topic Re: Double tax in State tax filing

Double tax

Minnow2021 — Wed, 12 May 2021 16:15:28 GMT

Hi,

I moved from AZ to NJ on July 15th.

While living in NJ from July 15th forward, I earned income from AZ but my employer only withheld AZ tax for the full year. Do I still report taxes paid to AZ from July 15th forward as a double tax since NJ did not withhold tax?

Otherwise, NJ will tax me on income I was already taxed and paid tax to another State.

Thank you!

Thank you for the reply. Let me see if I understand your answer.

I'm married and filling a joint return.

Person 1 - Job location changed from AZ to NJ on 7/15/2020. Income tax easily split between the two States using two separate W2. One for each State. (However, 4 pay periods had both AZ and NJ withheld even though I lived in NJ)

Person 2 - Job location remains AZ even while living in NJ from 7/15/2020 forward.

From 1/1/2020 to 7/14/2020 - We lived in AZ and earned income only in AZ.

File Part Year Resident in AZ.

Person 1 - Income and tax withheld reported from 1/1/2020 to 7/14/2020 based on W2 for AZ.

(Double taxes paid, NJ & AZ from 7/31/2020 to 9/15/2020 (NJ Resident) - transition error by the employer)

Person 2 - Income and tax withheld reported from 1/1/2020 to 12/31/202(?) based on W2 for AZ. (No withholdings for NJ for the entire year.)

From 7/15/2020 to 12/31/2020 - We lived in NJ and earned income in NJ and AZ.

File Part Year Resident in NJ.

Person 1 - Income and tax withheld reported from 7/15/2020 to 12/31/2020 based on W2 for NJ.

Show the double tax paid to AZ (Calculate the income for those 4 pay periods) So NJ can provide an AZ tax credit. (7/31/2020 to 9/15/2020)

Person 2 - No income or tax withheld for NJ based on the single W2? (Nothing to report?) All income and state tax withheld on W2 was only for AZ. Person 2 worked from NJ virtually as an AZ Employee.

Person 2 - Calculate the Income earned working for AZ while residing in NJ from 7/15/2020 to 12/31/2020 so NJ can tax that income. Don't show taxes paid to AZ, even though you paid them. (No AZ credit and pay additional tax on Income already taxed by AZ??)

Person 2 scenario is what throws me off.

Thanks again!!

Re: Double tax

LenaH — Wed, 12 May 2021 14:35:33 GMT

No. Assuming this move is permanent and not related to Covid-19, you must file a part year Arizona return (1/1-7/14/20) and a part year New Jersey return (7/15-12/31). Your wages will be taxed based on where you earned the income. Therefore, you should ultimately end up getting a refund in Arizona because you overpaid and pay tax to New Jersey because you underpaid.

Generally, income is taxed in the state in which it is performed. If you continue working for this Arizona employer, please have them withhold New Jersey state income tax going forward.

The first thing you want to do is make sure you've filled out the Personal Info section correctly:

With your return open, select My Info in the left-hand menu.
Then, on the Personal info summary screen, please make sure your resident state of New Jersey is listed under your name.
Then, scroll down to Other State Income, and select Edit.
At the Did you make money in any other states? question, answer Yes and make sure Arizona is selected from the drop-down.
Select Continue to return to your Personal info summary.
Click on State on the left hand side.
Add Arizona if not already on the list.
Follow the on-screen instructions.

Re: Double tax

Minnow2021 — Wed, 12 May 2021 16:11:55 GMT

Thank you for the reply. Let me see if I understand your answer.

I'm married and filling a joint return.

Person 2 - Job location remains AZ even while living in NJ from 7/15/2020 forward.

From 1/1/2020 to 7/14/2020 - We lived in AZ and earned income only in AZ.

File Part Year Resident in AZ.

Person 1 - Income and tax withheld reported from 1/1/2020 to 7/14/2020 based on W2 for AZ.

(Double taxes paid, NJ & AZ from 7/31/2020 to 9/15/2020 (NJ Resident) - transition error by the employer)

Person 2 - Income and tax withheld reported from 1/1/2020 to 12/31/202(?) based on W2 for AZ. (No withholdings for NJ for the entire year.)

From 7/15/2020 to 12/31/2020 - We lived in NJ and earned income in NJ and AZ.

File Part Year Resident in NJ.

Person 1 - Income and tax withheld reported from 7/15/2020 to 12/31/2020 based on W2 for NJ.

Show the double tax paid to AZ (Calculate the income for those 4 pay periods) So NJ can provide an AZ tax credit. (7/31/2020 to 9/15/2020)

Person 2 scenario is what throws me off.

Thanks again!!

Re: Double tax

DMarkM1 — Wed, 12 May 2021 17:08:11 GMT

The person 2 income will be allocated on the return according to the state person 2 lived in when earning the income; same a person 1. The difference will be that since no tax was withheld for the NJ allocated income the return will show that taxes were underpaid for NJ. However, the AZ return will show that too much tax was paid. There will be no double taxation/overlap.