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Filing taxes in more than one state sounds intimidating, but it doesn’t have to be.
If you’ve earned income in more than one state, or live in one and work in another, you may need to file more than one state tax return.
While needing to file doesn’t change your federal tax return at all, it can still make tax time a little more stressful. As a result, it’s important to know when you might be required to file multiple state tax returns and how to do it.
- Four reasons you might be filing taxes in more than one state
- Filing a nonresident state tax return
- How filing multiple state returns impacts your federal return
Four reasons you might be filing taxes in more than one state
A few situations may require you to file taxes in more than one state. Common scenarios include the following.
If you moved from one state to another during the year and both states withhold income taxes, you might need to pay state taxes on a prorated basis depending on how long you lived and worked in each state.
You live in one state and work in another
If you or your spouse — if you’re married filing jointly — work in a different state from the one in which you reside, you may have to file more than one state tax return. But you generally don’t have to pay taxes to both states.
Rather, you’d pay taxes to the state in which you worked, unless the two states have a reciprocal tax agreement. In that case, you can pay taxes to the state in which you reside.
“A state reciprocal tax agreement is an agreement whereby one state agrees not to tax employee compensation, subject to employer withholding of the other reciprocal state,” says Brian Thompson, a CPA and tax attorney. “These agreements apply to employee compensation only.”
Note, however, that this doesn’t apply if you live in one state and work remotely for a company headquartered in another state. Instead, you would only need to file a return in the state in which you live and work.Learn how to file state taxes for free
You own income-producing property in another state
Any reportable income that you earn from an out-of-state property or other source may require that you file a tax return in that state. You should also report the income on your resident return.
You’re a business owner who works in multiple states
“If a self-employed taxpayer works in multiple states, there is no effect on his federal income tax obligations,” says Thompson. “However, such a taxpayer may have to file tax returns and pay state income taxes in multiple states.”
As a result, things can get complicated fast with the more states in which you do business, and you may need to enlist help from a tax professional to make sure you do everything correctly.
Filing a nonresident state tax return
Each state has different criteria for determining your residency status. For example, the state of Maryland considers you a resident in two ways.
- Your permanent home is or was in Maryland.
- Your permanent home is outside Maryland but you maintained a residence for more than six months during the year, and you were physically present in the state for at least 183 days.
For your resident state, you’ll typically file the normal tax return for that state, if it requires one. But if you need to declare income in another state, you may need to file extra forms.
For example, the state of Utah requires that nonresidents who earned Utah income for the tax year file a normal state tax return with all the income earned from all sources plus an extra schedule to report which portion of the income came from Utah sources. (Though Utah makes exceptions for income solely from a partnership, LLC, S corporation or trust.)
How filing multiple state returns impacts your federal return
The short answer is that it doesn’t. Your federal income tax return is separate from your state tax returns. You report your federal return to the IRS and your state return to the state’s entity, such as a department, commission, board or state treasury.
While you may use some of the specific information found on your federal tax return on your state returns, it likely won’t go both ways.
State and District of Columbia taxing authorities
* State has no personal income tax for individuals
If you have reason to believe that filing taxes in more than one state is required, it’s better to be safe than sorry. Contact each state’s tax entity to check their respective requirements.
While Credit Karma Tax®, a free online tax-filing service, can help you with your single-state tax return, it doesn’t support multistate filings. But you may be able to file multiple state tax returns on your own by visiting each state’s tax website and filling out each state’s tax return. Many allow you to file electronically through the state website.
If you hit a snag or aren’t sure if you’re doing it right, it might be worth reaching out to a tax professional who can help you file any state returns required of you, to help you avoid potentially costly mistakes along the way.
Relevant sources: What Are Government Entities and Their Federal Tax Obligations? | Alabama Department of Revenue | Alaska Department of Revenue — Tax Division | Arizona Department of Revenue | Arkansas Department of Finance and Administration | California Part-Year Resident and Nonresident | Colorado Department of Revenue Taxation Division | Connecticut Department of Revenue Services | Delaware Division of Revenue | District of Columbia Office of Tax and Revenue | Florida Department of Revenue | Georgia Department of Revenue | Hawaii Department of Taxation | Idaho State Tax Commission | Illinois Department of Revenue | Indiana Department of Revenue | Iowa Department of Revenue | Kansas Department of Revenue | Kentucky Department of Revenue | Louisiana Department of Revenue | Maine Revenue Services | Comptroller of Maryland | Massachusetts Department of Revenue | Michigan Department of Treasury | Minnesota Department of Revenue | Mississippi Department of Revenue | Missouri Department of Revenue | Montana Department of Revenue | Nebraska Department of Revenue | Nevada Department of Taxation | New Hampshire Department of Revenue Administration | New Jersey Department of the Treasury, Division of Taxation | New Mexico Taxation & Revenue Department | New York State Department of Taxation and Finance | North Carolina Department of Revenue | North Dakota Office of State Tax Commissioner | Ohio Department of Taxation | Oklahoma Tax Commission | Oregon Department of Revenue | Pennsylvania Department of Revenue | Rhode Island Division of Taxation | South Carolina Department of Revenue | South Dakota Department of Revenue | Tennessee Department of Revenue | Texas Comptroller’s Office | Utah State Tax Commission | Vermont Department of Taxes | Virginia Department of Taxation | Washington Department of Revenue | West Virginia State Tax Department | Wisconsin Department of Revenue | Wyoming Department of Revenue
Christina Taylor is senior manager of tax operations for Credit Karma Tax®. She has more than a dozen years of experience in tax, accounting and business operations. Christina founded her own accounting consultancy and managed it for more than six years. She co-developed an online DIY tax-preparation product, serving as chief operating officer for seven years. She is the current treasurer of the National Association of Computerized Tax Processors and holds a bachelor’s in business administration/accounting from Baker College and an MBA from Meredith College. You can find her on LinkedIn.