouri and worked in Illinois. The company I work for is based in Missouri, however. So my W2 came, addressed from Missouri, to Missouri. I filed my taxes using HR Block online software, and ended up receiving a letter in the mail from the Missouri Department of Revenue Taxation Division, saying that I owe them $1,500. I remember filling out the form online for being a non-resident worker, but apparently Missouri didn’t see it as such. I called the division office and some with a woman who told me to simply send in my w2 and she would file for the MO-CR for me. I emailed a copy of my w2 on April 15, thinking everything was handled, and went about my business. Now it’s August 15, and I just got a letter in the mail demanding the amount that they previously stated, plus interest and fees. It also says that my right to appeal has expired, even though I had already sent in my W2 as an appeal. Is there anything I can do?

  277. Jennifer P. on Sat, 16th Aug 2014 4:21 am
  278. Hi Jan,

    Thanks so much for taking the time to talk with all of us. It’s much appreciated. Like many others here, I live and work in different states, and so does my husband. Here is my problem:

    Both my husband and I live in IN, but work in IL (at the same company). We grew up in IN, moved to IL for a while when we got jobs in IL, and then recently decided to move back to IN and just commute to our IL jobs (sorry, didn’t care much for IL lol). We asked our HR dept if there was any paperwork etc. to be done regarding withholding of taxes due to the change. They said no, just update your address with the company. Well, as soon as we did, we noticed on our pay stubs that on every check money is being withheld for BOTH IN and IL, so we are currently paying 8.4% state tax alone on every check. I questioned them about it today, and they kept telling me IL and IN do not have a reciprocal agreement anymore, therefore we have to pay both simultaneously.

    These accountants at our company are by no means experts either, they know nothing of tax codes etc. and we are the only employees they have commuting from a different state, and have never done this before. In fact, all the lady did was put our home address and work address in a program like Turbo Tax and b/c it showed we should pay 5% to IL and 3.4% to IN she assumes that’s correct even though those programs are not always accurate.

    I understand the reciprocal agreement expired in 1997, however, in the 2000s, well after the agreement expired, between the 2 of us, we have worked in IL and lived in IN about 4 times and this has NEVER happened. None of our IL employers before this company withheld taxes for both IN and IL simultaneously. We always got taxed by IL, then dealt with IN when it came time to pay our taxes. We know of several other people currently working in IL right now, but living in IN who are not being double taxed like this too.

    Do we really have to give up 8.4% of every paycheck all year long? Can we just have IL taken out since that’s where we work, and deal with IN when it’s time to file? If so, how do we get them to stop taking money out of our checks for IN? B/c that is a huge amount of money between the two of us, and even if we can get some of it back at the end of the year (b/c there’s no way I should have to pay both states the full amount in taxes given I don’t spend all my time in either one, that would be outrageous), we could really use the money now. If IN residents working in IL really have to pay 8.4% like that I can’t imagine many people would bother doing this, and there are a LOT of people who work in Chicago and live in Northwest Indiana… If they have to double tax us right now, how do we go about getting some of the money back when we file our taxes (and who would we be trying to get the money from? IL, or IN?)?

    Any advice you can give on this would be helpful and so appreciated b/c if we really have to pay 8.4% on every check like this, we’ll have to start looking for new jobs in IN….

    Thanks!

    ~Jenn

  279. Jan Roberg on Sun, 24th Aug 2014 8:06 am
  280. Hi Jake,
    What you need to do is show Missouri your tax return for Illinois. You are a Missouri resident who worked in Illinois and paid tax to Illinois. You need to show Missouri that you filed an Illinois tax return and paid the tax to them. They can’t do a CR without the Illinois return.

    The reason for that is, you may have withheld $1500 to Illinois, but without the tax return, Missouri doesn’t really know what your Illinois tax really was. Illinois may have refunded the whole thing–then you’d owe it to Missouri anyway.

    Call Missouri, explain the problem, and you send them the forms, don’t have them do it for you. They even let you email them in which is really easy.

    You don’t need an appeal so much as you just need to get them the right documentation. They’re usually pretty understanding about stuff like this, so just talk to them and send them what they need.

  281. Jan Roberg on Sun, 24th Aug 2014 8:14 am
  282. Hi Jenn,
    You are right, they are wrong.

    Your company should only be withholding State income tax for Illinois because that is where you work. They should not be withholding for Indiana. That’s the way it is.

    If they can’t understand that, then redo your Indiana W4s and claim 500 exemptions. That oughta put the Indiana withholding at zero and at least give them a document to stick in their file so they feel comfortable not taking the Indiana tax out. (I suppose 500 is a little extreme, but if you can’t get the to do the right thing the right way–there’s getting them to do the right thing the wrong way. 20 Exemptions should do the trick.)

  283. Robin on Wed, 3rd Sep 2014 10:31 pm
  284. I live in MN and have been working remotely from my home for 10 years first for an IL company and second at small NY company. I have always been taxed only MN, as that is where I live and work.

    I have recently accepted a position with a larger NY company. Still working remote from my home. The new company claims that regardless of where I physically work they consider my work site as Lockport NY. And will withhold for for NY. I don’t agree with this but it’s how they do it. It’s a great job in terms of salary benefits and title. So it would be hard to decline. Unless I will get double taxed. From what people have told me and what I have read, it will all even out. And I will not be double taxed.

    For example, I talked another remote worker at my new company who lives OH. He stated that he files non-resident first than the credit applies to OH and it evens out. He did caution that NY would not withhold city tax but so far Ramsey MN has no city tax.

    But I am still worried how this will play out come tax time. Not so much this year when I have 9 months MN and 3 months NY. I think it will be fine. But what about next year when I have 12 months of only NY withholding?

    I check marginal tax rate for both states, MN is 7.35 NY is 6.5 so will plus $$$ the difference to match what MN would have withheld. But want to be sure that I am not going to be in trouble with MN. Will I pay penalties for this? Should I call the State?

  285. Jan Roberg on Sun, 7th Sep 2014 5:00 pm
  286. Hi Robin,
    I think you’re being smart. You’re thinking everything through. Here’s what you do–take the job because you want it and it’s a good career move for you. File a New York non-resident return and then take a credit on your Minnesota taxes for your New York taxes. You already knew that from your research.

    So how can you tell if the withholding will be okay or if you need to make estimated tax payments to Minnesota? Here’s what I would do–

    First, just because the tax rate listed is higher in Minnesota than in New York (and that seems really odd, but hey, that’s how it goes) it doesn’t mean that the tax really is higher. For example. Missouri’s tax rate is 6% while Illinois is 5%, but I’ve often got people working in Illinois and their entire Missouri income tax is covered.

    Why? Because even though Illinois has a lower tax rate, Missouri allows so many deductions that our taxes are usually lower for most people. You may or may not have a similar situation.

    So how can you test it?

    That’s actually going to be kind of easy for you. Take your last income tax return that you filed (for Minnesota.) Use all the same numbers, but claim the income as non-resident income for New York, and then do a Minnesota tax return claiming a credit for tax paid to NY on it.

    You’ll only get a credit for the actual tax you are liable to NY for, so the withholding doesn’t matter. If your Minnesota return shows a balance due–then you’ll need to make estimated payments to Minnesota. You can set that up for 2015 when you file your 2014 tax return. If your Minnesota return doesn’t have a balance due, then I wouldn’t worry too much about it.

    Enjoy your new job.

  287. Aaron on Sun, 14th Sep 2014 11:10 pm
  288. Jan,

    I recently took a job for a company based in Illinois. I live in Texas and work for this Illinois company from home. I was informed by their HR department that I have to pay Illinois state income taxes throughout the year and then file a return for a refund. However, I see conflicting information when I’ve done research. Since I do not physically work in Illinois, and am a resident of Texas, should I be paying Illinois state income?

    Also, my first pay period check and signing bonus I received on Friday had Illinois state income withheld. If I indeed should not be paying Illinois state income taxes, what is the process I should go about to get the amount withheld for Illinois returned to me?

    Thank you much for your time and comments!

  289. Jan Roberg on Mon, 15th Sep 2014 9:12 pm
  290. Hi Aaron,
    You do not physically work in Illinois. You should not pay Illinois income tax. What you will do is file an Illinois non-resident income tax return. You will show on it that you earned zero dollars in income for 2014 and they will have to refund your withheld taxes.

    Now, technically, your employer should not be withholding Illinois taxes, but I understand where she’s coming from. The states are getting really cranky about “employees” and withholdings so I’m thinking she may have had her wrist slapped about that. (Or people she knows at least.)

  291. Joann on Tue, 16th Sep 2014 2:00 am
  292. Hey Jan,
    I’ve been scouring the internet for several hours and haven’t found a clear answer on this.

    I moved to WI from IL in May and am now a perm. resident of WI working remotely for my Illinois employer. My employer says she recently spoke to her accountant and he told her that in order for the reciprocity between WI/IL to apply, I would need to commute to Illinois regularly, which I don’t (maybe once every 2-3 months). As a result, she said her only options were to incorporate a new office in WI (not an option for her) or switch me from W2 to 1099 and treat me as an independent contractor.

    Can you let me know if there actually is any tax regulation regarding the act of commuting from one state to another in order for reciprocity to “count?” I haven’t been able to dredge this info up on the internet. I have a feeling she may be trying to switch me to 1099 to save money. Thanks for your help!
    -Joann

  293. Jan Roberg on Sun, 21st Sep 2014 6:57 am
  294. Hi Joann,
    Your employer doesn’t have to incorporate in Wisconsin, but she will need to file paperwork to do business there–like paying payroll taxes. And she doesn’t feel like doing that.

    Technically, you are a Wisconsin employee. So that’s what she should do.

    Now, if she wants to make you a 1099 contract laborer–then she would have to gross up your wages to cover the amount of self employment tax you would need to pay. (Just sayin’.)

    So really, she should be withholding Wisconsin payroll tax, but I do understand her side. If you’re the only out of state employee, it is a hassle.

    On the other hand, if she gets audited for calling employees 1099 contract labor–well that’s a much bigger hassle. The choice is hers.

    If you do become contract labor–do make sure that your income is grossed up. For example: if as an employee you make $100, then you have $6.20 cents taken out of your paycheck for social security and $1.45 for medicare. In addition to that, your employer also pays an additional $6.20 plus the $1.45 for her share of the social security and medicare taxes.

    What this means is that when you pay your income taxes as a 1099 contract laborer, you’re going to pay an addtional 15.3% taxes on the contract labor income. Now half of that you normally pay anyway with your withholding. But 7.65% of that you need to add to your income to make yourself whole. So at the very least, if she’s going to convert you to 1099 contract labor–then you need to raise your pay by that much. Take what you make and multiply it by 1.0765–that’s the minimum increase you need to ask for to make yourself whole.

    Now, there may be other benefits you lose by becoming contract labor so you’ll need to consider all that too. And remember you’ll need to file quarterly estimated tax payments.

    The upside to all this is that you’ll be able to deduct all of your business expenses-like your home office and any other job costs you have on your tax return.

  295. Louise on Mon, 13th Oct 2014 11:23 am
  296. Hi Jan,
    Hi, My husband lives and work in VA, however I work in NC but live in Va. Only Va taxes were taken out, so do I still have to file NC nonresident since no taxes were taken out for the state? And if I do have to, how will I file since I’m filing fed jointly? Will I have to file both states married filing separately? According to the NC website If I file married filing separately I have to complete either a federal return as married filing separately reporting only my income, deductions, and exemptions, or a “schedule” showing the computation of my separate federal taxable income and attach it to my North Carolina return. I must also include a copy of my joint federal. It sounds like I have to complete 2 federal returns and I have no idea what schedule they are referencing. Is that correct? I am very confused and need help. Thanks

  297. Jan Roberg on Sun, 26th Oct 2014 3:25 pm
  298. Hi Louise,
    There’s the “right” way to do your taxes, and there’s the way I’m going to tell you to do your taxes. Yes, I’m going to tell you to do the wrong thing. It will make your life easier, your employer’s life easier, the state of Virginia’s life easier, and the state of North Carolina’s life easier.

    I’ve done this the “right” way before, and it only caused problems. So here’s the easy way.

    Just file for Virginia. Forget North Carolina.

    Really, your employer should have withheld NC taxes from your wages. She didn’t. You can file a North Carolina return, and go through all the rigamarole, but the NC folks will be looking at it going, “why is she filing here?” She lives in Virginia and had no withholding.

    Now what should be happening is that your employer should withhold NC taxes. I’m thinking that she just figured there was reciprocity between the states. Virginia has reciprocity with lots of states, it’s just that NC isn’t one of them.

    Have your employer withhold NC for 2015 and do the two state shuffle next year. (Which is the right thing to do.)

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