Filing taxes is already a headache for most people and often begs the question, ‘do I have to file taxes in two states?’ If you live and work in different states, or you’ve moved to another state, you’ll likely have to file multiple tax returns. On a good note, you won’t have to worry about your federal tax return, which isn’t affected.
Question: Do I have to file taxes in two states if I live in one State but work in another?
Answer: Yes. If you live and work in different states, there’s a chance you must file taxes in both states. For example, if you live in New Jersey and travel to New York each day for work, you need to file taxes in both states.
Although you must file taxes in both states, you won’t necessarily pay taxes in both states. Usually, taxes will be collected from the state where you work only. Some states have a reciprocal agreement, also known as reciprocity. This agreement between two states means that each state’s residents can request tax exemption in the other, basically saving you the bother of filing multiple tax returns in multiple states.
Question: Do I have to file taxes in two states if my business operates in multiple states?
Answer: Yes. If you receive an income in more than one state, it will be more difficult for you to file your taxes.
Question: Do I have to file taxes in two states if I moved to a new state?
Answer: Yes. If you moved between states in the same year, you would have to file multiple tax forms. There are exceptions to the rule, so check with a professional for advice.
Question: Do I have to file taxes in two states if I have an income-producing property in another state?
Answer: Yes. If you own a vacation home in a state separate from where you live or a few investment properties, you’ll be required to file a separate tax return.
Form W-4 is required to pay federal taxes on a percentage of your paycheck. State taxes are collected using each state’s own version of Form W-4. To pay state taxes, if you’ve worked in two or more states, you’ll need to file a non-residential tax return.
If you’ve worked in two or more states, check to see if those states have a reciprocal agreement. If they do, you should pay taxes in your home state and not in the state where you work. Be sure to submit an exemption form with your employer. If there is no reciprocity agreement, continue to file taxes as per each state’s requirements. You won’t be taxed twice; you will receive a tax credit from your home state for the tax money paid in your work state.
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