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.
I really appreciate your reply
Hi
My husband is taking up a job that is based in Georgia, but we live in Texas, he will be working from Texas, and will not be traveling to Georgia, Do we have to pay Georgia State taxes.
I moved in Feb of 2012 from Texas to Kansas. I’m still technically based out of corporate office in Texas but travel around the world & in several states doing oilfield work. None of my services however take place in Kansas….just have my home address there – I’m gone from home approx 180 days per year. Am I a resident/non-resident? Do I even need to file in Kansas?
Hi Lynn,
Congratulations on your wedding! Now for the tax stuff. No matter what you do about drivers licenses and stuff like that, you will have to file two stae tax returns. I’m guessing that you will be better off filing a PA residents and NC non-residents. If I were preparing the returns, I’d run it two ways to compare (also as part year residents of both states) but I don’t think you’ll save much money, if any, that way.
You know that you’re in NC temporarily so I wouldn’t change everything over. I would just make sure that you pay NC the state tax that they are entitled to, that’s all.
Be sure to check out my tax tips for newlyweds also: http://robergtaxsolutions.com/2011/01/tax-tips-for-newlyweds/
I got married in July and lived in PA until August of this year when we moved to NC. My husband is a medical student and has always used his parents home address in PA as his permanent address. We know that we will only be in NC for one year (due to the way his schooling works), so we weren’t planning on changing our residency over and were just going to keep our PA drivers licenses and addresses (I still own a home in PA that we rent out). Is this going to cause problems on our tax returns if we don’t change everything over or can we simply file a two state tax return? Thank you!
Hi Lola,
That’s a good question. Now what you’re “supposed” to do and what people “really” do aren’t always the same thing. You’re supposed to put your real address on your tax return. If you’re married and filing jointly, you’re both supposed to sign the return and you would see what address is on the return. But–I know people often sign 8879 forms (the efile form) and don’t ever look at the real return. Some spouses never get a chance to see them, and some naughty spouses even forge signatures.
So–where would that leave you? If you filed jointly, but didn’t see the return, you could request a copy of the transcript from the IRS. You’d have to explain that you needed it sent to your new address (since you don’t know what’s on the return) but you would have a legal right to see it. (It will be a hassle, FYI because they’re going to want to send it to the address on the return, but you’ll work that out–just a bit of a hassle.)
Now, if he files separately, you won’t be able to find out his new address because the IRS won’t give it out.
Just curious! If my husband and I are seperated and I live in the house we own and he lives somewhere he shouldn’t be, does he have to put his new address on his income tax if we file jointly? Or even married filing separately, what address is he liable to put down?
Hi Patti,
Excellent question. As far as you employer is concerned–you do work in Texas–and that’s all fine and dandy for him. But you live in West Virginia and you will be taxed by West Virginia on that income.
Let’s say your boss was in Missouri instead of Texas. Then he’d be withholding Missouri income tax. You would file as a West Virginia resident and a Missouri non-resident. WV would give you a credit for the taxes that you paid to Missouri.
But your boss isn’t in Missouri, he’s in Texas. There’s no state tax in Texas so you won’t get that credit–so you’re have to pay tax to WV on all of your income that you earned in Texas.
What you’ll need to do is make estimated tax payments to WV for the income that you’re earning so that you avoid getting hit with a huge tax bill in April.
I just moved from TX to WV. I am working from home and my company is not taking WV income tax out of my check. I was told it was because I am technically still working in TX as I remote in to Plano everyday. I just want to confirm this is correct so I am not hit with a huge tax bill at the end of the year.
Thanks for your help.
Thank you so much for your help!!! I really appreciate it!
Hi Zoe,
You live in Illinois, but your company is based in California. But they send you for travel all over the world. (How horrible it must be to be you! Oops, sorry about the sarcasm. I’m just a little jealous. I’ll get over it.)
Okay, my gut reaction is that you will only pay Illinois income tax. And you should probably start withholding for Illinois or make estimated tax payments to the Illinois Department of Revenue.
That said, do you ever work in California? If there are times that you have to go work at the main office in California–then you may be required to file a California non-resident return. But from what I gather, that’s not the case with you at all. Quite frankly, if you were doing any work in California, your employer would be withholding California income tax. (Flying in for a few days for a meeting or seminar doesn’t really count. I mean going to California and staying awhile to actually work there when I’m talking about taxes.)
I am a tour director for a California company and I work all over the world. I live in Illinois when I am not working. My paychek comes from CA and no state tax is withheld. I assume that I should file an IL return only (for the state). Is that correct?.
Hi Lisa,
Tax rules, let’s see. The official rule book on payroll issues is called Publication 15, here’s a link to that: http://www.irs.gov/pub/irs-pdf/p15.pdf. It’s also called Circular E (don’t ask me how they come up with the names, I’m clueless there.)
Two other things that will help you out is what paperwork they ask you to sign. If they tell you to fill out a W4–then you’re an employee. Here’s a link to one of those: http://www.irs.gov/pub/irs-pdf/fw4.pdf
If they tell you to fill out a W9, then you’ll be contract labor. Here’s a link to one of those: http://www.irs.gov/pub/irs-pdf/fw9.pdf
Now, the Pub 15 is 59 pages long, but a lot of that is the income tax withholding tables. But that’s going to have the rules about income tax withholding and things like that.
Thank you for answering that so thoroughly. Now THAT makes sense! One last piece…..
Is there a tax rule, code or number that I can refer my employer to in order to substantiate this information?
thanks again,
Hi Lisa,
You got me! I’m confused too!
They say that they’re going to withhold your social security but they won’t pay it? People go to jail for that–so I’m thinking it’s a communication thing here.
It sounds to me like they mean that they will take the social security and medicare payments from your pay and then they will be matching it–which means they are paying the employer’s share, and they sure as heck better send the payments into the IRS or the can expect a revenue agent to be knocking on their door.
It sounds to me like you will be a W2 employee. (And that somebody was listening to too many lawyers when they came up with the “we don’t pay your social security” line.)
I’d still ask, “Will I be receiving a W2 or a 1099?” Just to make sure. If they say 1099 and they’re withholding social security–then I think you should find a different school to work for. (Because that’s totally nuts.)
Now, for the other thing–you live and work in Texas, therefore you are subject to Texas tax rules–and Texas has no state income tax. You should not be paying Missouri state income tax (even though we’d love to see your money up here.)
I’m saying you’re a W2 employee. For every $100 you make, the school will deduct $5.74 for social security and medicare. So your check will be $94.26 instead of $100. They will probably also withhold federal taxes as well so your check will actually be a little less. That’s how I interpret it anyway.
I’m a full-time Texas resident that works 100% remotely as an online educator. The university that I work for, and the students I teach, are based in Missouri. Which state should withhold taxes from my paycheck?
Also, I’m subcontracted to the university. (same tax scenario as above stands). My employer says I am responsible for my own PORTION of Social Security and applicable tax witholdings, although my employer will deduct these fees automatically. However, my contract mentions they will not be PAYING these taxes, merely withholding/deducting them from my paycheck and then matching the Social Security. What does this mean?! For example, am I a 1099 or W-2 employee now? Must I file my own employment taxes?
I’m so confused! I appreciate your help and clarity.
thank you!
Hi Chellsea,
1999 and 2001? My they are desperate for money aren’t they?
My first suggestion is to get some help from an EA. Here’s a link so you can find one in your area: https://portal.naeacentral.org/webportal/buyersguide/professionalsearch.aspx
I prepare North Carolina returns, but since you’ve got a problem with the NC department of revenue–I recommend you get yourself a NC enrolled agent. There’s just those little things that a local person knows that a foreigner won’t–it’s a good idea to get some help here.
Now–here’s what you should be thinking about or looking for–or at least, here’s the red flag that I’m seeing.
“He filed his taxes both years and received IRS refunds both years.” That’s the red flag–he filed his federal returns (that’s IRS) but you don’t mention his North Carolina returns. Being from Florida–you Florida folks don’t pay state income tax. North Carolina has a state income tax so that’s where the trouble is coming from.
So where do you go from here? First-look at the old tax papers. (If you even still have them.) Back in 1999 and 2000, you could e-file your federal return but many states still were mailed in. I wouldn’t be surprised if the tax returns were done and sitting in a folder someplace. I used to deal with that a lot before the efile became more streamlined. (I still deal with it for some types of returns.)
I’m guessing you won’t find anything, (but that’s always the first thing to look for) but if you don’t have a return already done, then the next step is to actually prepare a tax return for those years. Now–it sounds to me like the state already prepared a return for your husband–but if they’re anything like the IRS, then it’s wrong. That’s why you want to have a fresh one prepared.
Here’s the other important thing to look out for. Can you find a copy of your husband’s old w2s? $9000 is a lot of money to owe on a state tax return (even if it’s for two years.) My guess–and I’m just guessing of course, is that the state isn’t taking into account the money withheld from your husband’s wages that would be on the W2. And–if you could come up with the w2s–that would probably go a long way towards solving the debt problem. (Ahem–I have to say I’m guessing, because I am–but that’s generally the case here in Missouri–as in almost always so this is really worth checking out.)
For example: let’s say your huband had $4000 a year withheld from his income for North Carolina state income tax–well then the debt would only be $1000. Or maybe he even overpaid–I’ve seen that happen. You wouldn’t get the refund though, but at least it would get them off of your backs.
One thing about your IRS transcript information–it does not show your North Carolina withholding. That’s a key piece of information that you’re going to need. So you want to start searching for those W2s. Good luck.
hi, my husband has lived in florida since 2001 (I met him after). He lived/worked in North Carolina 1999 and 2000. he filed his taxes both years and received Irs refunds both years. Now in April 2012 the state of NC froze our joint bank account and is saying he owes $9000…the paperwork they sent was just an estimate they say he should owe plus penalties and interest. He agreed to make monthly payments of $250 until we get this all solved. Well I don’t understand the point of paying something when he doesn’t owe the state anything. How can we fix this? We just received account transcripts from IRS from both years stating info and that he was issued refunds both years. Please help
@ Steve,
I don’t know about switching your plates. How long will you be keeping the car in Connecticut? If the job is temporary–then I wouldn’t, but if you’re going to be doing this commute thing for a couple of years–you may need to switch your plates. I’d check with the Connecticut DMV on that one.
Thanks for the fast response! Our suggestion is what I expected but one thing still bugs me… I drove 1 of my cars to CT from FL which I use to travel for work form my apartment in CT to office in NY. Even though I don’t consider myself as a CT resident what do I do with the car? Obviously, I hold a FL driver’s license and the car is currently registered with FL plates. Do I have to switch my plates to CT?
Hi Steve,
I say that you are a Florida resident–therefore you pay New York non-resident taxes and Connecticut loses out. Apologies to Connecticut.
I recommend using your Florida resident address on your tax return when you file and not Connecticut–trust me on this-using your Connecticut address will get you a letter from their department of revenue. The fact that your wife lives and works in Florida adds substance to your claim of Florida residency.
Forgot to mention that I am married and my wife lives and works in FL.
I am a Florida resident, with a primary home in FL, work in NY State, but rent an apartment in CT. My employer deducts NY State Income Tax from my paycheck. I have no W2 or ‘earned wages’ in CT. I realize that I have to file a Non-Resident return for the State of NY. What obligations do I have to the State of CT? While I work in NY, I stay in my apartment in CT and travel home to FL on the weekends. Thanks!
Hi Matt,
You made a really good point when you said, “not my wife’s registered profession.” And I could go on and on about that–but in your case I’m going to take a different track–because this will be easier.
The IRS has decided that your wife’s 1099Misc is a business and that she’s self employed. Therefore–because the IRS says so–it is the law that you report all of her self employment expenses–including traveling to the temporary job location and the cost of her temporary housing. It’s the law Matt, you can’t cheat and report income you don’t really have. I’m sorry but you’re going to have to take a loss on your wife’s business. That will probably offset the income you earned as well and the IRS is probably going to owe you a refund.
I see how you were trying to be patriotic and pay a little extra to Uncle Sam–lots of people try to do that (most of them not intentionally)–but since the IRS insists on counting that as self employment income, then it’s your obligation to claim all of the expenses to offset it.
Amend your return, get a little money back. Personally, I love to make sure that people get at least a little money back when they get an IRS letter for something like that–I figure if enough people get refunds, the IRS will quit sending those letters. (Never happen.)
Oh–you can make an argument that your wife is not in the profession of accounting and that she should not have to pay self-employment tax on the money–it’s possible to win but it’s really hard, you could possibly go to court–and the cost of the defense would be more than the tax. (Even though, I think you could even win.)
But do the Schedule C–write off the expenses–because the reverse would be for the IRS to say–oh–it’s not a business, so she can’t claim the expenses–but they’ve already claimed that it was so you win. Easier–plus you get money (or at the very least pay nothing.) This one’s a winner.
Hello!
I have a question for you regarding my 2011 taxes. I am an Oregon Resident and got an internship for a company based in Herndon, VA last summer and my wife came over with me for the trip, we drove our car across the country there and back. I was an employee for Goldbelt Inc, and my wife was given a job there as an independent consultant working on the Accounting team with me. She was given a 1099-Misc at the end of the summer. As an employee, I was given a housing stipend on rent through the apartment that Goldbelt rented for the interns, however what they amounted to doing was taking the $4,500 monthly rent for the apartment and splitting it 5 ways between the interns and my wife, and they would take the $900 per person out of our checks, but the way they billed the “housing stipend” was to only take $500 a month out per intern, however my wife was not an official intern and thus not subsidized and they would take $1400 a month out of my checks ($500 for me and $700 for her).
We had to drive all the way across the country, stay in hotels and pay for meals. I didn’t file the 1099-misc income as self-employment and got a letter from the IRS stating that I owed SE tax for the SS/Medicare that went unpaid in my tax return for her wages.
Right now I’m not sure when I go to fill out schedule C that if I can claim the cost of “moving expenses” and her portion of rent, and mileage for her self-employment. It was a one-time job, not her registered profession. I have all my travel receipts for the trip there and back, but not any from the time while we were there for the most part regarding driving and meals.
Am I better off not bothering and paying the ~$300-400 in back taxes or can I fill out those items in Schedule C and reduce my liability? I can tell you that she only made $3390 the whole summer and the rent alone exceeded that wage base. We are fairly broke college students right now and I can’t justify giving away another few hundred dollars if I don’t have to.
Hey Simone,
If you charge your Dad less than what you’d charge someone else–you should sit down with a professional about the tax issues involving that. (I would be charging for that advice–it’s a little above the scope of this column.) But I think it would be worth your money to do that.
The second part–about letting your dad stay there for free–you can’t charge him rent and say he’s staying there for free. It’s one or the other. That’s why you want to sit down with someone and then you can have the “what about this?” “Okay, but what if we do that?” kind of conversation that you can only have with someone in person.
You can find an enrolled agent near you by typing your zipcode into this link: https://portal.naeacentral.org/webportal/buyersguide/professionalsearch.aspx
Good luck.
Hello again. You gave me some great advice on July 5th but I failed to follow-up on some of the questions you asked in your response.
You had mentioned that if I charge my dad a discounted rate for renting my home that the tax rules are different. I would just charge him the amount of my mortgage when I would most likely charge about $150 more to a random renter.
You also mentioned that an option would be to keep my house as a 2nd home and let my dad stay there to “stage it” and maintain it, not counting it as a rental. I really like that option but am curious what proof (if any) I’d need to provide when filing my taxes. I’d still be getting “rent” from him but he really is there to maintain it while I work on selling it. Is there a time limit on how long he and I could have this arrangement?
Hi Daq,
Generally, for students in your situation you would file a non-resident return for Illinois and a resident return for Michigan. You probably don’t need to have any withholding for Michigan as you would have a credit for the tax you paid to Illinois.
Many college students don’t need to have any state withholding at all, because they don’t make enough to be required to file. That said, it’s always nice getting a refund sometime in late February or early March.
Unless you’ve got self employment income or investment income in Michigan, you probably don’t need Michigan withholoding from your Illinois job.
My situation is similar to many of these other college students. My permanent address is in Michigan and I go to school and work in Illinois at the moment. Right now I am getting Michigan and Illinois state taxes taken out of my paycheck. Do I just need to file the non-resident form with Illinois and be done with it, or what should I do?
Hi Eric,
Thank you for your service to our country. First and foremost, the IRS doesn’t care what state you use on your tax return. The states do, but the IRS doesn’t.
Second, your pay while you are in Afghanistan is not taxable. (I’m guessing you knew that, but had to say it anyway.)
So your only real issue is what state you want as your “state of record”. I’m voting for Illinois, and here’s why–they don’t tax your military income!
Watch the election results in November (that is if you’re not busy getting shot at and stuff like that.) You’ll hear a lot of talk about the mail in ballots from the military in the states of Texas and Florida. That’s because those states have no state income tax. (There are other states with no income tax, but Texas and Florida get all the TV attention.)
If you can’t have one of those as your state of record, then Illinois is a good choice because they don’t tax military pay, so it’s a good home state for a soldier.
For example: right now you’re in Afghanistan so you’ve got combat pay–that’s not taxable at all, but–let’s say your next duty is in Germany. Your income in Germany would be taxable. So let’s say you made $30,000–if you had Utah as your resident state, then your tax for Utah would be $1210. With Illinois it would be zero. See the difference?
Now, you’ve been withholding based on Utah–and that was the right thing to do because you were in Utah for training so you will have to pay Utah tax on the income you earned in Utah. Just like when you come back–they could station you in a state that taxes military income–you’d still have to pay tax to the state you’re in for that.
You’re in a situation where you have a choice. You may choose Utah or you may choose Illinois. For tax purposes, I’d go with Illinois. If you really feel attached to Utah, you can move back there after you’re out of the service, but you’re not obligated to claim it as your tax home right now.
I am currently deployed to Afghanistan. My works base is in Utah, and I lived in Salt Lake for 4 months working and training before deploying. I filed Utah tax forms, and Utah taxes have been withheld.
Prior to this I lived in Arizona for 1.5 years and paid their taxes, and before that lived in Illinois with my parents while I was still a student and worked part time.
My logic was that since I don’t have any other permanent address, and haven’t lived with my parents in over 2 years, I shouldn’t be filing Illinois, and did not have any address in Arizona anymore either. My new address had become 2 different extended stay hotels. I was even receiving mail at these addresses.
Since I deployed in March, I have had to change all of my mailing addresses to my parents home in Illinois as it is my only way to get my mail over here. I don’t have an address in Utah anymore or any family there.
Am I wrong to have chosen Utah as my state for tax purposes? Should I switch it to Illinois? Would this make any difference other than a change in tax rate if I switch to paying Illinois? Am I required to chose Illinois since I am having my mail delivered to my parents address?
I talked to my accountant and he did say this would be fine and appropriate, but I have still been questioning it.
Hi David,
I hate to say this but the problem is not you, it’s your wife! My apologies to your wife. (I hate blaming the wife, bad for business.)
Here’s the situation–you work in California, so you pay California tax and you get a credit for that in Idaho. But–your wife works in Washington–no tax, no credit for taxes paid to Washington so you have to pay it to Idaho. I’m guessing that’s why your bill is so big.
Here’s what you do–you file a resident return for Idaho, and a non-resident return for California. You should make estimated tax payments to Idaho based on your wife’s income so that you don’t get hit so badly at tax time. Your retirement income is taxed to Idaho.
I talk a lot about deducting expenses for temporary job situations, but it looks to me like your job in California is permanent so that’s not going to work for you. Also, you can’t deduct commuting expenses so that’s out too.
If you’re serious about moving to California–sit down with a California tax preparer and run the numbers for you both living there and your wife working in Washington. You might also want to run the numbers for you living in California and your wife living in Idaho. Two reasons for using a California preparer for this: first, California rules are different from most other states and I’ve had to fix a couple of California returns because people had done them incorrectly–they always made sense by other state rules–but California rules are different. Second, California maintains a high standard for it’s tax preparers–I have more confidence in someone with a California license than another state. (It pains me to say that, being from Missouri, but higher standards brings about better preparers.)
You gave a good clue in your question–60% of your income is made in California–that means that 40% of your income will be taxed to Idaho. And since I’m guessing you have no Idaho withholding–there’s your problem.
Good luck.
Hi,
I work 630 miles from my home. My permanent residence is in Idaho,
but I work full time in California. I pay my work wage tax to california during the year,
i also receive retirement income.
I tried to file as a part year resident of idaho, but they audited my returns and said I could only have one domicile and all my income is taxed–claiming since i file my federal return in idaho, I am a full time resident even thought i send less then 20 days a year home
I do file California as a non-resident.
And I have deducted taxes paid to another state, but seems I am still paying
high taxes
MY wife lives in idaho at our home, but works in washington.
What can we do to reduce or simplify our taxes? Is there such a thing as state deduction for work expenses. in example, traveling to and from work?
OR would it make sense for both of us to move to california, at least on paper, since 60% of our income is made here in california?
Thanks for any suggestions!
Hi Joe,
I would check with the Alabama Department of Revenue. Here’s a link to their “where’s my refund?” site: https://myalabamataxes.alabama.gov/_/#2
You will need your social security number and how much your refund should have been for.
If you get a “don’t know” type response–(because you may have done that already) it might be that the return wasn’t filed. I see that sometimes. Some tax programs are not capable of efiling two state returns and one of them has to be mailed. If Alabama doesn’t recognize that you filed, go through your tax packet to see if there’s a return with a mailing envelope. Sounds corny, but often that’s the problem.
Thank you so much! I feel a lot better about what’s ahead tax-wise. I will definitely meet with someone to hammer out what will work best for me. Thanks again!
My husband works for the union and he worked last year in Dthan Al
And our account file his .GA which is where we live and filed his Al
Too and we got our account.GA state tax but not ALABAMA . Can you’ll me why.5
@Simone–
Oops, I should read all the posts before I start answering. So you plan on remaining a North Carolina resident? Then you pay North Carolina taxes. You would be a “non” resident of Florida–but there’s no tax there. But as a resident of North Carolina, then you pay North Carolina income tax.
Now this could change the rental too. You say you’re selling the house–but if you move back, that would change the whole house situation too.
Once again, this puts me to suggesting talking to a local pro. You are looking at a couple of years–so I’m thinking “go ahead and change residency”. If your job was for less than a year, I wouldn’t bother either, but for over a year, then I would. Most people like to have a Florida state of residency beause of the tax benefit. It’s something to think about.
Hi Simone,
You’ve got a few issues there so I would recommend that you find a person to do a good “sit down” and discuss your situation. Because I think there are many things may work for you–but some things are better discussed in person.
That said, here’s my “shoot form the hip” kind of response. (A sit down with a competent professional is better–I’m just going to give you more of a big picture idea.) First–once you relocate to Florida–you will be living and working in Florida and therefore will not have North Carolina withholding. You need to make your employer aware of that and you should not be paying North Carolina withholding once you relocate to Florida. (I’m assuming the relocation is permanent.)
About the house–Your Dad will be paying rent–and yes that’s taxable income to you. Remember though that the mortgage, real estate taxes, insurance etc that you pay are all deductions against the rental income. Also, you will be able to depreciate the house and that will give you another deduction. (You recapture the depreciation when you sell the home–this could cost you but usually claiming the depreciation while renting is still better.)
Now this is why I want you to sit down with a professional:
1. the whole depreciation thing–yes it’s a good deduction, but you do claim it when you sell (it’s called recapture.) You want someone to look at your situation and show you how bad it is–or how sweet it is, for you.
2. Your Dad will be renting your home–there are special rules about renting your home to family. Will your Dad be getting a discounted rate or will he be paying the same as anybody else? Different tax rules apply.
3. An option may be–keep the house as a second home, let your Dad stay there to help you “stage it” and maintain it, and not count it as a rental. You keep the mortgage on your schedule A deduction.
Bottom line–there are lots of questions and lots of options. And most important: what’s best for Simone? You want to crunch some numbers. If you go here and type in your zip code, you can find a local enrolled agent who can help you: https://portal.naeacentral.org/webportal/buyersguide/professionalsearch.aspx
There’s so many variables there I can’t possibly know and you wouldn’t want to post them online. But this is a case where paying for a little advance planning now can save you lots of dollars later.
Good luck!
I should add that in FL I will be working from home. Also since FL has no state tax, would I have to report anything to them? I plan to remain a resident of NC (car registered there, voting records there, etc) since I do not think I will be in FL for more than a few years.
I currently live/work in NC and will be moving to FL at the end of the year, working remotely. I’ve read through some of your responses and am still unsure what I should expect tax-wise. I own a home in NC which my father will live in until I can sell it. Since FL has no state income tax I’m guessing my employer will tax my pay the NC rate since it is higher? Also I’m guessing that my dad’s “rent” will be considered rental income which will be taxed insanely. I’m really bummed about that because being single with no children, the house is really the only tax break I have. Any guidance would be appreciated.
Great, thanks so much!
Hi Justin,
I’m still back on “worked in California for 6 days and filed a return”. Now there are situations where it makes perfectly good sense to file a return–and I’m assuming that you fit into one of those reasons. Therefore: file the amended return.
Here’s why–California received that information on the extra W2 so without an amended return, California thinks you owe them tax on that money. Without the amended tax return to prove otherwise, they’re going to keep that debt on their books.
You don’t want the state of California to be after you for money. Trust me on this.
Look at it this way. Let’s say you gave your landlord your rent check for $1000. Your landlord somehow forgot to record it and he called the police to put you in jail for not paying the rent. (Really happened to one of my employees many years ago, different state.) Well you’d just find the cancelled check and prove to the police that you really paid the rent so you could get out of jail, right? (That’s how we got my employee out of jail–what a stupid mess.)
Anyway, that’s kind of what you’re doing with California. They don’t know that you don’t owe so you’re going to have to prove it. What they do know is that you didn’t report all of your income and so as things stand with them now you’re a liar and a cheat and they want their money. (I know you’re not a liar and a cheat, it’s just that’s the way they’re seeing it.)
File the amended return.
Hi Carrie,
You will have to pay tax to North Carolina for the unemployment compensation you received from them. I’d file a part year resident return for North Carolina. Basically, you’ll pay taxes to NC on all of the unemployment compensation you received from them.
My situation is a bit different than the others: I live in NY and worked in California for 6 days. I filed a non resident tax form in 2008 for the work I did there. I found out last year, I didn’t receive the w2 from the company and my income increased by 11K, but all of that new income was earned in NY. I paid the IRS and the NY Income taxes and things should’ve been settled! Since then, I received something in the mail from CA saying I owe them more taxes, even though all of the underreported work was in NY. I challenged it amd they agreed and now they want me to file an amended tax form with the new income even though I owe them nothing. I don’t think I need to do anything since I owe them nothing…What should I do?
In 2009 I was receiving unemployment benefits for NC but moved to Florida in March of that year. I filed my taxes in the state of Florida. The other day I got a letter from NC stating I owed state taxes to them for that year. Should I have filed NC taxes since I was getting unemployment from that state during that time?
So Misty,
How did you know I was working on payroll tax issues today? Good timing! Seriously, I’m going to be filing my Missouri unemployment tax and I paused to check my email first.
So–since you live and base your office out of Missouri–I’m guessing that your company pays it’s unemployment tax on you to Missouri. So you will file for unemployment with the state of Missouri.
Here’s a link to the Missouri unemployment website: https://www.ui.labor.mo.gov/som/ File right away, it takes some time to get things started so file now. (From the been there done that school.)
Good luck on the job hunt! Sometimes, being downsized can be a blessing. Hopefully this is a blessing for you too.
I have an unusual questiion. I am a District Manager for a company. We are all “field” employees, so I am based out of my home office in Kansas City, MO. I pay MO state taxes and Kansas City city tax. The stores that I oversee, there are 5 in Kansas and 2 in Omaha, none in Kansas City. A few of us were just recently laid off. Which state do I file for unemployment in, Kansas, since thats where the majority of my stores/work is, or Missouri, where I pay my taxes?
Hi Bryce,
Living in a taxing state and working in a no tax state can present a real problem. There are basically two things you can do–and it sort of depends upon your employer. The first option (and easiest for you) is to have your employer withhold state income taxes on your home state even though you’re working in another state. Some will do it, some won’t. It depends upon the company. They may not want to do that if they have numerous employees working all over the country and they’ve got a strict–we tax based on the state you’re working in. (It’s a valid rule and makes sense.) Also, some small companies might not be able to handle multiple state tax issues, so I understand that too.
If your employer won’t (or can’t) change your withholding to your home state, then you’ll want to start making estimated tax payments to Oklahoma. There are computer programs that will figure out how much you should be withholding, but the quick and dirty way is to take what you owed last year and divide it by 4. Then make 4 quarterly estimated tax payments.
Given that you missed the April and June payments, I’d make 3 payments (pay June’s late.) You can get payment vouchers for Oklahoma at their website: http://www.tax.ok.gov/it2011/OW-8-ES-12.pdf You also have the option to pay online.
One final thing–if you are a resident of Oklahoma and you’re working a temporary assignment in Nevada–you may be able to deduct some of your living expenses while you were in Nevada as an employee business expense. The assignment would have to be for less than a year, and your costs would have to be out of pocket (not paid by your employer) but that might help reduce your tax burden–just thought I’d mention that in case it helped.
Hi, i work pipeline contruction and last year i was working in nevada. nevada has no state taxes and i claim residency in oklahoma so i owed oklahoma alot of money and i do not really understand why. to keep from this in the future i need to know when working in states with no state taxes what do i need to do?
Hi Craig,
You’re absolutely right. You will file a part year return for Illinois and a part year return for North Carolina. Make sure you talk to your human resource department to have them withhold taxes for North Carolina for you.
Don’t worry about the fact that your company is headquartered in Illinois. That makes no difference on your personal tax return. The important thing is you. (It’s all about you!) Seriously, where you physically live and work is what matters on your tax return.