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 Jim,
    When you prepare taxes, you have to do the federal first. Then you prepare the non-resident states, and then you prepare the resident state last. I don’t think that’s your problem here–but I want to make sure that’s the order your working in.

    When you’re working on the non-resident returns–are you making sure that the expenses are being moved over to the states? That’s the next thing to check. (Usually there’s a non-resident allocation type page.)

    If neither of those two tips don’t help, I recommend calling the software company and having them walk you though it. If there’s a glitch in the software they’re the ones who can fix it.

  2. I’m an over the road truck driver and I live in Florida. My company I work for is out of Texas. Do I need to file anything for the state that my employer resides in? My wife and I are confused about this because they w-2’s have the address for texas. So does this count as earning income in another state even though I didn’t physically work in texas I drove the 48 states.
    Thank you for your time

  3. Hi Meg,
    You will file a South Carolina resident return and a NC non-resident return. You will claim that you had no income in NC and request a refund of all the NC taxes withheld.

  4. Hi Matt,
    You will file as a part-year resident of California and a part-year resident of NC. Even though your wife is working for an NC company, she’s living and working in CA and that’s how you should file.

  6. We lived in KY for 8 months of 2012 and moved to FL. We bought a house in FL (only rented in KY). I cannot deduct the mortgage interest, property taxes on the FL house on my KY returns, correct? Also, how do I report interest income or deduct charitable contributions? Are these prorated?

  7. Hi Jan,

    sorry my previous comment I just noticed said:

    “She has had CA tax withheld for the time she has been in NC, and NC tax withheld for the time before that.”

    What I meant was:

    She has had CA tax withheld for the time she has been in *CA*, and NC tax withheld for the time before that.

  8. Hi,

    I lived in Florida and moved to Maryland in Nov 2012. I worked in Maryland half of November and the entire month of December, I have yet to switch my licence/registration over and I live with a friend. Am I considered a non resident or part time resident of Maryland. How should I be filing my taxes.

    Thanks

  9. Hey Jan! I’m not sure if this has already been asked because that’s a whole lot of comments to read through. Anyways, here’s my situation:

    I lived in North Carolina from Jan 1st, until June 5th, which then I moved to Washington State for the duration of the year. But here’s the intersting part. I did not denouce my residency in Carolina because I planned on moving back for school in June of 2013

    Just focusing on 2012, I had a Job in North Carolina and I got another job when I moved here to Washington. Washington also, does not do state taxes.

    So I did my taxes through a website and they listed my Washington earnings Under the Federal Adjusted Gross Income (FAGI). I just feel like something is wrong because I’m owing $360 even though I already paied $287 to NC while I was working/living there. My FAGI was $16275, I’m Single and I don’t know what to do. Can you help?

  10. Scenario:
    A truck driver works for a company based in Texas. The truck driver lives in Texas but delivers goods across the country, Mississippi, Arkansas, Texas, Louisiana, Oklahoma and some of the East Coast states. He is not an independent contractor, he drives a company owned truck.

    Does this truck driver owe state in any of the other states?

    Thanks!

  11. I worked only in Iowa and received my w2’s from Iowa.I was also a student in Iowa as well. I moved in September to Texas and have not worked in Texas as of yet. I am aware that Texas has no state tax. How would I file for 2013 will I still claim resident of Iowa even though I am no longer a resident of Iowa?

  12. Hi Scott,
    You’re just messin’ with me right? This is part of one of those exams on multi-state tax returns isn’t it? Okay–I’m game–

    You are an Illinois part year resident and a Virginia part year resident. You are an Indiana non-resident.

    Your wife is an Indiana part year resident and a part year Virginia resident, and an Illinois non-resident.

    Whew!

  13. Hi Jan,

    I googled my question and found you. Thanks for helping us out.

    I lived in NJ up until Mar 15 2012 with a full time job. I took a new job with the federal government and now live in Yokosuka, Japan. My “Home of Record” is NJ because that’s where they moved me from but this is a permanent move and I have no intention of returning to NJ.

    I’m hoping you tell me I can file as a part year resident as the Navy never took taxes out for NJ when I got here. I read what I could on the NJ site about moving to another state, and military doesn’t apply to me, so can I only report my NJ income for the three months there?

  14. Hi Jan,

    I’m filing jointly with my wife. I moved from Ohio to New York at the end of January. My wife stayed behind in Ohio and later moved to New York at the start of April. Then she moved from New York to Wisconsin at the end of August to start grad school where she earns income as a Graduate Assistant.

    The Ohio / New York returns are simple enough, but do I need to file a third part-year resident return for Madison? Anything I should consider to help deal with the strange time overlaps?

    Thank you for your time!

  15. Jan,

    I live and work in NC. I have prepared my Federal and NC state tax return without any issues. However, I’m having problems with filing two non-resident state tax returns in GA and VA where I own rental properties. When preparing the non-resident returns, the tax software program doesn’t appear to be transferring my deductions for property taxes, mortgage interest and costs to offset some of the income generated from the rental properties in each state. It does transfer my itemized deductions from my Federal return but nothing for the costs associated with the rental property resulting in significant taxes owed in both non resident states.

    When I included the same deductions on my federal return, I had “0” income to report on my Federal for the properties. Please advise if I’m entitled to these deductions on my state returns. If so, where would I report it if I have to manually make the change.

    I greatly appreciate any help.

    Jim

  16. Hi. I live and work in South Carolina, but my paycheck is coming from the corporate office, located in North Carolina. As such, income taxes were withheld by NC (and NC only on my W2). Do I file a SC income tax form (resident, for both my husband and I), as well as a non-resident NC income tax form? Thanks for any advice leading me in the right direction!

  17. We moved from NC to CA this year – but my wife is continuing to work for a NC company. She is working remotely, and hasn’t gone back to NC since we moved in 2012.

    She has had CA tax withheld for the time she has been in NC, and NC tax withheld for the time before that.

    Do we put down on NC return that she was NC Non-Resident but had NC source income, and put the tax we paid CA as a credit against it?

  18. Hi, My husband and I are full time MA residents. Last year, for one week, my husband worked in UT and made around $1600. The state tax in UT withheld was $80. Do we have to even file in UT? I did file the 1600 as income for my Massachusetts taxes. Thank you so much for your time.

  19. My wife and I got married in August 2012, and we are filing jointly on our federal return.

    I lived in Illinois from January through May 2012. I moved to Virginia in May 2012.
    My wife lived in Indiana from January through March 2012. She moved to Virginia in March and we both now live and work in Virginia.

    Any suggestions on how to file our state taxes? Will our marriage affect the state returns? We moved prior to our marriage, so I was taxed as a single person in Illinois and she as a single person in Indiana – not sure if this changes anything (e.g., tax rates generally or eligibility for credits for other state income tax)

    Thanks!

  20. Hi Pav,
    if you’re allowed to file as MFS for RI and OR then you don’t have to worry about the non-resident part because you’ll be left off of the return that you don’t need to file.
    If you do file jointly in those states, then the non-resident spouse would be the one with zero income.

    Your bigger problem is going to be with living in Missouri and working in Illinois. Trying to file a part-year return with a credit for tax paid to another state on the Missouri return will through your software into a tizzy. You are probably better off claiming a full year Missouri resident with a credit for taxes paid to Illinois and wherever else you lived. The numbers should essentially turn out the same, but it won’t throw your software into a funk. You might need to do the same with your wife’s income as well.

    Play with it, I haven’t done one for 2013 yet–so maybe that’s a bug that’s been fixed, but I often have to take those an manually prepare them and override the software. Bottom line–if the refund or balance due appears to be “out of whack” it probably is wrong.

  21. Hi Ann,
    I’m guessing that you’ll receive paperwork from Georgia showing the sale of the house. Since is wasn’t your primary residence, you’ll want to file a Georgia return just to show them that you didn’t make a profit and that you don’t owe them money. Sorry–but it will save you a headache by filing it now.

  23. Hi Allissa,
    You are Wisconsin residents. If you have non-military income, you may be required to file an NC tax return. Otherwise–just Wisconsin.

  24. My wife and I were married in 2011, but we are filing jointly for the first time for 2012. For the first half of the year we lived in separate states (RI and OR). Since July we’ve been living together in St Louis, MO, but she’s been working in MO while I’ve been working in IL. I know we have to fill out part year resident taxes for RI and OR, but I believe both states allow us to “file separately” even if we are filing jointly for the federal. If that’s true, and each of us is a non-resident for the other’s original home state, does that person have to fill out a tax form for that state? I have zero income from OR, and she has zero income from RI.

  25. I live in NC, but I sold a house in Georgia in March. I had changed my residency from Georgia several years ago, did not work there in 2012, and sold the house at a loss (i.e. I made no income from the sale). Do I need to file a GA return? I am already having to file 2 state returns because I didn’t move to NC until August (residency was SC before that – I’ll file both as part-year resident, I got that part), and I really don’t want to have to do a third but I’m not sure how/where to find out that information.

    Thanks!

  26. I think I figured out. I just had to put his name first as taxpayer and me as spouse. Did him a married filing separately for va (getting all withheld back) and married filing joint for ny. His income in va will be taxed in ny but he didn’t make much and we will get more back than if we each filed separately for ny since he has school credits and we both have loans credits we can receive. Thanks though for your help.

  27. Hi! I have a question. So my husband is in the military and I am a student. we lived in Wisconsin, but moved to NC for the military in November. We bought a house in NC but are both still residents of Wisconsin. How should we file? (we havent received any tax forms from our house either, i think because it was bought at the end of the year?)

  28. Hi Umesh,
    You are a part-year resident of Connecticutt and a part-year resident of Maryland. If you had no income in Connecticutt, then you would only file a Maryland return. If you had Connecticutt income, then you’ll need to file in Connecticutt also.

  29. Hey James G.
    Because you are a Maryland resident, your Florida income is taxable in Maryland. You were smart to have Maryland withholding done.

  32. Hey Kevin,
    If your parents claim you as a dependent, then you have to file in New York if you made over $3000. If they don’t claim you, then you have to file in New York if you made over $7500.
    If you’re making more than that, you should have Starbucks change your withholding.

  33. Hi

    I stayed first 2 months of the year in Connecticut and then moved to north carolina.
    Am I considered as NC residents and tax withheld for whole year? or should I be paying tax for only 10 months in NC

    Thanks
    Umesh

  34. I am currently a full time student who’s permanent address is in MD but I attend school and now am currently working in FL while in school, which has no state income tax. I was worried about being slammed on my taxes so I had all my FL paychecks deduct MD state taxes. How do I go about filing? And will i get all my of MD taxes that were withheld back because I did not work in MD?

  37. Hi, I have a question. I received $600 (minus taxes) stipend pay in CA for a two day training and live in MN. I spent 3 days in CA for the training and had MN and Federal taxes withheld from my stipend. Do I file CA taxes?

  39. I live in Massachusetts, but I attend school and work in New York State. (I work at Starbucks if it makes a difference). Even though I work in New York, Starbucks has my address listed in Massachusetts. As a result, all of my payroll taxes are withheld as Massachusetts Income Tax and New York does not withhold taxes from my pay.

    Do I need to file New York taxes if my income tax is already being withheld by Massachusetts?

  40. My husband and I live in Texas. My husband works in Texas but for a week he took a job in Oklahoma. It ended up not working out so my question is how do we file the taxes for the check he earned in Oklahoma, do we even have to since it was a $700 check?

  42. Hi Doug,
    Logic would make you think that you earned the unemployment in MA, but you didn’t. It’s all counted towards your Minnesota tax return. (Yeah, weird.)

  43. Hi Lindsey,
    The reciprocity of Kentucky to Ohio is that same as Ohio to Kentucky. Basically all you’re doing is saying you earned $X while living in Kentucky and $X iwhile living in Ohio. Basically, 11 months of income vs 1 month of income. Everything else should sort itself out.

  44. Hi Amy,
    Wow–that almost seems like a question on a multi-state tax return test. Okay, here’s the big test: Where do you really live? What do you consider to be your home? I’m thinking it’s Oregon. But quite possibly it’s Washington. I’m thinking that you are a non-resident of Alaska in any scenario..

    But here’s the thing–Alaska and Washington have no state income tax. So claiming Oregon as your home state is not to your highest advantage because then you’d have to pay tax on both your Washington and Alaska income. That makes Washington sound like your resident state to me and maybe Oregon is your vacation home. It makes the most sense. Use your Washington address on your federal tax return.

  45. I’m a college student from New York, and my parents have claimed me as a dependent. I go to school in Pennsylvania, and work here. I spent my summer working in Michigan. I haven’t worked or earned any income in NY since 2011.

    If my parents have claimed me as a dependent in NY, do I still have to file anything there, or do I owe NY anything? Can I just file in Michigan and Pennsylvania?

    Thanks!!

  46. How do I keep my husbands va income out of the Ny income return? He had no ny income and I have no va income. I got the va return to give the correct amount by doing a married filing seperately for him but it won’t let me do that for ny as we have that we are ny residents. Also he didn’t really make that much in va so he got all his tax money returned. If his income is included for ny the we get a lower refund. Thanks for all the help!

  47. For our state returns how do I file for va since I had no income and he did If he files as a nonresident of va and resident of ny? The only options the software is giving me is married filing jointly and we both had va source income, married filing jointly and my spose had no income from any source and married filing separately. If I do separate it wants to use me not my husband for the va return.

  48. Hi Zach,
    My bad–no New Hampshire tax. That makes it easier for you. You just file as a non-resident in the other states. If you lived in a taxing state like Missouri, you’d also have to file a resident state return and pay tax on all of your income from the other states to your home state. But, you could take a credit for the taxes you paid to those states to reduce the tax to your home state.

    Since you will owe no taxes to New Hampshire–you don’t have to worry about the credit. You just pay tax to the states you worked in.

  49. Hi Shashank,
    You are a resident of New Jersey and a non-resident of California. If you do your taxes on 1040.com–right here on my website, it will do both states for you. (Was that a plug? Yes, I believe it was.)

    Anyway, you do pay tax to California–the amount of tax that is paid to California becomes a credit against the taxes you owe to New Jersey. (Of course, since you’ve got withholding in both states–you may have paid in more than you owe and receive a refund.)

    Does your employer pay all of your expenses in California? You may be able to wrtie of some of your unreimbursed expenses out there on a form 2106. It’s worth looking into.

  50. I collected unemployment from MN ( state I live in) for the first couple months of 2012 and when that ran out, I collected from MA since that is where the company I worked for the longest was out of. When I file my taxes and it asks me if I earned income in another state, do I say yes and put MA. Thank you

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