How to File Tax Returns in Two States

File Tax Returns in Two States

How to File Tax Returns in Two States. If you work and/or live in more than one state during a calendar year, or if you earn income from property in a state other than your state of residency, you'll probably need to file two or more state tax returns.

Status

Step 1

Determine whether you earned income in more than one state during the year. Your W-2 forms will show the states to which your income and withholding are attributed.

Step 2

Determine whether you lived in more than one state during the year. Each state has its own definition of residency, but intent to stay can be used by most.

Step 3

Determine whether you lived in one state and worked in another.

Step 4

Verify that you are the legal owner of property in a state other than your state of residency and had gross income (income before expenses) from the property. Some states, such as Florida, tax assets rather than income, so check out the rules for any state in which you own property.

Step 5

Check out the filing requirements for all states in which you lived, worked or owned income-producing property.

Tax Preparation

Step 1

Obtain the proper state forms as well as instructions by mail or over the Internet. Some states have combined part-year resident/nonresident forms, while others have separate part-year resident and nonresident forms.

Step 2

Alternatively, you can take your tax documents to a tax preparer who has experience, as well as having the forms and instructions on hand.

Tip

You may be able to obtain a tax refund from a state by filing a return even if you are not required to file one. If you are a student out of state and your parents claim you as a dependent, you remain a resident of their state of residency. Some states don't have state income taxes at all, so you need to find out the rules in any state in which you earned income. States use a variety of methods to determine taxable income and to calculate credits, deductions and tax liability. Unless you wish to become proficient in this area, it is usually more efficacious to have an expert prepare the returns.

Warning

Even though you may have earned a minimal amount in one state, you may have an obligation to file a tax return in that state. Some states, such as California, calculate tax liability and requirement to file based on your total income for the year and not only on the amount earned within the state. You may be taxed on the same income by more than one state. Most states have reciprocal agreements with one another to allow a credit on dual-taxed income. You'll need to obtain a separate form to calculate the credit for taxes paid to one state on income whose source is in another state. Be aware that your tax liability may be higher than you anticipated and that you may have a balance due. File on time to avoid penalties and interest.

Things You'll Need

  • IRS Forms

  • Financial Calculator

  • Computers

  • Tax Preparation Software