Do you carry the burden of dealing with multiple states on your tax return?
For most of us, filing a state tax return is just another step in filing a federal return. Your tax-filing software just transfers your information to your state’s return and you’re done within minutes.
But what if you moved to a different state during the tax year? What if you worked in a state other than the one where you lived? What if you worked in multiple states? Suddenly filing state taxes becomes a little trickier and it may involve filing taxes in two different states.
Basically there are three different types of state tax returns that you need to worry about:
- Resident
- Part-Year Resident
- Nonresident
As a general rule, you have to file a resident tax return in the state where you lived, a part-year resident return in any state you moved to/from, and a nonresident return in a state where you earned money but didn’t live.
Preparing your Resident Return
A resident return is the return you have to file in the state where you are a resident. This return will tax you on all of your income, regardless of the state where it was earned.
For most people this is very simple – the state where you are a resident is the one where you live and work. But for people whose lives involve multiple states, the first step to filing state taxes is figuring out where you are a resident.
Every state has different requirements for who qualifies as a resident for tax purposes. You need to visit the websites of the tax authorities of the states in question to figure out where you are a resident.
You should note that there are nine states without income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. If you are resident of one of these states, you don’t need to file a resident tax return.
Preparing your Part-Year Resident Return
A part-year resident return is for people who moved during the tax year. If you were a resident of one state for part of the year and then a resident of another state for part of the year, then you need to file a part-year resident return in the first state and a part-year resident return in the second state.
A part-year resident return taxes you on all of your income for the portion of the year that you were a resident of that state. Let’s say you started the year living in Illinois. Then in July you moved permanently to New York. You would then have to file a part-year tax return in Illinois that taxes you on all of your income you earned during the first six months of the year. Then you will have to file a part-year resident return in New York that taxes you on the income you earned during the last six months of the year.
Preparing your Non-resident Return
You need to file a nonresident return for any state (other than the state where you live) in which you earned money. This nonresident return will only tax you on the income you earned in that state.
Here’s an example. Let’s say you live in New Jersey, but you work in New York. You’ll need to file a resident return in NJ. You will also have to file a nonresident return in NY and pay taxes on the income you earned there.
Worried about being double-taxed? Don’t be. When you file your state returns, you will have the opportunity to claim a credit for the taxes that you’ve already paid to another state through withholding. The states will then settle accounts among themselves.
You may also have to file a nonresident return for any state that had taxes withheld from your paycheck. Normally you only have to file taxes in the state(s) where you were a resident and where you earned your income.
But sometimes payroll departments goof up and withhold taxes for a state you neither lived or worked in. This commonly occurs when you work for a company that is headquartered in a different state than where you work. You’ll need to file a return just so you can get that money back as a refund.
File all of your state tax returns with RapidTax!
It doesn’t matter where your company is located. If you didn’t live in a state, and you physically did not work there, you don’t have to file a return there just because the company paying you is based there, although you do if they accidentally withhold taxes for that state. If this happens, ask them to stop withholding taxes in that state so you have one less return to file!
Hopefully this information will give you some basic guidance when it comes to filing state taxes. Each state tends to have their own set of rules. It is always a good idea to do further research into your resident state and the state where you work. Whether you need to get caught up on a late tax return or file a current year return, prepare your state returns on RapidTax.
Hi!
Can you give me some advice?
I lived in New York for half of the year and then went to colorado for work the other half of the year. Now I was charged tax on both states. First will I get a portion of that money back since every paycheck since moving to colorado included both New York and colorado state tax? Also do taxes become more expensive if you lived in two states through the year or do they simply just divide it? Also my wife and I weren’t married in the beginning of the year in new york but due to the common law in colorado, we would like to file as married. So if you become married in the middle of the year, does it count as the whole year on taxes?
Hi David,
1) Assuming your move to Colorado was a permanent one, you should not have had New York tax withheld after you moved there. If your employer is still doing that tell them to stop. If your move was NOT permanent and you are still a NY resident then it’s correct that NY taxes were withheld. If you are now a CO resident, you will have to file a part-year resident return in NY and then a part-year resident return in CO. Yes, you should either get some of that NY tax that was wrongly withheld back as a refund or they might transfer it to CO if it turns out you owe there.
2) Taxes could be more expensive if you lived in two states, if you moved from a low-tax state to a high-tax one (imagine moving from Texas to New York for example) but since you’re moving from a high-tax state to a lower-tax one, it will probably end up being a lower tax burden overall than if you had stayed in New York all year. Also note that on each return you will be able to claim a credit for taxes paid to the other state (through withholding) to ensure that you are not double-taxed.
3) When it comes to taxes you are considered married for the whole year as long as you were married on December 31st. If that’s the case, then you should file jointly. The only scenario in which you shouldn’t do this is if you two were residents of different states for different periods of time. For example, if your wife moved from NY to CO two months before you did (or never even lived in NY) then you should file a separate NY return.
My husband and I and our 2 kids have lived and worked in MN for 13 years. I am self employed in MN. In Sept 2012 my husband got a new job in WI. He stays there during the week (in an apartment he rents) and commutes home to MN on the weekend. Whis state is considered his resident state? How do we handle the state taxes for this situation? Also, are there any expenses we can deduct for his weekend commutes or for the apartment he rents? Thanks in advance for any help and info you can provide.
Hi Susan,
You should definitely check out the residency requirements of both states to make a determination, but I would say he’s a MN resident and a nonresident of WI, especially if he hasn’t changed his voter registration, auto registration, driver license, etc. If this is the case, he would have to file a resident return in MN (ostensibly a joint return with you) and then a nonresident return in WI. The deductions are a whole other can of worms that I’m not going to get into in this comment, but I will say that you can only deduct travel expenses associated with a temporary work assignment. If it’s an indefinite work assignment you can’t deduct anything. Take a closer look at this IRS page for more info: http://www.irs.gov/taxtopics/tc511.html.
Hi,
I lived and worked in VA for half of the year, then I got married and moved to MD. (My husband lived and worked in MD the entire year.) I earned NO income once I moved to MD. I understand my husband and I must file our state returns separately. He will file MD and I will file a part year in VA. Do I have to file anything for MD since I earned no income while I was a resident there?
Hi Sarah,
As usual with taxes, it’s a little more complicated than that. First off, you definitely need to file a part-year resident return in Virginia. There’s no ambiguity about that.
As for Maryland, however, you can essentially choose whether to file a joint return or file separately. In some ways filing jointly may be the easiest thing (since I’m assuming that you’re filing a joint federal return). Here’s what the MD return instructions have to say about it: “Complete the Part-year/MILITARY area on the front of Form 502…Married taxpayers with different tax periods filing a joint Maryland return should enter a “D” in the box, follow the remainder of this instruction and write “different date periods” in the dates of residence area.” You can find more on page 16: http://forms.marylandtaxes.com/12_forms/resident_booklet.pdf.
Even if you decide to file separately, I think you still may be required to file a return. You have to file a MD return if your MD gross income is above $3,800. MD defines MD gross income as your federal gross income + MD additions. I’m assuming that your federal gross income was greater than $3,800 so you probably would have to file a MD return. Part-year residents must show all of the income reported on their federal return, regardless of when or where it was earned. However, they are then permitted to subtract income received when not a resident of MD. So you wouldn’t end up owing any tax, but you would probably still have to file a return, if that makes any sense.
You might want to talk to a MD tax professional, but I would suggest that you look into filing a joint return and just marking that you weren’t a resident of MD for that portion of the year.
Hi,i live in New York for the past 3 years and I never file NY tax,cause my paycheck was a NJ address and my job in NJ.So last years I have to get my pay check with NY address for about 3 months.I file my tax but I forget to mention to tax preparer I live only 3 months on my pay check NY address.So now I want to make an emend and try to get my partial money back .Do you think NY State gonna ask me for those 3 years I didn’t report my income ??????I only file a tax in NJ cause my paycheck was NJ address and my job in NJ .THANK YOU VERY MUCH
Hi Maurice,
Just to be clear, if you are living in New York, and you qualify as a resident, you must file a New York tax return regardless of where you work. New York has every right to demand that you file those three years as long as they can prove you were a resident. Whether they will demand those returns if you attempt to amend your return, I can’t say. Their operation may not be that sophisticated. But you should know it’s a possibility.
Hi Tax advisor,
My employer in Ohio sent me to their New Jersey office for seven weeks last year to fill a temporary need in that office. I returned home each weekend. I only received one W-2 and all the state taxes are credited to Ohio. Do I need to file a non-resident tax return for New Jersey? And should my employer have handled this differently? Thanks in advance.
Hi David,
Yes, you probably do need to file a New Jersey nonresident tax return. This will tax you only on what you earned in New Jersey. You’ll be able to claim a credit for the taxes you paid to Ohio through withholding and they should transfer some of that money to NJ. Ideally your employer should of withheld state income tax for NJ but since it was only seven weeks it probably wasn’t worth the trouble.