It isn’t always easy preparing your taxes when you’ve worked in more than one state. We can help you get it right!
I get many calls from people who prepared their own returns with two or more states and they all say something pretty similar, “I did the return, the federal is okay but the state just doesn’t seem right.” Then I ask, “Do you owe way more than you think you should?” “Yes, how did you know?” I do this for a living. The quick answer is to check to see if you took a “credit for taxes paid to another state”, that’s usually where the problem is.
Normally, I would have put that at the end of the blog post, but it’s such a common problem that I figured it needed to go first. Quick answer and you’re done. If you need more information, I’ll start from the beginning.
Two states can usually be handled by most of the major tax software companies with no problem. Remember the credit for taxes paid to another state and you should be good. On the other hand, three or more states can send your software into a tizzy. Even with my professional grade software, I still have to compute numbers by hand and manually input them into the program. If you’re dealing with three or more states, spend the money on a professional. It’s a good idea to ask, “Have you ever done a California return before?” (Or Ohio, or North Carolina, or whatever.) Experience helps.
Back to the two states: There are two situations where you could have two state returns. One would be you moved from one state to another, for example moving from Indianapolis to Chicago for a job. The other would be where you live in one state but work in a different state, for example living in St. Louis, Missouri but working across the river in Alton, Illinois. These two types of situations use different forms.
Moving: When you move from one state to another, you’ll be filing your two state returns as a “part-year resident”. You’ll be completing paperwork that says how long you lived in the state, what your earnings were for the state, etc. You should only be taxed on the income that you earned while you lived and work in the state. If you withheld properly, your taxes should come out normal, no big refunds, nor big balance dues. Most of the time in a case like this, you won’t be filing a “credit for taxes paid to another state” because the “part year resident” return will handle you income allocations. (Most of the time—there’s 50 states and they all have different rules, so in some cases you’ll still be doing the credit for taxes paid to another state.)
Living in one state and working in another: this situation is a little different. You will be a “resident” of the state you live in and a “non-resident” of the state you work in. The state you work in is the state your company is going to withhold taxes from. But the state you live in is going to tax your income too. This is where it’s really important to remember the credit for taxes paid to another state, because if you miss taking that credit your tax bill could be enormous. Sometimes, the tax bill is still pretty large even when you’ve done everything right. For example, here in Missouri our state income tax rate is 6%. Next door in Illinois it’s 3% (although it’s moving up to 5% this year.) If you live in Missouri and work in Illinois, you’re going to get hit with a pretty harsh state tax bill unless you had Missouri taxes withheld or paid estimated taxes.
Here’s some other tips that will help you with your multi-state return:
1. Always do the federal return first. Don’t start the state returns until the federal is done and you feel that it’s correct. If you have to go back and make changes to the federal, your state numbers will be off.
2. Non-resident income: that’s wages that you were paid in a state you didn’t live in. It also includes self-employment performed in the state.
3. Resident income: the state you live in will tax everything, in addition to your wages, it will tax your pension, interest, investment income, everything.
4. Moving expense deduction-always goes to the state that you moved to, not the state that you moved from.
This is a pretty quick and dirty summary of multi-state tax returns. If these tips don’t solve your problem, do call us and get some help. They’re not always easy to handle and we do this for a living.
Hey Romeo,
Welcome to Missouri. Here’s the deal–you lived and worked in Illinois for all of 2011. You fill an Illinois tax return only. Now your tax return is going to have a Chesterfield, Missouri address on it–so later you’ll get a nasty little letter from Missouri asking you why you didn’t file a Missouri return. You will write back–on that very same letter they sent you, that you lived in Illinois for the entire tax year of 2011. End of story there.
For 2012, you probably had California taxes withheld, and of course you’ll be dealing with Missouri. You’ll be a Missouri resident and file a California non-resident. Not that hard. Since California was a temporary situation–you may have some “employee business expenses” that could be worth reporting–it depends upon your situation.
Or am I misunderstanding and you’re still a Chicago resident? If so, you would file an Illinois return, and have both California and Missouri as non-resident returns. You would claim credits for taxes paid to other states (this gets complicated if you have three states involved so that might be worth hiring someone–Hey–I’m good at that stuff–just sayin’.)
But f0r 2011–you’re just an Illinois resident filing an Illinois return.
I’m a chicago resident since 2008 , my employer files for bankruptcy on Nov 2011.. on Jan 5, 2012 until Feb 5 i worked in San Fran, CA as a consultant (w2 basis) then i found another job in Chesterfiled, MO where i moved/joined on Feb 7 until now.. means I paid taxes to CA and im now to MO.. at the end of 2012 when i file for my return .. would it be very complex to fill the forms? i read somewhere on the net that i may end up paying taxes to Illinois too? is that true ?
if so, why would Il tax my income that i didnt make in Illinois? I’m getting paid hourly( not FTE yet) and on my paystub i see taxes withhold to MO. but i’m not sure if i’ll owe Il at the end of the year of what?
from what i read on both states’ websites, seems there is some sort of credit between states but im still not sure if the picture is fully clarified .. or if i need to correct anything with my employer( they know im not a resident of MO).. would you please advise me on my situation..
Thanks 🙂
Hi Cris,
Yes, you’re right about paying Idaho state tax on the income your husband earned in Alsaska.
Now–just in case it helps you–that Alaska job is considered to be temporary employment or a temporary location anyway. You may be able to write off many of the expenses he had that were part of being employed at a different location temporarily. You would use a form 2106 and would deduct employee business exepenses. If he went to Alaska to work and his employer didn’t reimburse him for the cost of traveling and living there–there could be some deductions for you. It’s worth checking into.
We live in ID. My husband worked in Alaska for 2 months, which does not have any state income tax. So am I right that we would have to pay ID state tax on the income he made in Alaska?
Hi Becky,
Thanks for having a question I can answer! Tonight’s been a lot of “Gee, I don’t know.” But this one I do have an answer for you. Because you work in Illinois, withhold for Illinois. Then you’ll file a credit for you Illinois taxes to Missouri, but it will work out okay.
Hi Emily,
Forgive me but I’m going to do a classic cop out and have you contact the different states as to how they want you do handle the withholding. That’s out of my league. Sorry.
This is very helpful! I live in MO and have worked in IL for the past 18 months.
My employer seems willing to withhold taxes for MO or IL, based on my preference, and I am not sure which is best. It sounds like I need to file in both states either way. I will owe taxes on what I earn in IL to IL. Then I will file in MO where I will be taxed on all my income (with my husband’s wages, interest, etc) and I will claim a credit for what was paid to IL.
Does it matter in which state my withholding takes place? Do you have a recommendation on which would make it easier for me to file?
Thanks!!
I am sorry, one more addition- The construction guys report to work here in missouri to get their trucks and orders, and they end their day in missouri to turn in their trucks and orders. About 2 hours a day in missouri and 6 hours in the other state.
I hope you can answer my question and I really appreciate your wonderful advice on this website. I work for an employer who is a construction compan base of operations in missouri, the employees report to work in missouri everyday and live in missouri, but we do have a few jobs in kansas and oklahoma since we are at the border. Do we have to withhold in three states? SOmetimes our service techs are working a few hours in oklahoma and a few hours in missouri on the same day. Our software is setup to handle multi state issue, I just want to make sure to do the right thing.
Hey Jeremy,
Call your Turbo Tax hotline and they’ll talk you through it. Seriously, they have experts who work with their software everyday to help you.
We are using Turbo Tax to file our taxes this year. My husband works in one state and we reside in another. How on Turbo Tax do we get the Credit for Taxes Paid in another state?
Hi Igor–
You’ve got an unusual situation. I’m thinking that in your case–I would do the following:
1. file a part year return for Illinois.
2. file a non-resident return for Massachuestts
3. file a resident return for Connecticutt with a credit to taxes paid to other states.
Since you live in Connecticutt, your tax return will have a Connecticutt address and you’ll be expected to file Connecticutt paperwork. I think filing the way I laid it out will be to your best advantage.
Hi Dan,
Once you move to Chicago, your withholding will be for Illinois and you will be filing an Illinois state income tax return. Welcome to the mid-west.
Hi Conrade,
Here’s my basic advice.
1. Do your federal first. Don’t touch your states until your federal is done.
Now here’s the situation–you can file a part- year return for Virginia and a part year return for Montana.
Or– you can file a resident return for Virginia with a credit for taxes paid to Montana. (Since you’re moving back anyway.)
It most likely will not make a difference in your refund or balance due amounts. But if there is a difference–do whichever way gives you the most money.
Hope that helps.
Hi Amit,
I’m pretty sure that you can amend your Maryland return because you shouldn’t owe them any tax. (You didn’t have a period where you lived in New York and worked in Maryland did you? That seems rather difficult to pull off, but I guess it’s possible–in that case I could see you owing Maryland, but no other case.)
By the way–did you claim your expenses that you had in Maryland for the training as employee business expense? It might not have helped your return, but I figure I’d bring it up since you’re amending anyway.
Roberg,
First of all thanks for having such website and helping out individuals through it.
I have read through your blog post and all the comments up until now, but I’m still a little uncertain on how to proceed: I lived and worked in IL for 7 months. For the remaining 5 months, I lived in CT and worked in MA. Taxes were held in IL and MA.
(1) Am I correct that I have to file IL and CT taxes as part-time resident in each state and file MA taxes as a non-resident? From one of your comments it sounded like maybe I didn’t need to file CT taxes as I had no income there.
(2) I’m not sure if the “credit for tax paid to another state” applies here. I will look into if it does, but if it does, in which state would the credit be applied?
Igor
I will be moving to Chicago, Illinois and working for (and paid by) a company based in Massachusetts. Which state’s income taxes will be deducted from my pay check? One, both, or neither?
Thanks for your help.
I moved to Montana from Virginia in June of 2011. I will be filing taxes in both states here soon and was wondering if there is any information you have that I should keep in mind when doing so. I will be moving back to Virginia in March for graduate school, and I wasn’t sure if there were any hiccups that might occur due to my lack of experience filing for two different states. The forms are the 1040ez, but I haven’t done this before and don’t want to find out later that I should have done something I simply had no clue to do. Any advice would be great. Thank you.
Hi ,
I moved to Maryland in Jan 2010 in a consultancy for training. I was not paid during my internship during training. I got a job in NY in July 2010. I did not earn a single penny in Maryland . Total income for 2010 was from the job in NY. Do I owe any money to Maryland state ? I filed my returns via turbotax last year and they didn’t tell me that I owe $951 to Maryland state. I came to know this when I checked for my tax documents recently. Can I amend the last year’s return and get rid of this MD state tax?
Hey Katja,
You’ve got one of the more difficult tax problems–two part year returns plus non-resident income in one of the states. And it really doesn’t work because you’re generally doing one or the other. My recommendation is preparing the part year returns and just putting all of the VA rental income on the VA return.
Next year, when you have VA rental income but you’ll be living in Oregon–you’ll prepare a non-resident VA return and for Oregon you file a “credit for taxes paid to another state.”
I moved from VA to OR in August 2011 and have income from both states, so I guess I’ll be filing part-year resident returns in both states. My question is about rental income on a property I still own in VA. Do I split the income (loss actually) between the two states or keep it all on the VA return. If the latter, can I do that on a part-year resident return or do I need a non-resident return to cover the rental from Aug to Dec? Thanks.
Hey Jeremy–
It sounds like you are sent out on “temporary assignments”. This is how I’d do your tax return. What do you consider to be your home state? Sounds to me like out east is home–but that’s not always easy to determine. One state is going to be your tax home. That’s the state that you will claim you are a resident of.
Next, any other states you work in will be “non-resident” states. This is one of my little specialties. When you are on temporary assignment–many of your living expenses while you are on your temporary assignment may be deductible. I do a lot of these returns for traveling health care providers and IT consultants. Those are two categories of jobs that tend to have lots of temporary assignments. I’ve also handled some traveling construction workers, although not so many in the past couple of years.
So you’re not just looking at multiple states–you’re also looking at form 2106 expenses. If I’m right about you being on temporary assignments–filing your taxes correctly could save you lots of money. You should contact me directly for more information.
Hi Ed,
You’ve got one of the “problem” issues. A part year return with a “no-tax” state and income from someplace else. I get those a lot here–we’ve got Missouri and Illlinois, but someone will move here from Texas–it messes everything up.
Basically, you can either claim “credit for tax paid to another state” or you can claim “part year” residency. Usually you just pick whichever gives you the best deal. Unless you made a lot of money on your rental–the part year resident is what will work best for you.
So I’m thinking you’re stuck with double paying that tax. But just to be on the safe side, I’d call California and talk to one of their people at the help desk. It’s quite possible that I could me missing something. (I only do about 2 or 3 California returns a year–I’m not a California expert.) I know that different states handle the issue differently–we recently had a similar situation (different states though) and the state with the double tax issue gave us a solution that was very favorable to my client. But different states have different rules–so do talk to California.
My company is based in the East coast.I worked the first three months of the year in east coast. Then I was sent to west coast and worked there for five months. And I returned back to the head quarter(east coast) after working five months in west coast. I have been paying income tax for west coast while I was there. How do I file my state taxes? Thanks you
Thanks for the response! But it looks like the end of it is cut off. We did have positive income for the rental property, so NC wants to tax us on that. When I then did the CA return, there didn’t seem to be a way to get credit for taxes paid to another state (except for AZ, NV, Guam, and a couple of other “close-in” states, it seemed), at least not using TurboTax. It seems like I’ll have to file an amended return with the Schedule S, I guess.
Hey Vimal,
Doing the multi-state thing is confusing. Don’t feel bad. Here’s what you do.
First, prepare your federal return. Always do that first.
Now, you’re going to file a part year return for Connecticut and a part year return for New Jersey. It doesn’t matter which order you do it in.
I can’t tell you what you’ll get back unless I prepare the tax return.
Hi Ed,
First and foremost, California tax regulations are different from all of the other states. Make sure you read each line of the return carefully.
California will tax your rental income from North Carolina–you were earning income while you lived in California so it’s taxable in California.
But it’s also taxable in North Carolina. Let’s get started:
First do your federal return. Make sure it’s 100% correct before you even look at the states.
Next, do North Carolina–you’re a non-resident. You might not actually have any income because often rental real estate shows a loss. You may still be required to file even if your net income was very low, but even if you don’t have to file, you need to do the Carolina return to find out before you do California.
Next do California as a part year resident return.
There is no Texas state income tax. To make your computer software work, even though your Texas W2 doesn’t list anything in the state box, put TX in the state box when inputting the W2 income on the screen. This tells the program that that income is not from California.
I’m guessing that you won’t be required to file North Carolina or at least won’t owe any tax there.
With most states you can
Hi,
I am an illiterate when it comes to tax-filing/tax-returns stuff. So please bear my questions if they are dumb.
I lived in Connecticut from Jan 2011 to Jun 2011 and New Jersey from Jul 2011 to Dec 2011. Currently I am staying in New Jersey and my work office is also in New Jersey.
Please advise as to how my taxes need to be filed? One of the Tax-returns advisor advised me that I will get tax returns for New Jersey state. So what happens to tax I paid for Connecticut? How will I get the money for that? He says, it will be exempted. So what does that mean? I will get full tax money back? Or what will I get back for Connecticut?
Please advise.
Thanks,
Vimal
My wife and I lived in CA for the first half of 2011 then moved to TX. We also own a rental property in NC. We know we need to file a state return for CA, but do we also need to file a state return for NC just for the rental income? How do we ensure we’re not double taxed on that rental income in CA? Thanks!
Hi Cheryl C.,
First–do the federal. Then I’d file a “part-year” resident for New York. No Illinois. She may be required to file a Connecticut income tax return even is she had no withhodling so prepare that also as a “part-year” resident. No income in Illinois means that Ilinois is out of the picture for her tax return. Use her New York address when filing her 2011 taxes.
NOTE: home of record and permanent address are issues that are more important when filing a military tax return. For regular citizens–it’s a different story. That’s why for your daughter–there will be no Illinois return for 2011.
Hi Jan, My daughter, used Illinois as her perm address on paper, lived half of last year in Connecticut while finishing school and half the year in New York when she started her first job out of college. So I have three states involved. I have claimed her as a dependent on both my state and federal taxes, for the last time. Now that she is out of school and has a job, she will use New York as her perm address starting in 2012. So where does she need to file for this last year? Connecticut earnings were less than 3000 and they held no taxes because it was a student job. New York held both state and local taxes. She earned no money from an Illinois employer.
@B. Messier,
You will be filing a part year return for Massachusetts and you should not be paying Massachusetts tax on the money you earned while you lived in Florida.
In your situation–it’s very important that you file a Part Year resident return. Sometimes, computer software automatically files “credit for taxes paid to another state”. That works great for lots of returns, but it’s never a good idea for Florida.
It doesn’t matter where your company is headquartered. If you work in a certain state–then your income tax should be based out of that state. Hope that helps.
I lived in florida for almost 10 months in 2011 and then moved to mass. The company that I worked for in florida has its corporate headquarters in mass. Now when I moved to mass I got a different job in mass, I know I will be filing my tax form part year residence in both states but do I have to pay mass state taxes on the money that I earned in florida because the company is based in mass and I now live in mass. I hope not.
Hi Jamie,
You might need to file married filing separately this year. Play with it a little, but I’ve had similar problems with newlyweds with Massachusetts and different states before. Basically, your husband is a partyear resident of MA. He does have taxable income in Mass so he will have to file.
You cannot be head of household, you’re married and you lived together so it’s illegal for you to claim head of household.
Do you have children? If yes, then you probably don’t want to file separately–the tax credits for children will outweigh and problems with the Massachusetts health care tax issue.
Many tax programs have a button where you can run the numbers as filing jointly and then you push a button and it tells you how your return looks if you file separately. Your federal will almost certainly be better filing jointly–but take a close look at what happens to your Massachusetts tax when you’re joint vs separate. You’ll want to take the track that gives you the best overall tax rate. That should set you in the right direction anyway.
And thank your husband for his service to our country for me. 🙂
UPDATE ON THE LIVING IN ILLINOIS AND WORKING IN MISSOURI ISSUE:
Oh my goodness, this is a huge difference. Last year the Illinois tax rate was 3% and the Missouri tax rate was 6%. If you lived in Illinois and worked in Missouri, pretty much your credit for Missouri tax paid covered all of your Illinois taxes.
This year, the Illinois tax rate is 5%. You’d think your Missouri tax would still cover everything but it doesn’t. Here’s why–
Let’s say you’re married and make $50,000 a year. In Illinois, you’d get to claim 2 exemptions at $2000 each and your taxable income would be $46,000. At 5% that makes the Illinois tax $2300. (Back in 2010, it would have been $1380.)
In Missouri, that same $50,000 would have an exemption of $4,200, a standard deduction of 11,600, and a deduction for taxes paid to the IRS making your Missouri taxable income closer to $30,400. Now at 6%, you’d expect the Missouri tax to be $1824, but it’s actually even less than that because we’ve got a somewhat progressive tax system. In this particular example, the actual tax was closer to $1600.
So you see the difference? In 2010–the Missouri tax would easily cover the Illinois tax, but now with the Illinois tax rate up to 5%–the Missouri tax doesn’t cover it.
If you’re doing a an Illinois/Missouri crossover return, you can expect to be owing money to Illinois this year. Sorry about that.
Special thanks to Cindy and Cindy for pointing out the problem.
My husband was in the Army and was a resident of Florida until October of 2011 when we got married and moved to Massachusetts with me. He was honorably discharged from the military and is now on unemployement in MA. Does he have to pay MA state taxes for the income he had earned in Florida? Or can he file part time residency? And can I still file Head of Household in MA since he only lived with me the last 3 months of the year?
Cindy,
Will do.
I have the same situation as CIndy Robertson. My spouse and I both work in Missouri and live in Il. We always broke even on Illinois but this year we are paying almost $1k. Will you post on here what you find out regarding this situation? Thanks!
Hey Cindy–
That’s scary. I haven’t done a crossover return yet this year but I’m hearing horrible stuff. If you wouldn’t mind letting me take a look at it just to make sure. Even though Illinois raised their tax rates, and accounting for Missouri’s tax deductions, it still seems a little off.
I normally charge $50 to do a look see, but I’ll do it for you for free just to get some decent information on my web site. It’s quite possible that it’s right, but I just want to make sure.
You can email me directly a jroberg@robergtaxsolutions.com and I can explain how you can get me the information securely. Thanks.
Now folks–I’m not going to be looking at everybody’s tax returns for free. I can’t afford to do that, but Cindy’s got a situation that many of my own clients are going to be dealing with so she’d be doing me a favor. Sorry.
I live in Illinois and work in Missorui. My employer hold out for Missouri state and local taxes. For 35 years I have always broke even on my state taxes for Illinois. This year was totally different. Knowing that there was a change going into effect as to the way this would work % wise, my husband and I both had more held out on our state taxes, which didn’t help at all, and for the first time owe Illinois, and not a small amount. Unless someone can tell me how to erridicate this issue, we will be paying the state of Illinois hugh amounts every year, or we will be moving to Missouri(NOT!). We had 3700.00 held out this year between the 2 of us, the state tax credit for missouri was 3300 and the tax for Illinois was 4100, do the math.
Hi Bryan–
Technically–you should file a “part-year resident” return for Connecticutt and a “part-year resident” return for Massachusetts.
You should allocate the income that you earned while in Connecticutt to your Connecticut return and the Missouri portion of that state tax to the credit for your Connecticut return.
That’s what you should do. That’s technically the correct way to go. And you’ll probably be pulling your hair out. Your tax software may just not be going with you on this one.
So let me ask you a question–did you have any Connecticut withholding? Is there anything in your tax documents to connect you to Connecticut? How long did you live in Connecticut? How much money did you make there? You may just want to file a Mass resident only return. I know, it’s only fair to give Connecticut her fair share of the tax money, but if there’s nothing on your return to align you with Connecticutt, then filing only Massachusetts could be the easiest option.
Start setting it up as a part year return–but if your software won’t handle it (it’s weird–some states don’t do this well so without actually doing your return, I don’t know how it will turn out) but if you can’t get the part year, consider just filing for Missouri.
Start with Connecticut first.
I lived in Connecticut while working in Massachusetts for part of the year, then moved to Massachusetts and continued to work at the same job. Which state return do I start first? Should I expect to receive a tax credit from CT or MA since both will be taxing my income?
Hey Cindy–
You file as a resident of Georgia and a non-resident of Alabama. You put the credit of other taxes paid on your Georgia return. Many software programs will do it automatically for you, so check your return to see if it’s already there.
Also–traveling medical staff often have expenses that can be deducted on a form 2106–if your company reimburses you for everything–then just forget it. But if you pay your own expenses–you’ll want to track all of your hotel, rent, mileage, meals (or take the per diem) etc. If you only did the travel nursing for 7 weeks, you won’t have enough of a deduction to make it worth you while, but if this will be a forever type of career, start tracking your expenses now. (I do a lot of those returns and it can make a significant difference in the amount of tax you pay.)
I’m just started travel nursing in 2011, I live in Georgia and I worked in Alabama for seven weeks. How do I file? Where do I put the credit to taxes paid?
Hi Vegas,
probably only need to file Maryland. I’m guessing that you’re not married so you don’t have a spouse’s income to worry about. If there’s no income then you won’t be filing for the state with no income.
I lived in North Carolina but was a stay at home mom. I moved back to Maryland in the summer and now have a job. Do I need to file for both states or just Maryland?
Hi Haish,
Okay so you need to file taxes for Rhode Island as a part-year resident. You will also need to file taxes for Connecticut as a non-resident.
You might have to file taxes for Massachusetts as a part-year resident, but if you were a student and your income is really small, you might not need to file at all. Of course, if you had withholding and are eligible for a refund, you’ll want to file Massachusetts even if you don’t have to.
If you’re doing your taxes from this website (link above) when you choose the state tax returns, you get as many states as you need for the one price, so even if your Massachusetts refund would be really small, it won’t cost you any extra to file.
my case is a combination of the above two.
I lived in Massachusetts for 7 months…had a small income as i was a student . In August I moved to Rhode Island….but worked in Connecticut . Taxes witheld in CT, and i voluntarily put aside $25 for RI every paycheck.
How should i file?
You should not owe North Carolina taxes. What happened was that the federal government sends copies of the tax returns to the state that has the taxpayer’s address. In your case they sent it to North Carolina who in turn went–oooohhh, this guy lives here so he owes us money!
But in your case, you don’t live there. You will need to send North Carolina a note explaining the situation. You did not live there now and did not live there in 2010. That should solve the problem. (Here in Missouri, there’s actually a little box you can check when you get one of those letters, it’s much easier.)
This should be easy and you might even be able to handle it with a phone call. Good luck.
I worked in Texas in 2007 for a company based out of Florida. I lived in my Camper, since I worked in several locations. When I filed my Federal tax return I put my daughters address, in North Carolina, down for the return since I didn’t have a permanent address anywhere. I did not file any state return since Texas doesn’t have state taxes. North Carolina took my information from the IRS and now says that I owe taxes, Interest and Penalties for that year. I was just informed of this in March of 2011 and they are assessing interest and penalties. Do I indeed owe North Carolina taxes?