Guide to Filing Taxes in Two States After Moving

Filing taxes is fairly simple when you live – and work – in one state. But what happens if you relocate to another state? And what should you do if you live in one state, but work in another?

If you have such questions, don’t worry. Filing income taxes in two different states is easier than it looks. Below, our tax team explains how to file taxes in two states. We’ll also cover how to file your return if you live and work in different states.

Why You Might Need to File Taxes in Two Different States

First, you must determine if you need to file multiple tax returns. You typically need to file returns in more than one state if:

• You moved to a new state of residence within the tax year; or
• You work in one state but moved to another.

In other words, if you relocate, you may have two separate tax returns. This doesn’t necessarily mean you need to complete two federal tax returns, though. You normally only file one federal tax return, regardless of whether you move state.

Filing Taxes After Moving States: What to Consider

We’ve explained when you might be required to file multiple tax returns. So, when filing taxes in two states, the next step is to know how to file your taxes. Filing taxes in at least two states comes down to:

• Which US states you lived and worked in
• Whether these states have “reciprocity agreements” between them
• Where you earned the majority of your income
• If you’re in the same job or your employment status changed

Let’s cover each of these points in more detail.

The US States Involved

Every state handles state tax returns differently. The key point, however, is this. If you move during a tax year, and you earn income in each state, you may need to file two separate returns. This means filing a part-year resident return for each state.

How do you know if you need to complete separate returns? It depends on the income tax requirements for each state. 

If there’s no income tax requirement in your old or new home state, you might not need to file a return in that state. If each state has an income tax requirement, you most likely do need two separate returns.

Note, too, that some states consider you a “full” resident, rather than a part resident, after around 180 days. This means you’ll complete a full rather than part-resident return.

The rules can be complex. It’s important that you file correctly. Our team can explain whether you must file one or two part-year resident returns.

Reciprocity Agreements

A reciprocity agreement is an agreement between neighboring or nearby states. It applies when you work in one state but live in another. If there’s a reciprocity agreement, you only pay income tax in the state where you live – not where you work.

In practical terms, this could mean you’re still filing two returns. However, you will get a tax credit from one state on the tax paid in the other state.

Main Source of Income

When you complete part-year tax returns, you first need to know your total income. Then, you calculate how much income you accumulated in each state. This ensures that you don’t pay tax on the same income twice.

How do you calculate your income? Income includes everything from your salary to dividends and even rental properties. If you need advice on determining your total income for each state, we can help.

Employment Status

As mentioned, you need to pay tax in any state where you earn income, whether it’s from self-employment or regular employment. You’ll also pay tax in any state where you have a rental property. In this situation, you need to apportion your income earned in each state as outlined above.

What if you don’t move but work remotely or work in a different state? You may need to complete a non-resident tax return for the state where you earn money. For example, independent contractors working across multiple states must file multiple tax returns.

Again, the rules vary by state. Ensure you comply by contacting us for tax preparation support.

Consequences of Not Filing Income Tax in Two States

There’s a chance you may end up paying more tax than you owe. However, if you don’t file your taxes properly, the main concern is IRS tax debt.

When you file your return, you will be notified if there’s outstanding tax due. If you cannot pay the overdue amount, the collection process begins.

Tax debt is highly stressful to manage, especially if you try to handle the situation alone. However, help is at hand. Our team can represent you in all IRS tax situations. We’ll also explain what options may be available, such as payment plans, to help you pay.

The best solution, though, is to avoid tax debt. By filing taxes in two states properly, there’s less chance of underpaying (or even overpaying) income tax.

Tips for Filing Taxes in Two Different States

Filing taxes in two states after moving can be complex. As such, proper tax preparation is essential. Here are some points to consider before you file your next tax return.

• Know the filing deadlines. Give yourself plenty of time to file your return so you don’t risk late payment penalties.
• Calculate exactly what you earned in both states. Two states can’t tax the same income, so you need to know what portion of your income you earned in each state. Otherwise, you risk overpaying tax.
• Remember that every state has different rules to follow and forms to complete. Fill in the correct forms by checking with your state Revenue Department first.

In reality, filing taxes across multiple states can be a challenge. If you make a mistake, the consequences can be severe.

The good news, though, is that it’s not a challenge you need to face alone. Instead, hire our tax professionals. We can walk you through the entire process, from tax preparation to filing your returns.

Take the Stress Out of Filing State Taxes in Two States

Don’t let tax be a burden this year. Instead, get the support you need – and deserve – to file your taxes with confidence.

Our team offers more than just tax relief services. We’re your one-stop-shop for every tax concern. From filing taxes to managing IRS debt, we have the experience to help.

We will walk you through how to file income tax in different states so you can complete your returns with ease. And if you need IRS representation, we’ll help with that, too. Contact us now to learn more about our multi-state tax filing, and to discuss our range of tax services.