When we think of tax time, we often focus on our federal returns. However, the truth is that you also have to think of your state return as well. For many people that just means one state return. If you’ve moved, though, you might have multiple state tax returns to file this year.
Income in Different States
Since my family moved across the country recently, we are considering the financial implications. Of course we’ve had to deal with the cost of moving, and the realities of selling our home, as well as the joys of making sure we have the right insurance coverage. When you switch states, you often have to switch providers.
However, it’s not just those things we have to think about. We also need to consider the state income taxes associated with earning money in more than one state. While we might not actually owe money in our new state (although we likely will), we will still have to file a tax return. This is especially true since my husband earned money for institutions in two different states.
I’m not sure how my business income will be handled yet, though, because the business hasn’t been moved yet. The business is still located in our old state of residence, so I don’t know how that will play out. I still need to find out what, exactly, my options are for setting up my home business in the new state, and then I’ll work out the taxes at that time — preferably with the help of a knowledgeable tax professional.
What gets really fun is when you have a job that takes you through several states. A couple of years ago, my brother had a job that involved him working in about 10 different states over the course of a year. That meant that he was paid in those states, and the companies involved considered his pay to be in those states. Even though he only owed taxes in about two of those 10 states, he still had to file a tax return in every single state. It was a tedious process.
Understanding Your Tax Law
It’s important to note that, while federal tax law is the same no matter where you go, state tax laws vary. So, you need to know what is expected of you in the state you are moving to, or the state in which you are working. It can be tricky, so it’s important to make sure that you consult with someone who understands the tax law in your state so that you don’t wind up in trouble at some point.
It’s never fun to pay taxes, but it’s an important part of your finances. Take the time to find out what needs to happen when you work in multiple states so that you don’t miss filing a crucial tax return. The fees and penalties from a failure to file can be a big problem, and you will want to avoid them. Look into the situation ahead of time so that you aren’t taken by surprise later.
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