When we think of taxes, we often focus on federal income tax. However, it’s important to remember that your state wants its cut, too. If your state collects income tax, you need to file a state return as well as a federal return. If you’ve moved in the last year, you might need to file more than one state tax return.
Making Money in More Than One State
Often, when you move, it’s for a job. This means that you are likely to have made money in more than one state. For the most part, this means filing a return with all of the states that you made money in. If you are in a job that requires you to move around to different states, and you receive paychecks in those states, you might have to file even more returns.
Those who move around, working to install security systems, or selling services from state to state, might find themselves filing multiple returns. My brother filed seven different state tax returns one year after he had received paychecks in different states as a result of a job he had traveling around.
It’s important to check the laws in each state that you made money in so that you can determine whether or not you need to file a state tax return.
When you do file a return, you need to look for the process of filing as a non-resident, or as a part-year resident. Normally, these filing statuses depend on how many days you lived in the state. In my brother’s case, there were times when he lived in a state for only 30 days. However, he still had to file a state return — even if he didn’t end up owing any taxes in that state.
If you don’t abide by the tax filing rules in the state, you could find yourself paying penalties, and that can get expensive quickly.
Foreign Tax Paperwork
Don’t forget that you might also have to deal with foreign tax paperwork. If you earned money in another country, you might have to pay taxes and file paperwork with that country. The good news is that the United States offers you a foreign tax credit if you pay taxes on foreign income.
If you have moved out of the United States to another country, you still need to file your tax return. Uncle Sam expects you to report your income, even if you live in another country. There might be a way to reduce your tax bill, especially if some of your income is non-U.S., but you need to make sure all of the proper paperwork is filed. It’s especially important to take these steps since the government has been cracking down on foreign income and filers trying to hide their assets using foreign accounts.
Whenever you move across boundaries, whether they are state boundaries or foreign boundaries, you need to be prepared for the different tax laws. Look them up, or consult with a tax professional so that you know what to expect, and you avoid the fines and penalties that come with non-compliance.