How do I know if I need to file a tax return in more than one state?
During tax season, many clients who moved to another state or have income coming from different states ask if they need to file taxes in more than one state. You may be thinking that this is not something you need to worry about since it isn’t tax season; but it is important to understand what taxes you are required to file so there are no surprises come April 15.
Most people only need to file taxes for their resident state, but there are certain cases where filing is required in more than one state. In a previous blog, we discussed that states you have worked in during a tax year determines which states you need to file your taxes. In this blog, we will cover nonresident taxes details.
Nonresident taxes are usually as simple as identifying where you were physically present to earn wages; however, there are situations you may not initially consider. You could also be taxed on:
- S Corporation or partnership income
- Out-of-state rental income or profits from property sales
- Gambling winnings
- Beneficiary income from a trust or estate
Remember to keep detailed receipts and documentation of all your earnings. This will come in handy when you provide your accountant information for your taxes, or in case you are subject to an audit.
If you have moved from one state to another during the year, you must also file a part-year tax return. Here are other scenarios that generally indicate that you will file part-year return before April 15:
- You started working in a different state than your residential state, then moved to
that state later during the same year
- You and your spouse moved to a new state: you received a job in the new state, and
your spouse still works in the old state
Luckily, this is not as uncommon or complicated as you may think. In most states, you will list your total income from your federal return in one column and the nonresident income in another column. Then you calculate the percentage of your nonresident income to total income from the totals of these two columns. If you have questions on nonresident taxes, please give us a call (781) 436-5810.