sojatt16
New Member

W-2 includes 2 states; one where state income tax was deducted and other state where no state income tax was deducted. Do I need to file state tax returns in both states?

 
LisaBr
New Member

State tax filing

You may have to file in both states.  You will file in your state of residence unless your state does not have income tax.  There are different reasons why companies may have two states on your W-2.  If taxes were withheld in your non-resident state you will want to file for a refund.

If the state that you did not have withholding is your resident state, and it is a state that has an income tax, then you need to indicate that you paid taxes in another state and how much.  Your state will give you credit for paying taxes in another state.

The following information is helpful in filing a non-resident tax return. 

Nonresident income is income from another state you didn't live in during the year, and includes any of the following:

  • Wages or income from a state you're not a resident of, 
  • Rental income, gambling winnings, or sold a home for a profit in a state you're not a resident of,
  • S Corporation business shareholder income from a business in another state,
  • You are a partner in an out-of-state partnership,
  • You are a beneficiary of a trust or estate that has an interest in another state, or
  • Your employer withheld state tax for the wrong state. Under most circumstances, you’ll have to file a nonresident return to recover the incorrectly-withheld taxes.
    Notify your employer right away so it doesn't happen again!
Filing a Nonresident State Tax Return:

Make sure you prepare all nonresident returns before your resident state return, to ensure proper calculations. Also, make sure you select the state long form(s) even if TurboTax selects the short form(s) for you.

Tip: If you are preparing a nonresident state return solely to recover tax that was withheld in error, enter 0 on the screen that asks for the income earned in that state. This will eliminate your tax liability for that state, resulting in a full refund.

If you live and work in a Reciprocal State, you may only need to complete Step 3.

  1. Prepare your federal tax return first, then as you begin each state return;
    • Your federal return data transfers into your state return, and
    • TurboTax learns that you need to file each state return.
  1. Prepare a return for the nonresident state(s). Only report the income and withholdings from that state.
  2. Prepare a return for your resident state. You will report all of your income, including income from any nonresident (or part-year) states.
  3. Take a credit for taxes paid to the nonresident state on your resident state return so that you won't get double-taxed on the same income.

TurboTax calculates the credit for you, but you must select the state's long form to get the option, even if TurboTax chooses the short form for you.

Example: if you live in Kansas but work in neighboring Missouri, you would file a nonresident Missouri return in addition to your usual (resident) Kansas return. You'd then take a credit for any taxes you paid to Missouri on your Kansas return

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