Multistate Tax Filing: What Does One Need to Know?

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Jul 22, 2022

Multistate Tax Filing: What Does One Need to Know?

Multistate Tax Filing in 2022

Some taxpayers file taxes in multiple states when they live in one state and work in a neighboring state which is called Multistate Tax Filing.

It’s that time of year when you need to talk to your CPA about your state income tax obligations from last year.

Multi State Tax Filing

It is possible that you will be required need to file and pay income taxes in multiple states due to the fact that your company has locations in more than one state. If you already have a CPA, you should talk to them about your income tax obligations in more than one state.

If you don’t have a CPA used to file income tax returns for more than one state, we suggest you work with one of our recommended income tax partners who can…

  • Help you figure out where to file your income tax returns.
  • Fill out your tax returns for you
  • Give you great service, just like you’d expect from Unison Globus

What Do I Need to Know About Filing Taxes in Two States?

Is it really necessary to jet off to some faraway land in the middle of summer? It’s unclear whether it’s possible to work and live in two different states. You may be required to file your taxes in more than one state for multiple reasons. We’ve given some examples to show how they can affect your state taxes.

Filing taxes when you’ve resided in two distinct states

How you do your taxes for the two states you live in will depend on many things, such as:

  • Which state is thought to be where the money came from?
  • States that are involved
  • Whether you switched jobs or stayed in the same one
  • If the states involved have an agreement that says they will help each other out.

Filing Taxes in Two States

You will probably have to file a part-year resident tax return in each state. A state return is usually required in one of the following states:

  • Have a property that generates income
  • Have earned income from self-employment or via wages

Make sure to keep the tap on the residency rules for each state you’ve lived in before you start to file your taxes. Some states think you live there all year if you’re there for at least 183 days.

If you are a part-year resident of two states and are filing two tax returns, check the rules for each state to see what income to report. Interest, dividends, and pensions are often generated in your home state.

Some states will want you to report all of your income, just like a person who lives there all year. Then, after you figure out the tax, your income as a resident will reduce this amount. Divide your income into some states before calculating your tax.

When you work in distinct states, you must pay taxes in each one

Because they work and live in several states, some people have to file their taxes in more than one state. It all relies on whether your non-resident state has a reciprocity agreement that allows you to request a withholding exemption.

Pay Taxes

The state where you live may also require that your employer withhold taxes from your paychecks, or you may have to make anticipated tax payments to that state. If both states have income taxes and there is no reciprocity agreement, you will be taxed in both states:

  • The first step is to file a non-resident tax return in the state where you are employed. In order to submit your tax return correctly in your home state, you will need the information on this return.
  • You’ll then need to file a tax return in your home state. Taxes paid to a non-resident state can be deducted from your state’s taxes, so you don’t have to pay them twice.

Because each state’s tax laws are different, it’s important to double-check the specifics before filing your taxes. Those who make money in multiple states may have to file multiple income tax returns.

Below are a few examples:

  • You are a shareholder in an S corporation, and most of the corporation’s business is in a state other than where you live.
  • You are a partner in a business with people from another state.
  • On behalf of an estate or trust, you are the beneficiary.
  • You own a house in another state that you rent out.

Most of the time, your home state will let you take credit for the taxes you have to pay to another state, like when you temporarily live there. To see if this credit is available in your state, visit your state’s tax page. You can also figure out the credit with the help of Unison Globus.

Filing Tax Returns for More Than One State Requires Special Attention

The first step is to learn about the rules in the states where you resided or worked throughout the year. The Federation of Tax Administrators can help you locate the state tax office where you resided or worked throughout the year.

Here are some additional things to consider:

  • Be prepared to pay more than someone who only needs to complete one state tax return if you want to do your taxes. Some online tax software will charge a fee for each state tax return, usually around $50 per state.
  • Check your state tax withholdings as often as you can during the year to ensure you pay enough state taxes. You can do this by using an online state tax withholding calculator or talking to a CPA if you need help. If you think you’re not paying enough state taxes, talk to your human resources department at work about raising the amount of state taxes that are taken out of your paycheck.

Tips for Filing Multiple State Tax Returns

Overwhelmed?

Don’t worry. We want to help!

With some help, filing tax returns for more than one state is as easy as 1, 2, and 3.

First, consider where you have lived, full-time or part-time, this year. In addition, make a note of any other real estate you possess outside of your primary residence state.

Last, write down the address of your employer.

Next, find out where you live in each state. There are three ways to live in a country: full-time, part-year, and not at all.

Full-time

Let’s get started with the simplest one: to live there full-time.

Full-TimeYou are considered a full-time resident of a state if your primary residence is located there and you have resided there for at least six months. In this case, you only need to submit a tax return for that state if your employment is also in that state and you didn’t relocate during the year.

Being a Non-Resident

Being a non-resident is also pretty simple. If you got money from a state but didn’t live there for any part of the year, you are not a resident of that state.

For example, if you lived full-time in California but worked from home in Oregon, that would be an example. Then you don’t live in Oregon but in California full-time.

Part-year Resident

If neither fits your situation, you may be a “part-year resident,” the third type of person.

For example, you might have started the year in Oregon but moved to California for good in the middle of the year.

If you want to know where you live, you need to show whether a move was permanent or not.

You’ll need documentation to establish that you’re making the transfer permanently. New driver’s licenses, automobile registrations, and voter registrations are only some instances of this type of documentation, but this list is not comprehensive.

FAQs – Multistate Tax Filing

Q.1 Taxes in two states: Is this a good idea?

It all depends on the situation. Depending on the state, workers from out-of-state are only required to submit tax returns in the state where they now reside. Tax “reciprocity” exists between the two states, as the term implies.

A resident and a non-resident tax return are filed separately if your state of employment and residence does not have reciprocity. You may not have to submit a tax return if you reside or work in one of the nine US states that don’t levy income taxes.

There are no income taxes in Tennessee, Alaska, Washington, Florida, South Dakota, Nevada, New Hampshire, Texas, and Wyoming.

Q.2 What is a non-state resident’s tax return?

A non-resident has never lived in a state where they earn money for any period of the year. This form is for people who work in the state but do not reside there.

Q.3 If I’m required to file in more than one state, how can I avoid paying taxes twice?

As a matter of federal law, two states are prohibited from taxing the same income differently.

If you work in a state that doesn’t reciprocate, you’ll generally obtain a tax credit for the state’s taxes.

Q.4 Where do I send my state taxes if I reside in one state and work in the other state?

If you work in one state but live in another, regardless of where you earn your money, you must file a tax return in the state where you live.

In addition, depending on your employment, you may be required to file a state tax return.

Q.5 How can I file my state income tax return if I move in the middle of the year?

Your state tax returns would be divided into two parts. One for each state where you lived during the tax year (assuming both states charge income tax).

To avoid paying taxes twice, you may claim part-year residency, allowing you to divide your income between the two jurisdictions.

There are guidelines for determining if you live in each state and how to disclose that on your tax returns. To learn more you can contact your state’s Department of Revenue.

Q.6 How do you submit your state taxes for those who work from home?

Tax laws vary from state to state.

Tax obligations may vary per state, but you should still plan to file returns for both states: one as a resident in the state where you live and another as a non-resident where you work, even if your tax obligations are different for each state.

Learn how to submit your taxes if you work from home.

Q.7 Is it possible to file as a married couple even though my spouse worked in a different state than I did?

Yes. Your income is included in a single federal income tax return.

You’ll have to list your incomes on your state tax return if you’re a US resident (if your state charges income tax).

One can file tax returns for each state where you or your spouse work, and the income from that state must include on each return.

Q.8 Where do I file taxes if I’m in the military and live outside my home state?

The military selects a “state of legal residence,” often known as a “legal domicile” (SLR). This is where you’ll pay your state income tax.

In most states, unless you’re also employed as a civilian, you’re exempt from paying state taxes while stationed somewhere other than your primary duty station.

Armed service members and their spouses may be able to live in the same state as their partners if they meet a few prerequisites.

The Key Takeaway!

Remember that you don’t have to worry much with Unison Globus tax preparation outsourcing services.

Why? Because we will sort your taxing issue by asking you a few simple questions and helping you fill out all the tax forms.

Plus, we will get you in touch with the finest CPA, or an EA for the same. With Unison Globus, you can be sure that your taxes will be done right, no matter how simple or complicated.

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