How does it work (taxes question)?

[simba20]

How do taxes work when you live in one state, but work in another?

Obvisouly you'd have to file Federal taxes, but would you have to sile two state income tax returns (if both states had state income taxes).

I may seem nieve, but it goes like this.

Hubster and I live in the boonies, in GA, 45 minutes away from the city. Where we live there is nothing, absolutely nothing. Travel to the nearest Wal-Mart is 30/40/45 minutes away (pick a direction). All we have around here are dollar stores and a chain grocery store.

Recently we have begun talking about moving to the city (in GA). The area I want to live in, is very desired, and due to this, rents are high, and affordable houses are small or adequte size with a postage stamp yard (walk out the back door 5 steps and hit the fence). Rents in our price range seem to be older homes that give me the heebie jeebies -- still looking for that hidden gem.

However, over the river, is another state (SC), and a city that blends in with the city area in our state. Houses in the other state are affordable, on good sized lots, and good schools are there as well. Rents (if we did a trial run) are also affordable, and nice houses can be found for good rents. This has intrigued me about possibly moving over to the other side of the river (a 50/55 minute drive from where we are now).

Hubster would either continue to work where we are now or get a job in the city. I would also, likely, get a job in the city (as I am losing enthusiasim for grad school).

So how would our taxes work in this situation if we moved to another state (SC), but continued to work here (GA). Is it worth it? Would we be taking a hit? I also know if we did move, and the hubster continued to work where we are now that I would have to factor in gas costs.....nothing would change as we basically run to the city already a few times a week (at least 2-3).

 

[allison443]

We live in NJ, I work in NYC. We file federal, New Jersey, New York State, and New York City tax returns.

I don't know the tax rates, etc. for the particular states you are talking about, so I cannot comment specifically on that, sorry. But I don't think it's uncommon to live in one state and work in another.

 

[deerhart]

You usually file in both states. You file in Georgia as a non-resident and file in SC as a resident.

 

[auralia]

I will use me as an example I lived in Maryland but was a Minnesota resident (hubby is military). Whe working inmaryland I owed my taxes to maryland first and second to Minnesota I filed 2 tax returns mn has higher taxes than maryland so lets say my Maryland taxes calculated to 1000$ but if I had made the same amount of money in mn the tax would have been 1200 because of the higher tax rate ... I owe Maryland first because that is where I work so they got my 1000$ then I file with mn mn says I owe 1200 in taxes but I get to deduct what I've already paid to Maryland because you can't be taxed double on the same money so end result is I send 200$ to Minnesota .... If Maryland had higher state taxes than Minnesota then I wouldn't have had to pay mn anything. Also think about If you hunt or fish on ga if living in south Carolina you will probably have to pay non residency licencing fees for game my brother is resident of Wisconsin but hunts and fishes in Minnesota and his non resident fees for this are very high

 

[roadtripper]

I used to work in RI and live in MA. We filed Federal, MA resident, RI nonresident taxes. I usually got a refund from RI, so I would file that form first. I usually owed MA (around the same amount as the RI refund) so I would wait to pay that until the RI refund came in. I'm sure I could have adjusted withholding so that I didn't owe in MA, but it was never much--about 200 dollars, so I just kept it the same.

 

[minnie1928]

It's gonna depend on whether or not the employer holds taxes for the state where you live or if they hold based on where the company is located. My husband and I lived in PA and for 10+ years worked in MD for large companies. They withheld PA tax from our paychecks. We never filed a MD form.

 

[Cindy B]

It also depends if you state has a reciprocal agreement with the other state.

We live in NJ and for a portion of the year DH worked in DE. DE doesn't reciprocate with NJ but does reciprocate with PA. We had to file our NJ resident, DE non resident. Honestly not a huge deal-- we got a big refund from DE, but had to pay NJ

To complicate things further this year, DH transferred from DE to PA but then into a city that has a separate local tax for everyone that works there (Philadelphia). I also have a job in PHiladelphia.

So this year we will have four separate state local returns to complete:

DE state (non resident)
NJ state resident
PA state (non resident) x 2
Philadelphia local x 2

SC to GA is nothing compared to that!

 

[Green Tea]

Can I nudge in here and ask a question as well. My child, a dependent and in college full time, earns money in the state where he goes to school. No state taxes there. We do have state taxes in our home state. What I have told him is I assume he will file a state return for our home state and have to come up with the money for the state tax as the employer with-held no state taxes. I know Turbotax will figure it out once I start, but any first hand knowledge?

 

[wdwfan16]

You need to find out if the two state reciprocate. If they do they you pay your state taxes in the state that you live in. If not, then you have to do 2 states taxes, if both have state taxes. This could actually result in higher taxes being paid than if you lived and worked in the same state.

 

[wdwfan16]

Can I nudge in here and ask a question as well. My child, a dependent and in college full time, earns money in the state where he goes to school. No state taxes there. We do have state taxes in our home state. What I have told him is I assume he will file a state return for our home state and have to come up with the money for the state tax as the employer with-held no state taxes. I know Turbotax will figure it out once I start, but any first hand knowledge?

If your son uses your address as him home then he will need to do a state tax there and may have to pay a penalty for not paying any taxes to his state all year.

 

[phred52]

oooh boy, I'm glad to have found this thread! I never gave it a thought before!! My dd worked in the college program at Disney from January to August in 2009. She's now back to college in our home state. Thanks for the heads up!!

 

[Green Tea]

If your son uses your address as him home then he will need to do a state tax there and may have to pay a penalty for not paying any taxes to his state all year.

I told him when he started to have our state withholding done. Of course, college kids never listen. Parents don't know anything right? He is one scared kid now!

 

[FloridaDisneyFan]

If your son earned wages in a different state then that is not considered income in your home state and therefore should not be taxable in your home state. If the state he worked in has a state return he will need to file that return (as a non-resident) as well as his home state return (as a resident with non-state income) and his federal return. You can specifically allocate income to a state. In the tax software you should be able to select which state the income originated in. I am a CPA in Florida and have prepared many returns where people have income from other states.

 

[FloridaDisneyFan]

Also the state he works in may not have state taxes. Florida doesn't.

 

[Cheshire Figment]

It depends on the states and reciprocity agreements.

For example, in Virginia (where I used to live), DC (where I used to work), and Maryland (where my wife worked for a few years) all three jurisdictions would withold VA tax and we would only file a VA return. Likewise for resident of DC or Maryland. It was simple this way, although the employer would often have to withhold for three different states.

However, I had a client who lived in Maryland but worked in Delaware; even though these two states touched they did not have a reciprocity agreement. I had to figure his DE tax based on his DE income and apportion deductions and exemptions. Then I had to figure his MD tax, based on all income but he was allowed a credit on his MD tax for the amount of ax he paid to DE.

And I currently have a client who lives in Alabama and who, during the year because of the nature of employment (short-term contract health services professional), has to have withholdings and file taxes from short-term employment in both Louisiana and Mississippi as well as Alabama. I have a weird sense of humor and think it is fun playing off one state against the others.

Mike (CPA Retired)

 

[Green Tea]

Cheshire Figment: He is our dependent, but he lives at college. He even stayed there over the summer to work. But as our dependent, I say he lived full time with us, right? We pay car, school, living, phone, etc.

 

[robsmom]

If your son earned wages in a different state then that is not considered income in your home state and therefore should not be taxable in your home state. If the state he worked in has a state return he will need to file that return (as a non-resident) as well as his home state return (as a resident with non-state income) and his federal return. You can specifically allocate income to a state. In the tax software you should be able to select which state the income originated in. I am a CPA in Florida and have prepared many returns where people have income from other states.

I guess this varies by state? If you file as a resident in NJ, you are taxable on all income earned no matter what state it is in. You do get credit for taxes paid to other jurisdictions but if NJ has a higher tax rate you will pay the difference.

 

[robsmom]

Requirements below:
Take a look at the georgia law for filing separately. If only one spouse works in the state, that person can file separately instead of joint just for the state. This used to save me money in the state i worked in because i was in a lower bracket then i would be with dh. this will vary on who is working in which state, what the tax rates are, and whether there is a big difference in your income.

Q. What are the filing requirements for a South Carolina resident working in another state?
A. As a resident of South Carolina, you are taxed on all your income regardless of where it is earned. In order to avoid double taxation, South Carolina would allow a tax credit for the taxes that you had to pay to the other state on the wages earned in that state. For South Carolina purposes, you would file the SC1040 with the SC1040TC. A copy of the other state’s return and federal return must be attached to the filing of the South Carolina return

Georgia:

What are the filing requirements for a nonresident who works in Georgia and/or has other Georgia source income?

Nonresidents, who work in Georgia or receive income from Georgia sources and are required to file a Federal income tax return, are required to file a Georgia income tax return. Some examples of Georgia source income are wages, Georgia lottery winnings, income from flow through entities (s-corporations, partnerships, LLC’s, trusts, and estates), rents, etc. If you are a legal resident of another state, you are not required to file a Georgia income tax return if your only activity for financial gain or profit in Georgia consists of performing services in Georgia for an employer as an employee when the compensation for services performed does not exceed the lesser of five percent of the income received in all places during the taxable year or $5,000.

Generally a taxpayer must use the same filing status on their Georgia return that they used on their federal return. However, a taxpayer who filed a joint return with a nonresident, who has no Georgia source income, may file a separate return and claim himself or herself only.
What are the tax law rules for changing filing status from married filing separate to married filing joint and married filing joint to married filing separate?

If taxpayers filed separate returns, they may change to a joint return for that year any time within three years from the due date of the separate return or returns. If they filed a joint return, they cannot choose to file separate returns for that year after the due date of the return. Exception: A personal representative for a decedent may change from a joint return elected by the surviving spouse to a separate return for the decedent. The personal representative has one year from the due date of the return to make the change.

 

[Cheshire Figment]

Cheshire Figment: He is our dependent, but he lives at college. He even stayed there over the summer to work. But as our dependent, I say he lived full time with us, right? We pay car, school, living, phone, etc.

Yes, he is your dependent and your house is his residence. All his income is taxable to your state. However, if there were withholdings from the state where he goes to college he would have to file a non-resident return there and take a credit for the tax paid on his home state tax return.

Note that most tax programs would be able to handle this simply; however you would have to get a program which will allow more than one state return to be done.