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 Jan,

    We own a rental property in Rhode Island but live in California. We’ve been California residents all year in 2013 (in 2012 we were partial year residents of each state and filed returns in each). I’ve completed our federal taxes, and we have a net loss for the rental property in 2013. We have no other income that would be attributed to Rhode Island this year. Do we need to file a Rhode Island state return?

    Thanks,

    Amanda

  2. Hi Caleb,
    What I’m hearing as I read your question is, “I’m living in NYC and commuting to Connecticutt for work.”

    So without any additional information, I’d say you’re filing as a NYC resident, not an Oklahoma resident.

    Lot’s of people own homes in other cities, but if you don’t actually live in Oklahoma, then you can claim Oklahoma residency.

    How temporary is that rental you’ve got? You might have a case there. But if your job in CT is a temporary job–a genuinely temporary job, then you may be able to claim all of your temporary living expenses as an employee business expense deduction.

  3. Hello,
    I currently work in CT. I have an OK driver’s license and purchased a home there where my family lives. I also have a temporary rental in NYC where I live part of the time to commute to work.

    I obviously want to file OK resident taxes, and I wanted to hear your thoughts.

  4. Hi Maria,
    It sounds to me like you are a resident of Arkansas but you are temporarily living in IL, is that correct? But if you were in Illinois for the entire year, that makes you an Illinois resident. If you were only there for a few months–you’d still be a non-resident.

    So you should file a resident tax return for Illinois.

    But, I’m thinking your husband’s income should still be attributed to Arkansas. If your main home is there and you intend to move back into your home, that’s where he should be taxed. But, unlike the military, if you moved to Illinois, really moved, you don’t own a house in Arkansas that your’re going back to–well then that’s going to be his home state also. So he’ll be an Illinois resident too. That said, since your husband is out of the country for the entire year, you may be able to exclude some of his income using form 2555. And that would also exclude that income from Illinois as well.

    If you don’t know about form 2555, here’s a link: http://www.irs.gov/pub/irs-pdf/f2555.pdf

    You might want professional help with this form. I do this for lots of military guys working overseas after retirement. This is a really important form for you. It will save you lots of money on your taxes.

  5. My husband and I are resident in AK. We moved here in IL and I got a job for 2 months here in IL (2013) while my husband worked overseas after retirement from military service (2013). I am left here in IL for the whole 2013 while he’s gone to work overseas. My question is, do we need to file a non resident state tax? If we do, is my husband’s income overseas (since we file jointly in our federal tax) be included in our filing of state tax here in IL? Or should I file a separate state tax?

  6. Hi Karey,
    I believe you’re dealing with the Military Spouse Relief Act. I’m going to attach a link that will help you: http://www.dornc.com/taxes/individual/armedforces/faq_spouses.html

    You shouldn’t be paying taxes to North Carolina, as you and your husband both are residents of Massachusetts. While there are some exceptions to that, I don’t think you’ve got one of those exceptions.

    You will need to file a North Carolina return in order to get a refund for the taxes that were withheld from your paycheck.

    Do read the link I put down, it gives you exact instructions as to how to file your return to get your refund.

  8. I think we have to remember that each region has its own rules. Where we live in and we work in, we have to read all information about the state we want to go clearly. Moreover, paying taxes is a sensitive case so that it needs a proper calculation.

  9. My husband is active duty army. Both our home of residence is MA but we are stationed in NC. He pays state taxes to MA and I thought I was too but my employer was taking out NC taxes instead. How do I file? I’m guessing I file resident to MA and non-resident to NC, but what about my husband? He only paid to MA so how do I separate it when filing so we are not paying both his state taxes and my state taxes to both states?

  10. Hi Emma,
    Since you had no income in PA at all, you may as well just file New York taxes. Now, because you have a PA address, you may get a letter from PA asking you why you didn’t file a PA tax return. You just sign a little statement that says you had not PA income in 2013 but filed for the state of New York. That’s all you need to do (and that’s only if you get a letter in the first place.)

  11. Hi Jan,
    I worked in NY till June 2013. I was looking for jobs and moved to PA in December. My start date for my new job in PA is in March 2014. So basically I did not have any income and have been living on my savings until now. How do I go about filing taxes? I know I will be filing for NY state tax. I have no income/W2s from PA since I have not worked here. Should I still file for PA state taxes? Thanks

  12. Hi Stephen,
    File the returns in the way that you pay the least amount of taxes. It seems reasonable to file separately with your state returns–unless it makes you pay more in taxes.

  13. Hi Rick,
    I just filed a student’s return with her Florida income. Sadly, she’s going to have to pay tax on that income in her resident state and so is your daughter. Technically, even though your daughter is living in Florida while going to school, because she is your dependent, she is considered to be a resident of your household.

  14. Hi Gabriel,
    You are a resident of Massachusetts and a non-resident of Connecticut. You should file both states because you’re probably entitled to a refund.
    Preparing tax returns is my job. I get paid for it. I give free advice online, but I can’t afford to give people their numbers. If you need help, there are free tax clinics sponsored by VITA. Here’s a locator tool: http://irs.treasury.gov/freetaxprep/

  15. Hi Sarai,
    The bottom line is that the United States taxes world wide income, and a US citizen (or resident) working in Puerto Rico will have his income that he earned in Puerto Rico taxed in the US.

    It’s confusing because a citizen of Puerto Rico will not pay US federal income tax.

    Now, taxes paid to Puerto Rico count as taxes paid to a foreign country–so you could claim a credit for taxes paid to Puerto Rico to offset the taxes that the IRS wants you to pay.

    Since you live in California, I recommend hiring a California registered tax preparer with foreign income experience. California has some pretty stringent training requirements, so you should be able to find someone competent that’s not one of those “pennies on the dollar” scam artists.

    Here’s a link to the National Association of Enrolled Agents find an EA website: https://portal.naeacentral.org/webportal/buyersguide/professionalsearch.aspx

    Not all EAs have foreign income experience. You’re going to want to ask, “Have you ever prepared form 1116? Did you have any experience with Puerto Rican income?” You want to hire the person who says yes. Good luck.

  16. My wife and I move in 2013 from MD to MA, but we moved on different dates (me, end of July; her, near end of August).

    Based on my reading around the web, my impression is that we would file jointly for federal, but separately for MD and MA. (I know that the state codes allow for this; found that on the web.)

    Does that sound reasonable?

  17. My daughter works out-of-state(Florida) while she is away at college, do I have to report that money to Indiana? Does she file as a fulltime resident since I claim her as a dependant? She has been there all year with the execption of two weeks she spent at home. My tax software wasn’t much help.

  18. I live in mass but worked in Connecticut my wages were 3056.49. They took 278.77 out in federal and the ct state wages were 3056.40 and state ct taxes 52.81 and ma state wages were 3056.49 and ma state taxes 95.81 so how will i claim this and what should be my numbers on my return? Do i file both states?

  19. 2012 for 3 months my husband was filming and working out of Puerto Rico but a California resident. he paid an X amount of taxes to Puerto Rico and To the U.S. along with California taxes. a month ago we received a letter from the IRS stating we owed that X amount that was paid to Puerto Rico. We don’t know what to do anymore we are exhausted and don’t know who to ask for help that will not just take out money and not help us.

  20. @Dawn from Kentucky and Alabama,
    Yes, once you correct the dollar amounts you earned from each state on your tax returns, you’ll compute the tax liability correctly. Once that’s done, you’ll be refunded for the overpaid tax.

  21. Hi Dawn B,
    Yes, you’re doing something wrong!

    Best guess– change from Missouri resident to “Non-Resident”.

    Two places to check–one is in the State form itself, and also, check on the very beginning screen. You are a resident of Missouri now, but there may be a box for “multi-state” or “part-year” or something like that. In my software, when you type in the address, it automatically sets you up as a resident of the state of the address you type–but you’re a part year resident of Missouri. Part-years and non-resident go into the same category.

    Fix that and it should solve the problem. Bottom line, your Missouri tax should not be more than 6% of your Missouri income.

  22. I moved from Texas to Missouri in October 2013. My Missouri State Tax owed is showing way more than I expected. The income paid in Missouri is 15% of the total gross income. Missouri is taking 70% of my Federal Refund? Am I doing something wrong? Thanks!

  23. I appreciate your insight. We are indeed filing as part-year residents for AL & KY. My concern is that I know we paid more into AL than necessary and probably not enough into KY. Same company in both states but he didn’t change his withholding from AL to KY until October even though we moved in February. So my worries are how to figure out what was paid/over-paid/under-paid to which state? I hope this may help you understand our confusion.

    Thanks again.

  24. Hi Dawn, I can help!

    First, where did you live? That’s important, are you moving with him? Or are you stationery while he moves around. If you’re stationery, then your husband is a “non-resident” for tax purposes of Kentucky and Alabama. Where you live would be the resident state.

    If you’re moving with him, you would file as “part-year” residents of both states.

    To figure your Alabama income. Take your annual salary divide by 12 and multiply by 2 months. The rest is attributed to Kentucky.

    Of course, if you’ve got the actual–great use that, but dividing by 12 and mulitiplying by the number of months he lived in a state may be the best you’ve got to work with.

    For example: let’s say he made $36,000 for the year.

    $36,000 divided by 12 = $3,000

    $3,000 times 2 = $6,000

    So his income in Alabama would be $6,000 and the income for Kentucky would be $30,000 right?

    Now, to figure the FICA (that the social security and medicare tax.) Social Security is 6.2% of income and medicare is 1.45% of income. Even if he has money taken out for a 401(k)–that’s still taxed for FICA so you’d have to add that back in.

    But for his Alabama FICA you’d take the Alabama income time .0765 (6.2%+1.45%)

    Using the example with the $6,000 : $6,000 * .0745 = $447

    Not all state have you compute that.

    The federal tax liability per state question: That makes me think you’re using another state as your home state and counting Alabama and Kentucky as non-resident states.

    You’ll compute your returns for both of those states before you do your resident state. Tax liability is the amount of tax that you are liable for according to the state. You’ll find that number on the tax form–it is not your refund or balance due and it’s not the amount of withholding on the W2.

    Just a heads up though. Turbo tax is not real good if you have more than two states on the return. If you’re dealing with three states, you might want to at least have someone eyeball it for you. They’ll probably charge you a fee, but for a mulitstate return you should get a second look.

  25. Jan, thank you so much for having this site! My husband works for a company that causes him to travel to various locations to work. In 2013 he lived and worked in Alabama for Jan-Feb then moved to Kentucky Mar-Dec.

    The problem is that he didn’t get around to redoing his tax form to have taxes taken out for the correct state. So taxes were collected for Alabama from Jan-Oct and Kentucky from Oct-Dec. For the tax software I’m using it asks me to “enter the portions of FICA tax that you actually paid when you lived in Alabama.”

    This then leads to the question “Federal Tax Liability per state”.

    How do I figure out these items?

  26. Hi Nathan,
    Sorry about the delayed response. I was halfway done with the answer and got called away from my desk and then I shut down the computer. The answer never got posted. Sorry to leave you hanging like that.

    Anyway, about you wife first: I would attribute all of the money from her working in New York to the New York tax return. Even though she received part of it while living in New York, it was for work she did in Colorado. Also, I’m guessing that the withholding is for Colorado anyway so just keep it easy.

    Now, for you. It’s perfectly normal for state wages to be less than federal wages in your situation. You worked part of the year in Colorado and part of the year in New York. Frankly, I’m surprised that the New York wages say the same as the federal. But, with the New York return, there’s a section where you attribute the income to the days you worked in New York so you’ll be able to account for the fact that you didn’t live in New York for the entire year.

  27. Jan, thank you for a helpful site. My wife and I moved from Colorado to NY last year and I have two related questions. The first pertains to my income. I work for the same Colorado company in NY (now from home) as I did in Colorado. I received two W2s from this company, one has NY state wages equal to the federal amount and the related withholding. The other W2 is the same except it has Colorado wages of an amount lower than the Federal amount (i.e. it is only the amount earned while in Colorado). I believe that the NY part is correct, but cannot confirm that the Colorado W2 wages were done correctly. I understand how to file my partial-year state taxes, but don’t want to file something that conflicts with a W2. Would it be correct to only have the partial year state wages on the W2?

    The other question pertains to my wife’s income. She was a teacher while in Colorado, but received her salary for that work as a monthly paycheck spread out over the school’s fiscal year, so received several paychecks while in New York. For income tax purposes, was that money earned when the paycheck was received (i.e. in New York) or when the work was performed (i.e. in Colorado.)

    Thanks so much!!

  28. Hi Chris,
    Both Massachusetts and Rhode Island have the Student Loan interest deduction and Rhode Island allows it on their non-resident return so you’re good for both states.

  29. Hi Jan,

    I live in MA, but work in RI. Can I claim student loan interest in both states, or only MA or RI?

    Thanks for your help.

    -Chris

  30. Hi Karen,
    Your state taxes are owed to the state that you lived in when you earned the money. I’m guessing that you earned income In Illinois since you moved there so I would make the payment to Illinois.
    If though, you made all of your income while living in Virginia and you earned no income (or retirement money or investment income) in Illinois, then you would still make the payment to Virginia.

  31. I lived in Virginia through August of 2013, then moved to Illinois. I pay estimated taxes. To which state should I send my 2013 4th quarter payment?

  32. Hi CJ,
    I see no problem with keeping the business in St Louis. Lots of people live in Illinois and work in Missouri and the other way around as well. There’s a bunch of things to consider about his filings–whether he’s got a corporation or is a sole proprietor and things like that, but he’s certainly able to keep his business in St Louis while living in Illinois.

  33. My son-in-law refinishes floors. Has his own business. He and my daughter currently live in St. Louis. My daughter would like to live in Columbia IL but her husband doesn’t want to move the business. My question is, does he have to move the business? Can he keep the business in St Louis by getting a PO box?

    thank you much for your input!!

  34. Hi Andrew,
    My first piece of advice is to get a second opinion from a California licensed preparer. California rules are different from the rest of the country so I think when you’re dealing with California taxes–it’s always good to check with a California preparer. And–California preparers are required to pass an exam that proves they know what they’re talking about. Even though I prepare some California returns, I’m not an expert on residency rules there.

    But here’s my opinion anyway–While you are out of the country, you should be able to exempt a large portion (if not all) of your income from tax using the form 2555 Foreign Earned Income exclusion. So, you could wind up with a zero US income balance on that income anyway.

    Now, you moved away from California in June of 2013. To me, that means you’ve been gone for over 6 months. I would file your 2013 return as a part year resident of California and a part year resident of Massachusetts.

    Now–you’re going to be a contract employee of a California company. Here’s the thing, you’re not working in California so you don’t pay California tax on that income. Now, if you travel to California to work at that company, then I can see a pretty good argument for you paying California tax for the weeks you spend in California–but only for the weeks you actually work in California. See the difference?

    Where the official company headquarters is located doesn’t make a difference on your tax return. What’s important is where you actually do the work. The majority of the tax returns that I prepare are for people who live in Missouri–but their W2s are from all over the country. It’s not the address on the W2, its the address of where you do the work.

    My opinion is that you moved away from California over 6 months ago and made a residence in Massachusetts. You will be moving to Japan and setting up a residence in Japan. Pay to California what is California’s, nothing more. California should not receive tax on your income earned after June 2013.

  35. Hi Jan,

    First, thank you for this site, it’s very helpful.

    My situation is that I used to live and work in California but was laid off last June. I knew that the job was ending and as early as 2012 I had started moving my stuff and addresses, car registration, etc to my parent’s place in Massachusetts. After leaving California I spent two weeks in Massachusetts and then moved to Japan, where I’m intending to live for the next few years. After that I’m not foreseeing returning to live in California, but I can imagine moving to Massachusetts.

    My question is: I’d like to switch my residence to my parent’s house in Massachusetts (I have no other housing in the US), so I was planning to submit part year returns for both CA and MA for 2013. But I hear that California is very aggressive about considering you a resident if you move overseas. Further complicating things is that I have a chance to continue working remotely on a contract basis (sole proprietor) with my old employer in California. (I am also starting a business in Japan). I’ve read advice about switching everything — doctors, voting, library cards etc — but I’m wondering if the fact that I’ll only be spending a few weeks a year in Massachusetts for the next couple years (and may still be spending a few weeks in California also, in addition to getting most or even all of my income from California) would make it pointless to try to claim Massachusetts residency. Potentially I would pay a little less in taxes as a Massachusetts resident (depending on my income level). I’m trying to do the right thing and am also worried that, for example, California would try to claim me for tax on any non-California income even though I don’t have a California address anymore. Any advice you can give would be appreciated.

    Thank you,
    Andrew

  36. Hi Dave B,
    That’s a really good question. I say that you can only carry forward a net operating loss from Michigan to a Michigan return. I recently had an disagreement with someone over this about a Colorado return. She ignored my advice and submitted a Colorado state return with the NOL even though the NOL was from Missouri. That was over six months ago and she still hasn’t received the refund yet. But–she hasn’t received a reject letter yet either. I still say the the NOL belongs to the state you earned the NOL in, but it may be worth a phone call to the Kentucky department of revenue to double check.

  37. I just moved to Kentucky, but I have a loss carry-forward in Michigan. Can I take that loss on my KY return? The KY return specifically asks to enter Kentucky Net Operating Loss. It sounds straight-forward, (like it does not apply to KY return) but just wanted to make sure.

  38. Hi Jun,
    The bottom line is that California will tax your Texas income. If you have a W2, then California will withhold your tax. If your company cannot withhold California tax, then you will need to make estimated tax payments.

  39. Hi Ms. Roberg,

    I live in California and I’m about to get a job in Texas as a computer consultant. Since I don’t have a company to use for 1099, I going thru my friend’s company based in california for a W2. My friend also work in that company in Texas and he lives in california. I will be fying to TX every Monday morning and going back to california Thursday nights. I will just stay in a hotel (will not be renting a place). My question is will California still tax my Texas income? Will the W4 be for texas or california? What state will withhold my income? I know that Texas has no state income tax, so I will not file a non-resident tax return?

    Thanks a lot.

    Jun

  40. Hi Lisa,
    I took your last name off for privacy. You ask if your taxes will be a disaster–I say no. But we’re probably looking at this differently. Will your taxes be more difficult than they were before? Yes. But don’t let your taxes keep you from a good opportunity.
    So, if you take the job in Colorado and they pay you as a W2 employee, then you will be able to claim something called “employee business expenses”. Because you’re only expected to be there from 6 to 12 months, you’ll be able to deduct the food and housing expenses as well as mileage and any other job costs that go with the position.
    You will file as a California resident and a Colorado non-resident. You will claim a credit on your California tax return for the taxes that you pay to Colorado.

    Now, if you are being paid a per diem, you will not be able to deduct your living expenses. That said, getting a per diem is usually better than getting a tax deduction. You are correct, you would write off the difference between your per diem and what your expenses actually are.

    Currently, the standard lodging per diem rate is $77 a day. The standard meal rate is $46. Here’s a link to the US Government Services Website. It has all the local per diem rates. Click on Colorado on the map and you’ll be able to look up the area you’re looking for: http://www.gsa.gov/portal/content/104877?utm_source=OGP&utm_medium=print-radio&utm_term=perdiem&utm_campaign=shortcuts

    Hopefully your per diem that you are paid will cover most of your expenses. In those cases, you really won’t have much of a deduction, but you won’t care either.

    Good luck.

  41. I am considering a 6-12 month temporary assignment in Colorado paid by Colorado employment agency. My husband and I live in CA. I’ve worked as 1099 this year and my husband works W2 in CA. Reading the comments on this page, are my taxes for 2013 and most of 2014 going to be a disaster?

    The assignment is full-time and so I will have to get a place in Colorado for the duration of this project work. What deductions can I claim?should I file in CA married filing separtely? Because I dont want to incur cost to fly home ever weekend so which state would be my residence and which would be non-resident.

    Also, agency (is located in CO so will issue me W2 for those wages in CO) offered to pay me additional per diem plus hour wage, what amount is customary? Can I rent a place in CO and write off difference for per diem vs what I will have to actually pay out?

    This is all very confusing and I’m not sure if its worth taking if I’m going to have issues with my taxes!

    Please advise. Thank you kindly.

  42. Hi Pamela,
    I would play with your tax returns if I were you, but I see a couple of issues.
    First, since you both lived together in Mississippi during that last part of the year, then you won’t be able to claim head of household instead of married filing separate. You can still file jointly, but as you say, your husband’s taxes mess you up.
    That said, filing jointly may still be better for the two of you together rather than separately, especially since you have children.

    I would have you be a part year resident of Maryland and Part year of Mississippi. Your husband would be a part year of Georgia and part year of Mississippi.

    This is going to be a little confusing, but it’s not impossible. I think your biggest issue is your husband’s $15,000 he took out of his retirement. That’s going to be taxed to the state that he was living in when he took the money out.

  43. Hi Jopaga,
    You’re right, you should have your wife be a resident of Maryland, especially since that is where you are, and be a non-resident of the other states.

  44. Hi Gregg,
    Thank you. You’re so kind.
    Okay–you live and work in Dallas, Texas a no tax state. You were hired to do some contract work–some of which will be done in Colorado.

    Bottom line: the work that you perform in the state of Colorado will be taxed in the state of Colorado. The work you perform in Texas, will be taxed to Texas–but it’s a no-tax state so it’s not subject to state taxes.

    You’ll want to keep real good records, because Colorado will most like want you to pay taxes on everything. Be prepared to back up everything that you allocate to Texas. You will file a Colorado “non-resident” return.

  45. Hi Melanie,
    I wouldn’t claim exempt for Missouri–you work in Missouri so you will definitely pay tax in Missouri. Did you wind up owing for Illinois? If you want to jack up your exemptions so you don’t have as much withholding, I’d do it for Illinois–unless of course you wound up with a large balance due.
    Bottom line, you pay tax on your wage earnings to Missouri and you should get a credit in Illinios for the taxes that you pay to Missouri. It used to be a no-brainer and you’d never owe Illinois anything. But now that the Illinois tax rate went up to 5%, lots of people now have to pay tax to Illinois also–but still, it shouldn’t be up to your full withholding rate.

  46. Hi. We live in Illinois and work in Missouri. Until this week, we only had Missouri tax withheld and filed both Missouri and Illinois returns with the proper tax credit forms. Without alerting us beforehand, this week our company has starting withholding both Illinois and Missouri taxes. They based the Illinois withholdings on our Missouri paperwork. Should we start claiming “exempt” for Missouri or just jack up the number of allowances being withheld?

  47. Hi Christopher,
    I don’t know. Sorry. Here’s what I can tell you. You will file a part year return for New York and a part-year for California. You won’t get credit for taxes paid to another state because you are doing a part year return.
    You should only pay tax on the income you earned in each state to that state.
    If you normally have not owed New York and your withholdings are the same, then you probably don’t owe $500 now. But if you weren’t withholding properly while living in New York, you could easily owe that much for four months.
    Sorry, I just don’t have enough information to go on.

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