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. I have a question about multi state returns. I have always done our taxes myself but I’m having some trouble this year. We have a unique situation. For the past 8 years my husband and I have lived in Kentucky. He worked in Kentucky and I worked in Ohio all of these 8 years. In the past my employer withheld KY tax for me so I never had an issue, plus the two states have an agreement so I only had to file a KY state return. Well in Nov of 2012 we moved into Ohio and we both continued our same jobs. So from this point on we lived in OH with me working in OH and my husband working in KY. So now I am trying to file a part time resident return for both states. I’m very confused as to how to fill these out. All of my husbands income was earned in KY and we lived there up until the end of November. All of my income was earned in Ohio but we lived in KY up until the end of November. This is where I’m getting confused because the form is asking my how much of my income was earned in OH. Well all of it but yet my W2 shows KY for the most part and only a small portion for OH. On my W2 I have a box showing income for KY and taxes paid as well as a box for OH income and taxes paid. My OH income is only a few thousand dollars so I’m assuming that is the income I earned while living in OH for the month of Dec.? My husbands W2 has no mention of OH at all. Can you help me???? I’m so confused. Thanks so much.

  2. Jan Roberg, thank you so much for your answers to all these questions! I have learned so much about filling for taxes, but I still have a question for you. I work in Alaska most of the year. When I’m not working in Alaska I work out of Washington. Now, when I work in WA I use my friends address, however, my boyfriend and I have a apartment in Astoria OR where we spend our time off together. My drivers license is in WA, my mail is sent to WA, my phone is in Alaska, I spend 200+ days a year in Alaska but my electric bill is in OR. I don’t want to file in WA if OR is going to flag me, but I don’t want to pay taxes in a state I don’t live in. Where on earth do I file my taxes through?

  3. NH has no state income tax and I do not own any property so a NH filing is not necessary. What exactly do you mean when you say I will claim a credit in MA for taxes paid (whats on return, not what was withheld)??? Can you clarify this for me??

  5. Hi Jac,
    If you don’t live or work in Alabama then no payroll tax in Alabama. So you’re only dealing with California. I’d contact the California department of revenue about their payroll–that’s out of my sphere of knowledge. Sorry.

  6. Hi Amanda,
    You’re smart to thing there’s something wrong when the refund is way out of whack. It’s a good clue.
    Part of your problem is the whole Texas thing–it can mess up other state returns. Now, it sounds like you’ve already filed federal–if you don’t have children, I would have recommended filling separate for this year. But–too late.

    So–Your husband is a Texas resident and a MD non-resident and a WV non-resident.

    He has income in MD but no income in WV.

    You are a resident of WV.

    So–I think you may have gotten it right. Now here’s the thing–you’re married–by the way, Congratulations. So you’re paying tax at the married tax rate! And his deductions are your deductions–although the alimony deduction should be on the WV return. (Although you might not have a choice there–but if there is a choice, the alimony should be on the MD return.)

    But in your case, I’m thinking your refund actually will be higher than it used to be.

  7. Hi Jan,
    Gee, I like your name! You probably didn’t make enough in those 5 weeks to be required to file in NC. I’d just do a Georgia return.

  8. Hi,
    My wife and I live in NJ and both work in NJ. In Aug. I changed my job and was living in temp. housing in CA provided by my company. My company has been since been charging me CA state taxtes even though it is a temp. stay and my ties are with NJ. Which means I willl have 2 W-2’s (one form for each company). Federal taxes should be straight forward but am worried about the state taxes. When I am going to do my state taxes, I have worked partly in NJ and partly in CA (but my perment resident is still in NJ – family and house still in NJ), my wife has worked the entire year in NJ. So when I do my taxes using Turbo Tax, how should I file my taxes. Would I have to pay NJ taxes for the time I was in CA and will the CA state refund me my withheld taxes? Would this type of situation be handled by TurboTax software?
    When I file my taxes for CA, would they ask to pay me taxes for my wifes income as well since we do a joint return. Please advise.

  9. We moved from Georgia to Alabama in Oct 2012, I still work in Georgia and they take Georgia state taxes. My husband is retired military and collects Social Security both are tax exempt in both states. He also withdrew from a 401K while we lived in Georgia. How do we file each state ? Part year resident in both states even though no Alabama tax is taken from my pay?

  10. Hi Jan,

    I live in CA now. If I hire my children (under 18) , also living in CA with me, to work for my LLC incorporated in Alabama, do I have to withhold PIT for CA or AL for salaries paid to my children? Do they have to file tax returns for both CA and AL?

    Thanks.

  11. Hi Zach,
    You’ve got three state returns to do: Massachusetts, New Hampshire and Rhode Island. Use your New Hampshire address on your tax returns. You are a resident of NH and file as a non-resident of RI and MA based on the income you earned in each state. You will claim a credit in MA for the taxes paid (as in what’s on the tax return, not what was withheld) to the other states.

    For triple states–you might want some help–the credit doesn’t always compute well in tax software.

  12. Amanda,
    You should be covered under the military spouses residency relief act–which holds that your income in Virginia is not taxable to Virginia but to Georgia.

  13. Hi Adam,
    I found what I was looking for.

    1. You’re right that your military pay isn’t taxable in Ohio because you are an Ohio resident. I was confused because you had Ohio withholding–you’ll want to file an Ohio return so that you can get that back.

    2. You’re stationed in Connecticut–so your military source income isn’t taxed in Connecticut. So you’re good there.

    3. So with Massachusetts–the only income taxed there is your wife so filing separately is probably your best bet.

  14. Hi Jaime,
    I’m lost. On your W2 it should list the state that you had taxes withheld from. That would be Missouri and Indiana, right? In the Locality–that would be your city. Here in Missouri you might have an SL or a KC for St Louis or Kansas City because we have city taxes that we have to pay.
    I’m guessing that C62 would be Perry County. They have individual income tax withholding.

  15. I am having trouble figuring out my state return this year. My husband is in the military and is currently stationed in MD, but is from Texas and he doesn’t have to file a state return. I am from WV and we just got married in Sept of 2012. I continued working and living in WV until the end of November when I moved to MD to be with him. I didn’t make any income in MD, but I’m not sure how to file my WV return. We filed our federal return Married-jointly, but when I go to put in our information for the WV return (he has never lived in WV) it uses part of his deductions (alimony) when determining my return. Some of the numbers that have been coming up seem too be too high for a refund compared to last year. I made about the same amount as last year in WV and paid about the same in student loan interest. I’ve never filed a joint return before so trying to file just my income in WV is confusing me. Should they include his income and deductions when determining how much I owe and whether I get a refund or not? I have even tried putting in the sections that mine was the only income and that only my student loans interest should be included in the deductions, but the numbers still seem to be too high.

  18. Hi Pam,
    Neither you nor your husband owe taxes to Virginia. You will file a Virginia return to claim a refund for the taxes that were withheld. You are non-residents and you did not earn any income in Virginia. That’s basically what the return will say. (It will have lots of zeros on it.) 🙂

  20. Hi Adam,
    I’m not avoiding your question, there’s something I need to look up. Then when I get to work I get busy and forget. I promise to answer you tomorrow. I think you’re fine filing separate–but I want to check something on your military return (You know that nagging feeling that there’s something important at the back of you head?) Anyway, I just want to make sure I’m giving you good advice. Sorry.

  21. I was paid 5 weeks of unemployment compensation by the state of North Carolina as a resident of Georgia at the beginning of 2012. My husband and I both have only Georgia income after that time and were full year residents of Georgia for the tax year 2012. Will I need to file a NC tax return for the unemployment compensation?

  22. I am a NH resident and that is reflected on all of my paystubs. I spend most of my time in Rhode Island with my girlfriend and have my mail sent there. I worked 2 jobs this year. The first was in RI which the company paid me a per diem to stay in the state during the week. Instead of them paying for a hotel I stayed at someones residence in RI. They with held taxes for RI. The second job was in MA and some thing except they with held taxes in MA. I have received my w-2’s and they both have the mailing address in RI on them. How will this affect my filing since I am a NH resident? Is RI going to assume that I am a resident there and say I owe them money???

  23. My husband and I live in VA because he is in the military. Our state of residence is actually GA. I worked here in VA and had VA state taxes withheld. Now I am filing my return and it says I owe money to VA AND to GA. I am confused why I have to pay GA state taxes if Ive been paying VA state taxes all year? Is there not a way I can only be held responsible for paying VA taxes? It seems like Im double paying….?

  24. We lived in Missouri for most of the year and we moved to Indiana in July and on our w-2 it wants the Locality name and it says C-62 but on this w-2 we worked at the same place we just swicthed store. I dont know which state it means.

  25. Hi Miss Jan!

    I lived in California the beginning of 2012, I did not have a job or any source of income. I then moved to Virginia on March 6, 2012. I got a job (First Job) in early April. My question is, do I file a Part Year Tax Return for VA and CA? Or should I file a normal Tax return like every other Virginia resident?

    Thank you for this post!

    -Lily

  26. I live in Ga and have been out if work for 8months. My aunt who works in ga but lives in Sc has been supporting me and my children. She can claim my children even though she lives in a different state right?

  27. I have two questions

    1. I am a resident of Florida and work out of my house 100% of the time for a company that is located in Virginia. My company does not withhold virginia taxes. Do I owe state taxes in Virginia?

    2. My husband also is a resident of Florida, works out of our house 100% of the time for a company in Viginia. His company withheld Virginia taxes. Will he get all if this back.

    We don’t own any property in Virginia and these jobs are our only source of income.

    Thanks so much

  28. So both ny seems like the best since we do have student loans and he didn’t make very much and we can get the credit for the other states taxes so we aren’t double taxed. H&r block made it look as though I could do ny resident for me and va for him while filing together.

  29. @Jennifer–you can do that if you file separately–which should be fine if you have no children and no student loans. Otherwise, file jointly and do the extra paperwork because it would make a difference in how much you get back (or owe.)

  30. I have no va income and have all ny income he has no ny income and 5mon of va income from his externship. So I was thinking I do me ny resident and him va resident.

  32. Hi Jenny,
    So you’ve both lived in New York for the whole year. You have no income. Your husband worked in Viginia, and that’s really where you live anyway. So, here’s my question–was he living and working in Virginia for this externship? If so, since you really are Virginia residents, I’d file as Virginia residents.

    But do you have New York income? And you’ve been there for a year? Then I would file as a New York resident and a Virginia non-resident. Even though you’re going to be Virginia residents again–if you were in New York for the whole year–then you should file as New York residents.

  33. Hi Johnathan,
    You have two options:

    1. You both file married filing separate, and she files a West Virginia return and you file a Maryland return.

    2. Or, you file jointly and she is a West Virginia resident and you are a non-resident while in Maryland you are a resident and she is a non-resident.

    Option 1 is probably fine if you don’t have children or college loan interest. Option 2 is probably best if you do have kids or college loan interest.

  34. I have a question…I am active duty military stationed in Connecticut but living in Massachusetts. I am (and always have been) an Ohio resident. Since I am stationed outside of Ohio my income is exempt from Ohio tax. I got married a year and a half ago, my wife is a Massachusetts resident and works in Massachusetts.

    Since my wife and I are residents of different states, we are filing our returns separately. So we will both file a separate federal return and I will file my state return with Ohio and my wife will file a Massachusetts return. My question is, is this the correct way? Do I also have to file a return with Massachusetts and my wife and Ohio return? My tax gets withheld from Ohio.

  35. Hi Vanessa,
    You will file a non-resident return for the state of Alabama. Since Florida has no state income tax, you won’t be getting and credit for the taxes you pay to Alabama so basically all of his income that he earned in Alabama will be taxed there. The only way you’ll get any money back from Alabama is if he withheld too much. If he didn’t withhold enough, you’ll actually have to pay in. Sorry.

  36. Hi Caroline,
    Congratulations on your marriage!
    Okay so you want to file jointly. Technically, your husband is resident of Indiana and you are a part year resident of Indiana and part year resident of South Carolina.

    Although for what it’s worth, it might just be easier to file as both being residents of Indiana and non-residents of South Carolina. It will probably work out to be the same amount of tax anyway.

  37. my resident is CA, but my work is based in VA, and i have a VA tax withheld. i travel to VA for 4 weeks, stayed in a hotel, then go home for 2 weeks, then go back to VA again for 4 weeks, then go home again in CA for 2 weeks, and so on and so fort.

    my wife is a stay home mom and has no income, I”m the only one that is working.

    so my question is… Do I have to pay taxes in CA and VA… and how do I file It,

    Pls. help me.

  38. Hi Angie,
    I think you’re great! You’re going to file a Missouri non-resident return and an Illinois resident return. You had withholding taken out for Illinois, but the income is taxable to Missouri–it’s all good. You did the smart thing–now go do your happy dance. 🙂

  39. We for the year have been in ny as my husband goes to the Culinary Institute of America but our licenses, vehicle registration,etc are va as we are only here in ny temporarily till he graduates. Therefore I had no income for va, he however did as he did a paid externship there for about 5 months. How do I file? For tax purposes am I a ny resident even though everything is still under va.

  40. i live in md but just got married and she lived in wv we want to file married jointly how do i file my taxes in md and hers in wv.

  41. PLEASE HELP ME!!!

    OKAY MY HUSBAND LIVES IN FLORIDA AND WORKS IN ALABAMA. WE HAD TO PAY STATE TAXES IN ALAMABA. HOW DO I NEED TO GO ABOUT DOING THAT. AND WILL WE GET A CREDIT BACK FROM HIM PAYING ALABAMA STATE TAXES SINCE WE LIVE IN FLORIDA. PLEASE HELP ME

  42. I lived in South Carolina for part of the year, made a little money there seeking my car. Moved to Indiana in the summer and found a seasonal job as a sub contractor. Got married in December and my husband and I want to file jointly. How do we file? Because he is an Indiana resident and I wasn’t a resident of the state until the beginning of 2013.

  43. Hi Betsy,
    My first question is–did you have any New York withholding? If yes, you absolutely must file a New York tax return.

    Now I would consider you to be a New York non-resident, but if your New York source income is more than your NY standard deduction, then you are required to file. You mention your boyfriend being in school, but not you–so I’m guessing that your parents aren’t claiming you as a dependent-in that case the New York standard deduction is $7500.

    If you made less than $7500 in New York–I wouldn’t file a NY return. Technically, if you made more than that, you should claim the income you earned there because you were working in New York.

  44. Hi Mike,
    Your income from Texas is taxable in Kansas–because Kansas is where you live. Now, since your income was low–you might not have earned enough to be taxed anyway. But if your income is high enough, then it is taxable to Kansas.

  45. I live in Illinois and work in Missouri. I noticed that this year on my W-2 it listed that I had taxable income for the state of Illinois. Could this be because I elected to have specific amount of $ taken out of my paychecks for Illinois taxes? I looked at my W-2 from last year and there were no IL taxable income listed. I started taking out the extra money in Aug. or Sept. of 2012. Will this totally screw up my taxes? I am worried.

  46. Hello,

    I am a resident of Ohio, and temporarily living in NY (since September) while my b/f completes his schooling. My home address is still Ohio, and we’ll be going back there in May.

    I still work for the same company in Ohio where I’ve been working 2+years, just tele-commuting and doing everything over the computer, internet-based clouds, etc.

    They mail my paystubs to NY, and my W-2 was mailed here, so my W-2 has the NY address. Do I have to file anything for the state of NY?

    Thanks!

  47. Hello,

    I had an internship in Texas and lived there for the 3 months during that internship. Since Texas has no state income tax I was did not have any witheld. I live most of the time in Kansas where my income is very low being a student. The question I have is… Will I have to pay kansas state taxes on the income I received in Texas over the summer?

  49. Hi Sarah,
    So it looks to me like your company counted you as being stationed in Phoenix even though your base was in Portland.

    Normally, I would file as an Oregon non-resident and an Arizona resident–taking a credit in Arizona for the taxes that you paid to Oregon.

    But it sounds like your company is treating you as working out of Arizona–in which case, I’d just file the Arizona return. Companies withhold based on the state you’re working in–so for all intents and purposes, your company treated you as being based in Arizona for payroll purposes anyway.

    Do use the new address on your tax return–that way the IRS and the states can find you. You may receive a letter from Oregon asking why you didn’t file an OR tax return, and you will respond that you were living in Arizon in 2012 but moved to OR in 2013.

  50. Hi Stephanie,
    Honest answer: I don’t know! Here’s my best guess: somebody in his payroll department did a whoopsies! It’s happened to me before. I live and work in the suburbs of St Louis Missouri. One year, I got my W2 and for some reason I has pay in Kansas City. Although I’ve been to Kansas City (nice town) I’ve never worked there. Someone had just messed up in the payroll department.
    I would contact your husband’s payroll department as ask about it. There are two possible outcomes here:
    1. Something messed up while printing out the W2s and they’ll have to issue him a new one. (Easiest, and hopefully that’s all it is.)

    or 2. Something got messed up earlier and they’ve been sending withholding payments to California on your husband’s behalf–in which case you file a California non-resident return to show that he never worked in California and you’re just claiming a refund for the withholding.

    For your sake, I hope it’s option 1.

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