Working in Another state, do you pay double state tax?

[wmjivey]

I had to get an job across the border of the next state to keep my seniority, I know I will be paying CA tax and AZ will of course take its share. Anybody know any secrets to get from being charge double?
Thanks
John

 

[TwinsinCA]

I had to get an job across the border of the next state to keep my seniority, I know I will be paying CA tax and AZ will of course take its share. Anybody know any secrets to get from being charge double?
Thanks
John

My husband works in AZ but we live in CA. His taxes are taken out all year in AZ. We get all that back and then pay CA when we file taxes. We are supposed to be paying estimated tax to CA for now, but we have not been very good about that.

 

[Cindy B]

I live in NJ and work in PA. I don't pay double tax. Check with your HR rep about this. I had to elect from my HR NOT to take PA but only NJ (which is a higher rate). To complicate things further, I also pay a specific wage tax because I work in a specific city in PA.

You should be able to get this with HR. Check to see if neighboring states have reciprocity agreements.

 

[momrek06]

In 2008 my 22yo DS worked in 4 states. MA, RI, New Mexico, CA! He had to pay taxes in all those states.

 

[hopemax]

After our move, for 3 months, we lived in CO and DH worked for his company back in AZ. We had to file in both states, but on our CO return, there was a section for people paying taxes in 2 states. Our CO taxes were reduced by the amount of what we paid in AZ taxes while living in CO.

 

[Mrs.Toad]

Usually the state you live in will give you a credit for the taxes you paid to another state. Look up the instructions for individual income tax returns in both states, or check with a CPA.

 

[Cheshire Figment]

There are two possibilities.

One is reciprocity. In this case (usually involves commuting) the employer will take out the withholding for the state of residence and show the state of residence on the W-2. Here you would not get California involved at all.

The other involves a credit. You would file a non-Resident return in California and a Resident return in Arizona. In the case of the non-residnet return there will be a ratio between your California and total income, which would also be used for deductions, exemptions, etc. You would pay tax to California based on this computation. Then oon your Arizona return you would file based on your total income, but the amounts of California tax (not the amount withheld) would be a credit (reduction) to your Arizona tax.

I am very used to working wth clients with both these situations, but I will not do the research for you and I normally don't work with either California or Arizona. You might want to check with a local office of one of the national Tax Preparation Services (such as Jackson-Hewitt or Block) and ask them for advice.

Mike (CPA)

 

[deva]

Anybody know any secrets to get from being charge double?

The "secret" is the resident credit. But be forewarned you might not end up entirely whole due to differences in state tax rates and how your state calculates the credit.

 

[wmjivey]

Thanks, Mike I will check with the HR department out Florida and see if I can just stay with Arizona taxes.

John

 

[3boymthr]

DH used to live in RI and work in mass then lived in MA and worked in RI (he just couldn't make his mind up ). We didn't find that we got charged double but even with the reciprocity and tax credits we still did pay extra taxes over what we would have paid had he worked and lived in the same state (about $100 - $200/yr). Yes, we had a professional doing our taxes. I know we ended up owing more because when DH finally got a job in the same state in which we/he lived our overall tax payout went down even though his income went up - and none of our allowances changed.

 

[bicker]

Then there's New Hampshire. The way I understand it, ten or twenty years ago, a lot of folks got it in their mind that they could move just a little further north, and avoid paying their fair share of what it costs to maintain a healthy economy in Massachusetts. New Hampshire didn't have an income tax. That state raises money primarily through property taxes, and in general, at the time, spent a lot less on providing services and fostering a healthy economy. So that kept the property taxes relatively low too.

Well, as all other states that rely heavily on income tax revenues, Massachusetts imposed non-resident income taxes. As others have suggested, if you pay non-resident income taxes, your home state generally applies that amount as a credit onto your home state income tax bill. However, without a state income tax, there is nothing to credit against, and so you're essentially double-taxed: Taxed non-resident income taxes by the state you work in, and taxed the higher property taxes by the state you live in.

And the option to just get a local job is not practical: New Hampshire, Vermont and Maine have never invested in fostering a healthy economy in the same way that Connecticut, Massachusetts and Rhode Island have. Sure, there are some jobs, but now, ten or twenty years later, many New Hampshire residents still find it better for themselves to endure the double taxation and work in Massachusetts, because the commonwealth's investments in its economy have generally paid off: the opportunites are greater here, and the jobs themselves are generally better paying.