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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
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.
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.
File your single-state and federal taxes for free
Credit Karma Tax® can help you file your single-state and federal income tax returns for free. Plus, we can help you uncover deductions and credits that could really add up.
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.