[galaxy]

So I'm starting a new career next week and doing my initial W4 and other paperwork, and I'm stumped.

I am a resident of, and physically live in one state and will be driving across the border to work in another state. Who do I pay state taxes to and how do I file at the end of the year? The employment form seems like it lets me choose. It asks "indicate which State tax is to be withheld for". So I need to input a state here and not sure which one.

And then how do I file at the end of the year? Does Turbo Tax account for situations like this?

There are others at my company doing the exact same thing, so I will be asking them as well, but thought I'd see if there's a tax expert floating around here as well. Thanks guys.

 

[BobSoFine]

You file in the state where you live and not in the state where you work.

 

[driller]

You file in the state where you live and not in the state where you work.

True, but you may also be required to pay local taxes where you work if applicable.

 

[BobSoFine]

In those instances the state where you reside will most likely let you take a credit for taxes paid on income in another state so it would be a zero sum game. Unless of course we're talking about things like oil or mining royalties.

 

[galaxy]

So yes, I do understand the credit for the "other" state and the zero sum game as you put it, but was mainly trying to pin down what state to put on my form. So I'll claim the state I'm living in/residence of on this piece of paper and that's what I file at the end of the year. That's the main question. And then I have between now and next April to figure out the rules about filing for my residence state and also if I need to file in the work state.

 

[BobSoFine]

Hi galaxy. The best thing you can do is to ask around and get the name of a few CPAs near you then give each a call and ask them if they could talk to you for a few minutes about your tax situation. If you call a small independent CPA they'll probably just spend a few minutes with you on the phone for no charge.
As far as the new tax laws are concerned everyone is still trying to figure out their impact on 2018. The new withholding tables just came out so it's going to take a bit to figure out. If most of your income comes from wages a CPA should be able to give you a quick answer right after tax season is over and things settle down. It never hurts to talk to a CPA to get the straight scoop so you won't get caught short next April.

 

[Gamecock]

Ultimately covered by state law. GENERALLY, you pay state income tax in the state where you earned it.

So you file in the state you work in for your pay, and also in your home state for any other earnings, like stock dividends or interest bearing accounts.

"You file in the state where you live and not in the state where you work."

This is false up and down.

 

[BobSoFine]

Hey Gamecock your absolutely right. I've lived in the D.C., VA, MD area all my life where there are reciprocal agreement so everyone files and pays in the state where they live. Never gave any thought that it might be different elsewhere.
BTW I found this web site the has a good discussion about this issue. See this link:
https://www.rapidtax.com/blog/state-income-tax-living-in-one-state-working-in-another
As I said before it's always a good idea to consult with a CPA to be sure you understand the local requirements.

 

[galaxy]

So here’s what I’ve found out for the most part. Since the business is in MO, I’ll automaticlaly be paying MO taxes throughout the year. At the end of the year when you file, MO gives you just about everything back since it is non-resident income. Then you’ll get a bill for IL taxes. I’ve heard it’s about a zero sum game.

 

[BobSoFine]

Glad you got it sorted out galaxy.
A few years ago I had to pay state tax in Utah on a small amount of royalties from a mining lease because it was "earned" in Utah. Since I live in Virginia they gave me a credit for the Utah tax. Another zero sum game.