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.
how can i find an accountant who can deal with someone who firesides in both puerto rico and new york state? i make my money in puerto rico part time but have a residence in new york city. i may be selling my business and moving permanently to new york city. how can i manage my money, taxes, and investing?
It may be best to speak with a local accountant or a CPA for further advisement on your situation. Foreign tax information involves a specialized professional with a personal consultation in order to file your return correctly.
The company that I work for is registered in another state (Kansas) and they only take taxes out for that state. However, I physically work in Illinois. I am so confused about how to do my taxes.
A filing for both a resident return for IL and a non-resident return for KS is needed. This is so that the income that you earn in KS is being reported on a tax return form, that will allow you to allocate a non-refundable credit onto your full-year resident state tax forms with IL.
When it comes to remote workers for companies, it is up to the company on how they want to handle filing taxes. The only downside of not having your taxes withheld in your home state is that your income may be subjected to higher taxes in your non-resident state.
I live in Tn and work in Mississippi. I know I have to file a non-resident return for state income taxes in Ms. I also have to file federal in Tn. Do I have to file a federal tax return in Ms as well, or just file the state income tax in Ms and file federally in Tn?
Also, if I work in Tx while living in Tn, how will I file since neither state has a state income tax? Do I file a non-resident return in Tx federally and file federally in Tn, or just report income from Tx on the Tn federal tax return? How will that work?
A Federal return is separate from your State tax returns. You only need to file your Federal Return with the Federal Government, or with the IRS offices. For State taxes, you will only need to file a State tax return with Mississippi for the income earned within that state.
If you worked in TX while working in TN, you will not need to file a return in either TX or TN as both states have no taxes on income earned there.
My wife and I live in MN, but will be moving to South Carolina on November 1.
My wife works in MN but will be retiring October 31.
I work in Wisconsin and will continue to do so through the end of the year.
I assume we will file a Minnesota part year resident state tax return and include income earned through 10-31. Then we will file a part year South Carolina income tax return and include income earned from 11-1 to 12-31. And then we will file a Wisconsin non-resident tax return for all my Wisconsin based earnings.
Does that sound right to you?
Hello Tom, What you have mentioned is correct:
Part-Year MN, Part-Year SC, and Non-Resident WI.
I live in PA but work in NY. They aren’t taking out local taxes out of my check. Do I need to set up something?
You may need to file a PA resident and a nonresident return form with NY when it comes to filing your returns in the coming year. This is so a resident credit is allocated to your PA return for taxes paid to NY. You can choose to file with our website rapidtax.com for your multi-states in the coming year, and if you need any assistance, our representatives are on the line to help you through the process.