Taxpayers who’ve lived and worked in more than one state may be asked by the IRS to file multiple tax returns. Not only an average traveler is asked to file a tax return in every state he worked, he will also need to file in his home state. It may be necessary file a part-year resident returns or nonresident returns in different states depending on the situation. This can be a difficult task to do as it is a common mistake for taxpayers to make errors in coordinating multiple state tax returns.
Working In Another State Work By Commuting
Those who commute in order to work to another state may be required to file for a resident tax return not just in their home state but also in their work state filing nonresident tax return. All of your income including your income from your work state must be included in your resident tax return. The reason to is the fact that almost all states charge tax a resident’s income coming from all types of sources as well as income from out of state. There are cases where a taxpayer qualifies for a tax credit on the resident tax return for the taxes paid in the work state.
Filing a Nonresident State Tax Return
Since most states have received a negative feedback from working families due to the added tax burden they have to face, those states have made reciprocal agreements that permit taxpayers to work out of the state without being charged with tax. If you’re one of the lucky ones who lived and worked in these states, then you’ll be able to benefit from this agreement by only paying taxes to your home state. However, an exemption form must be filled and submitted to your employer so that no taxes will be withheld by your bosses in your work state.
Out-of-State Employees
You may have heard the rumor that says you have to pay state income taxes to the state where your employer’s corporate headquarters is located. It is not true and doesn’t hold any bearing on your state income taxes at all. If you live and work in Arizona but your company is based in California, you are not liable to pay taxes in California.
Working for an out-of-state company will not create a state tax liability for you at all. However, there are several ways for nonresidents who don’t physically live or work in a state and have a state income tax liability.
Moving To Another State
A two part-year state tax return has to be filed if you move to another state provided that it all happened during the same tax year. The two tax returns will be given to both your former state and for the new state. Each of the tax returns will have an already divided income and deductions between the two different states.
Spouses Working In Multiple States
One usual problem for military families in the past was living in multiple states. Although family members of the military are exempted from state residency and taxes in the state where they are stationed before 2009 spouses weren’t exempted. The problem arising from having different residency is that two taxes will have to pay by the spouses for both states. Thanks to the Military Spouse Residency Relief Act that was passed in 2009, it has finally resolved the problem.
Owing taxes to more than one state is also common for spouses who just got married, those who separated, and those who commute into different states for work. The general rule is that you will only owe income taxes to the state where your work or earn your income and pay taxes to the state where you live. Each spouse has to follow the same rule unless a reciprocal agreement exists in the same state where you work and live.
There’s also an option of filing all of your state tax returns jointly as a married couple if you find yourself in a situation where tax returns have to be filed for multiple states. The tax return has to be filed jointly under the names of both spouses provided you’re only putting in the earnings made in each specific state.
