I’m sure this is a softball question for the tax attorneys and CPAs here because of all of the situations where people live in one state but work in another (e.g. Bullhead City, Ariz and Laughlin, Nev or the two Wendovers). If I have income from a state but am a legal resident of another state, what state get the tax on it (or can I be doubly-taxed, once by each state?)
I ask out of curiosity but also because I rolled over my California teacher’s pension when I moved to Arizona and then about 4 months ago, I got a check from STRS for about $800 that I guess wasn’t rolled over (the distribution code is a 1 intead of a G) and they took federal taxes out of it. Does California get any of it because I “earned” it in California (and we all know that taxing authorities have a very liberal definition of the word “earn”). Is it Arizona’s tax because it was a pension disbursement while I was a resident of that state?
I’m also curious because Colorado is requesting that I show that I paid state income tax to establish residency (I have another thread about this issue) and I would like to know if it is possible to have a situation where the state you pay tax to is independent of your state of legal residency.
When I lived in Illinois, but worked in Missouri, I had to file taxes in both states. And when we were active duty military (or husband was I should say) we filed takes in whatever state in which we were living and also to his “home of record” state.
It’s not as complicated as most people would think. The state in which you work, but not live you would (probably) file a non-resident form (at least all the states I have lived in have had a special non-resident form, some might have a tick box or something…) and claim all the money you earned and then all the money you earned in that state. For example our military pay would be included in the total we earned, but only the money from husband’s part time job and my job in the state counted as money we earned in that state, and taxes were paid to the state only on that amount. We also filed in husband’s home of state of record claiming all income, but indicating that none of it was earned within the state, thus no taxes were due.
When I worked in MO but lived in IL, I filled out my state forms and indicated how much of that money was earned in MO, IL did not tax that amount, because MO already had. On the MO forms I filled it out as non-resident and claimed all monies (those earned in MO as well as those in IL) then indicated which portion was which. MO only taxed the money earned there.
Computerized tax forms and services like TaxAct or TurboTax make this process even easier. I have filed taxes like this for more than 10 years and never had a problem.
State tax can be independent of your state of residence if you earned money in that state (or acquired taxable money somehow).
You should file in each state you received income and where you were a resident. Most states provided deductions for taxes paid in other states…so in theory you should not be double taxed…but you may be paying different tax rates in different states.
Yes. You wind up paying the higher of the two, when all is said and done.
From what I recall, from when I worked in NY and lived in VA: I paid tax to NY on all the income I earned there. Let’s say it was 50,000 a year at 10%, so I paid them 5,000.
Then in Virginia, let’s say the tax rate is 6%, so my tax bill would be 3,000. I claimed a credit for the Virginia income which was taxed in NY.
Now, I didn’t get to claim a credit for the full 5,000 - just the amount I’d have paid Virginia - so my net tax due to Virginia was zero.
If the other state had a tax rate of 2,000, I’d have claimed that as a credit against my Virginia tax, and been left with a Virginia bill of 1000 dollars.
Some states have reciprocity agreements - where you pay taxes only to your home state. DC / MD / VA work that way - when I lived in VA and commuted into DC, my income tax was withheld and remitted to VA.
That became an issue in 2008 here in Minnesota, when Senate candidate Al Franken paid taxes to Minnesota on all his earnings, including those earned in other states. His opponents attacked him for that, because he should have paid taxes to each state for the money he earned in that state. He had to re-submit corrected tax forms in several states.
(Doing this, he ended up paying less taxes overall. Many of the states had lower income taxes than Minnesota (or none at all), so he paid less taxes in those states, and got a sizable tax refund from Minnesota. Though the additional fees paid to his accountants would have used up some of that.)
Mama Zappa, the rules you describe do apply to NY and VA… but not to every state. So many people work in NY and live in neighboring states that there are some special rules to help simplify the process. Fortunately, I’m out here in the west and don’t see that much.
Most of the time, you just have to report all of your income and then use the state’s rules for apportioning it out. There are part-year/non-resident worksheets or forms for every state that I have had to deal with. In CA, residents file form 540 and non-residents or part-year residents use form 540NR. In CO, form 104 is a standard return for residents. 104PN is for part-year residents or nonresidents. AZ uses form 140 (for residents), 140PY (part-year residents) or 140NR (non-residents). It’s worth noting that each state has different definitions about what constitutes a resident, part-year resident or non-resident.
With the situation in the original post, I believe that the $800 will be considered taxable by BOTH AZ and CA, but that no tax will be owed in CA after apportioning income between the state and federal amounts.
My father was an airline pilot, lived in Nevada, domiciled in (and commuted to) California, paid by the company out of Illinois. He used to get a few requests a year to pay tax to states he flew over… for time spent working in their airspace.
The company had a form letter to tell the states in question to pound sand.
I live in Texas (no state income tax) but I work in Louisiana, about 2 years ago (post-Katrina the state lost a lot of it’s tax base) the state of Louisiana decided that “my income was derived from Louisiana sources” and began making me pay state income tax.
I never got (or filled out) ANY paperwork from them, they just charge me whatever they feel like (why do I think I am taxed at the highest rate?). It works out that I pay roughly $10.00 a day (whether I work or not) for the “privelege” of working in Louisiana. Last year I paid them almost $4,000.00 and my “refund” was $175.00!
Let’s say I live in state A and work in state A, but deposit my wages into a bank account in state B. Would the interest earned while the money is sitting in the account considered taxable to state A or state B?
I discovered this many years ago when I drove race cars. I participated in a race at Anderson, California Speedway and made a total of $400. Before the promoter would pay me I had to fill out a state of California tax form. I never did file taxes with California and they never contacted me about it. I also drove in Oregon a number of times and never filled out any Oregon tax forms or file a tax return.