Multi-State Tax Returns

Posted on: 03/30/11 894 Comments
Preparing multi-state tax returns is tough.

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.

894 thoughts on “Multi-State Tax Returns”

  1. Hi Sharon,
    Your son is a non resident of NC and a resident of Georgia. He will take a credit for taxes he pays to NC on his Georgia tax return.

    Yes, I took your name off too.

  2. I need some help with my state taxes and I apologize if it repeats something from above… Here is my scenario:
    My husband started work in PA while we were still living in WV from approx March 2012 to June 2012, when we signed a lease for an apartment in PA (became resident)… Although I was listed on the lease, I remained in WV. We were having a lay off at work that started Sept. 1st so I remained in residence of WV until Sept. 1st then moved to PA permanently so my income from employment is all WV. I did have unemployment for WV while in PA from OCT – DEC.
    My husband earned income living and working in PA since June and I have no income for PA at all in 2012.
    I know PA and WV are reciprocal ( I don’t really understand what that means)…
    trying to do PA and WV tax returns are making me pull my hair out…. They ask for the date you became resident, but they only ask it once and it’s different for me then my husband…. any suggestions or help would be greatly appreciated!

  3. Hi!

    Last year I moved from MA to ME (April 1, 2012), and I transferred within the same company. I didn’t check my paychecks, which I obviously should have, but when I went to file my taxes I noticed MA took out the whole time I was with the company in 2012. So from April on I was being taxed from ME and MA when I was only living in ME. I never lived in one state and worked in another. When I go to put in my state withholding from MA it says the full taxable amount I made that year when it should only be a little more than half that. I asked my company to correct it (I quit in July 2012) and they said they don’t know what to tell me since my address never changed in payroll. Talking to the state of MA about it was helpful, but their advice was to get it corrected, which my former employer is giving me a hard time about. I feel like I shouldn’t just subtract the ME state withholding from the total to get the MA because it won’t match with my W2. Is there an easier way to go about this? Thanks for any advice!

  4. I have a question on the same subject.
    The state of North Carolina keeps sending me notices that I owe an enormous amt of taxes.I neither lived in nor worked in the state those years.
    The notices they sent me even listed the companies that I worked for in another state.
    I called several times and also sent the forms back,with explanation,and yet I STILL receive the notices.
    NOW they are asking me to retrieve all my tax documents for 2008 and 2009 and send them copies.
    I am angry.
    Do I have to comply?
    If I neither lived in nor worked in this state it is none of their concern.What do you suggest?

  6. My son is a college student in NC. We live in Georgia. He works for the college as a Resident assistance and makes an income while at college. In the summer he works here in Georgia. We file him as a dependent on our taxes and he files his own taxes also. He does not claim himself on his taxes. This is the first year he has had an income in NC since going to college. I don’t know how to file his residency on his taxes. What is the best way to do this. His income in GA is greater than the NC income.
    Thanks

  7. Hi Jan,

    So what you are saying is that I should file full year resident for GA/non-resident for CA and my husband full year for CA/ and non-resident for GA right? Can I just file GA full year resident for me and my husband and then allocate only his w-2 income to CA and pay the rest of other income such as dividend, interest for state of GA? What is the best way to do this?
    Thanks

  8. Hi Amy,
    Since you made no money in VA, then don’t show the in and out. Either you’re just a VA resident and MA non-resident–or since you had no VA income, just a Massachusetts resident for tax purposes.

  9. Hi Cindy,
    California will be taxing your income too. Be aware of that. Technically you are a resident of GA and your husband is a resident of CA. But California rules will count your income as taxable as well. Be very careful filling out the forms. Read the lines exactly as how they are written–because the California return means exactly what it says which isn’t the way many other states handle taxes. (What I mean is–don’t just assume the answer should be X because that’s what makes sense–California tax rules are different.)

    Because you have children, you’ll still want to file jointly (better tax status). Since your income was very low, it shouldn’t hurt you too much with the California return. It’s just something to watch out for.

  10. Adam,
    You don’t need to file a tax return for California. You will probably get a letter from them asking why you didn’t file. You’ll just explain that you had no taxable income in CA during 2012 (if you get a letter.)

  11. Hi Andrea,
    Technically you were a California resident for 33 days and an Oregon resident for the rest of the time.
    Social security and pensions and annuities are taxed to the state you lived in at the time you received the payment. So you would file part year returns for each state and attribute the income you receive the the state you were in at the time you received. it.

  12. Hi Jack,
    Generally, if you’e issued a 1099–then you’re considered to be self employed and your company is in Utah because that’s where you live. Now you travel to those other states, but I suspect that your travels are of a temporary nature and you’re always home by the end of the week in Utah. Is that right?
    If yes, then I’d just file a Utah tax return. If you actually work and stay in these other places for like a month or so–then you’ll need to file other state returns. But most sales folks are on the go so much they’re not in any one place long enough to be doing tax returns for the states they travel to.

  13. Hi Sirena,
    If you are moving to Colorado, you will pay Colorado taxes. If you are temporarily locating to Colorado–you will pay Colorado taxes for the time you are working there. Sorry.

  15. Hi Britain,
    Usually the software allows a “non-state” option. If yours doesn’t, you may need to manually prepare the return and list “out of country”.

  16. Hi Mary,
    Probably the easiest thing to do would be to file as an Illinois resident and a VA and DC non-resident. Because she worked the other jobs for such a short time, check the non-resident filing requirements to see if she even has to file.
    If she does, make sure she claims a credit for taxes paid to other states on her Illinois return.

  18. Hi Theresa,
    First, if you want advice about how to file with Turbo Tax, you need to call Turbo Tax. On the other hand, you my try using my link to 1040.com. Sorry, but Turbo Tax doesn’t pay me.
    Now, what you will want to do is file a part year resident return for NY so that you don’t pay them tax for all the income you earned while in Florida.
    About selling your car–if it was for personal use–you cannot claim a capital loss on personal property. Sorry.

  19. I’m having trouble with my state efiling being rejected for the first time. I’m a graduate student in MA, but I maintain my VA residency. Last year, I worked for the university during the spring and fall semesters, but went back to VA to live for the summer (where I did not work, so earned $0). My online filing doesn’t allow you to show that you moved out of a state and back to it in the same year, which is maybe why it is rejecting my return? What do I do?

    Thanks so much.

  20. Hello Jan,
    I and my husband lives in GA. I am living in GA with 2 kids while my husband is working in CA. I didn’t make any income in 2012 except couple hundreds of dividend. My husband paid taxes to Ca and he also received dividends and he had some stock transactions (a loss). I am trying to figure out how to allocate income/dividend to Ga and CA. Should i file full year resident fo Ga, non resident for CA or GA full year resident for me/non resident for my husband and vice versa for CA? Thank you so much

  21. I used to live in NE and had a job there. Then I moved to CA on oct 2012 but have not earned any money and I am still living in CA. DO I need to file a state return for CA ?

  22. Good evening… I lived in California for 33 days in 2012 before moving to Oregon. I receive a Federal Surviors Annuity and Social Security. No state tax from either income was withheld from either state. Which state tax should I file? Any info will be appreciated….. Thank you in advance.

  23. Hello,

    My husband and I are non-residents of Oklahoma. We reside in Texas. He was sent by his company to work in OK on a project. On his W2, it shows how much he earned in OK, $4,760, and the state taxes deducted, and the rest from TX with no state taxes deducted. On the other side of the OK tax form, you may deduct your Federal itemized deductions, and they show only $1000 allowed for exemptions for OK, rather than what is used for the Federal exemptions per person. Naturally this is going to make a larger amount to be taken into consideration for taxes owed. Anyway, why must you use your entire amount earned for the adjusted gross when he only earned $4760 in OK? With the Federal tax return, we will be getting an amount back. With OK, we will owe. It makes no sense whatsoever.

    I would certainly appreciate your help in trying to understand their form.

    Thank you so much.

  24. Hi Jan,

    I am an alarm salesman who is a resident of Utah, but spends 6 months out of the year selling in California, Arizona, and Texas. Since I’m 1099, I’m curious to where I would file state income taxes. Would it be the states where I travel? The state where I live? Both?

    Thanks!

  25. Hi Jan,

    I am a current resident of Anchorage, Alaska but I am moving down to Colorado in a few weeks. The company I work for has an office on Fort Collins, Colorado where I will be working out of. However, I will remain an Alaska department employee and be paid from our Alaska office but residing in colorado. Since Alaska has no state tax I was hoping that perhaps I would not need to pay Colorado state tax.

    Thank you very much!
    Sirena

  26. I live in Alaska which doesn’t have a state income tax but worked in California for most of 2012. Do I get all my taxes paid returned form California? I did my return on Turbo Tax and it says I get about a 1/3 of the taxes back.

  27. I have been doing my taxes myself for several years now but this year I am in a bit of a weird situation. In 2010, I moved to Cyprus (EU). October of 2012, I moved back to the US. I am a US Citizen and I moved to GA. I started working here in November. I was able to use the foreign income exclusion on my federal to exclude money made in Cyprus and am trying to do my part-year GA return. On the GA return, it asks me to list my income info for income not taxable by Georgia then it asks, “List the state(s) in which the income in Column B was earned and/or to which it was reported.” Do I write in Cyprus? Do I write N/A? Do I leave it blank?

  28. My daughter graduated from an Ohio college in May. No income there. Moved home to Virginia and worked one job for one month in DC, then a second job in VA until September. In October she moved to Chicago for a job. 3 W2’s, federal return is complete but we do not know how to file the state returns. Thank you!

  29. Hi John,
    the income for the bonus was earned in Texas. Unlike unearned income like interest and dividends which are taxed to the state you live in, earned income is taxed to the state you earned it in. So–you earned the bonus in Texas, even though it wasn’t paid until you moved to MA.

    But here’s your problem–normally, you’d pay the tax to the state you earned it in and then just take a credit for taxes paid to the other state. But because it’s Texas, there’s no tax paid and you get no credit–so, I’m sorry but you’re going to still get stuck paying tax on the bonues to MA. That really doesn’t seem fair, but that’s the way it works. Sorry.

  30. Hi Ashesh,
    You will file part time for New York and part time for Massachusetts. There will be no credits for taxes paid to another state because you’re using the part year allocations.

  33. Hi Patty,
    Your son will file a non-resident return for Washington (which has no state income tax) and a resident return for New York.

    I see the desire to make him a part-year resident of Washington.

    One thing–because he was in Washington on a temporary assignment–you might be able to claim his per diem expenses–less of course what his employer paid for his lodging. It’s worth a try anyway.

  34. Hi Jennifer,
    Even though Tennesee doesn’t tax income, North Carolina does, and since you work in NC, you will have to pay the NC tax. Sorry.

  35. Hi Amy,
    You won’t need to file a California tax return. You may get a letter from them asking why you didn’t file–and that will be because you moved to California but hadn’t earned any income there yet.

  36. Hi Eilyn,
    Here’s the thing that jumps at me. Did you take the money from your 401(k) while you were still living in Florida or did you take it out after you moved to Maryland? The big deal is that when you take money from a 401(k) it is taxed to your resident state at the time you took it out. So, if you were already in Maryland, it’s taxed to Maryland. If in Florida–taxed to Florida (which has no taxes.)

  38. Hi Kathy,
    I’m thinking you’re missing the credits for taxes paid to another state. You are a resident of Wisconsin. So is your husband. He is a non-resident of Michigan and Illinois (and Ohio I guess.)
    Because you’ve got mulitple states, sometimes the computer software doesn’t always carry all the right numbers forward. You’ll want to double check your work by hand.
    Claiming per diem expenses would be for temporary job assignments–which I think your husband might qualify for. You can look up the CONUS per diem rates here: http://www.gsa.gov/portal/category/100120

  39. Hi Jan,

    First off thanks for all the advice you’ve given. Its helped me tremendously.

    My wife and I got married in 2012. I was working in CA for all of 2012. My wife worked partially in MA, and partially in CA.

    I already filed federal and CA jointly. Now Im afraid I did something wrong. For CA I just plugged in our W2 numbers and let the tax software do the rest. I am struggling with how to approach MA. Should I file my wife as ‘married but file separately’? Our tax software is not allowing us to have separate residence status for MA so Im a bit stuck.

    Thanks

  40. I have been a resident of Florida for the past 10 years. I just recently moved to NYC in November 2012. How do I go about filing my taxes if I use Turbo Tax online?

    Also, I bought a used vehicle in April of 2012. When I found out I was moving to NYC, I ended up selling it in November of 2012 and taking a $6000 loss. Can I file this as a capital loss on my taxes for 2012?

    Thanks!

  41. Hi Jan,

    In 2011, I left a job in TX and moved to MA. At the time I was vested in a bonus plan that was to pay out in 2012, which it did. Federal taxes were taken out of the payout, but no MA state taxes. Because I earned the bonus when I was living in TX but it was paid out when I was living in MA, do I need to include this income on my MA state tax return?

    Thank you.
    John

  42. Hi Jan,
    Thank you for your helpful post! I was living and working in NYC until October 1st of 2012, following which I moved to Boston. I am still getting paid by my employer in NYC and will continue to do so (I don’t have any Massachusetts sourced income). Does this mean that I file my taxes as a part year resident of New York and NYC, and part year resident of Mass? Also, can I then claim an exemption for taxes paid in those 3 months to Mass on my NY and NYC tax return?
    Thanks for your help!

  43. Hi Jan,
    Thanks for the great site, it’s been really helpful. I have some questions about state taxes and was hoping you could shed some light on the unique situation. My daughter was a full time graduate student at the University of Illinois, the Champaign campus, during all of 2012 but interned during her summer break for a company located in Tennessee while renting in Alabama for 2.5 months. She maintained an apartment in Illinois for the complete 2012 year. She also worked part time for the University of IL ( less the summer break) with a dollar income split of about 54/46% ( Internship vs. Uof I ) for all 2012 income. The company where she summer interned paid Alabama State Tax only. How should the Alabama State Tax be handled? ( Non -resident or part time resident?)
    Thank you in advance!

  44. Hello,
    My husband worked in two states (Illinois and Alabama) for the same company. He worked 2 months in Illinois and the rest in Alabama. While living in Illinois he lived in a hotel, so the company put his permanent address down as his previous home in Michigan. Now he has 2 w-2s from his company, one from MI and one from AL, do we file part residents in MI/AL or do we need to worry about Illinois?

  45. We live in NY state. My son goes to college in NY state (and lives on campus) where he has a small amount of earned income as well as some unearned income from savings/investments. This past summer he had a summer job in Seattle WA at which he earned a substantial sum. He lived in a furnished apartment for the summer partially subsidized by his employer. Does he file a part-year resident retun both in NY and in WA, or a full-year resident form in NY and a non-resident return in WA? Or some other permutation?

  46. Hi John,
    Depending upon how the job goes, you’ll probably claim VA as a non-resident at first. If the job takes hold and you stay there, you will be filing as a VA resident and your wife will be a VA non-resident, and she will be a NC resident and you will be a NC non-resident. I have friends who filed that way for years.

  47. Hi Lisa,
    If you plan on claiming your daughter as a dependent on your tax return, then she will need to be a Vermont resident and a Utah non-resident.

  48. Hi Missy,
    You’ve got quite a challenge there. Because of the whole community property state issue you will be reporting your income to Arizona. I’d spend the money and have a professional do your return.

  49. Hey Jennifer,
    I hate to answer a question with a question but as a military spouse it’s possible that your residency could be PA also and your income could be protected from state tax under the military spouse rule. Just thought I’d bring that up.

  50. Hi Shannon,
    You don’t have to guess at the tax–that’s why you figure out the tax return–that’s what figures the tax. You job is to figure what income was earned where. You’ll get refunded for what was overpaid.
    You say that since you were paid commissions–you can’t just count days. But you can go back and check your paychecks to figure your income and relate it to where you worked.

Leave a Reply

Your email address will not be published. Required fields are marked *

CAPTCHA

*

This site uses Akismet to reduce spam. Learn how your comment data is processed.