Multi-state tax issue

Forum|Forum|4 years ago
September 13, 2021
2 replies
8 views

I'm a resident of Alabama but work and live part-time in Tennessee. My employer, who is located in South Carolina, is taking SC income taxes from my check. I asked that they take Alabama but for some reason, they don't think they can do so. I don't think I should be paying SC income taxes as I'm not working in SC. Am I right in thinking they shouldn't be taking SC taxes? If so, is there something I can provide to my employer to have this changed?

Thanks so much.

Not A Product Question

Best answer by GeorgeDenseff

When you file your income taxes next year, you will file a return for South Carolina and a return for Alabama. Tennessee does not have state income tax.

You will show that you paid taxes to South Carolina and assign those taxes back to Alabama. When it asks what percentage of the income was earned in South Carolina, you will put zero. You will then put 100% for Alabama on the Alabama return.

Just remember to do your non-resident state first. That way TurboTax will compute this correctly.

You are correct that your employer should be withholding taxes for Alabama. If they make that correction, you will not have to file two state returns in future years.

The law is that you cannot be forced to pay more than one state for the same income. No double taxation is allowed.

G

GeorgeDenseffAnswer

Level 8

When you file your income taxes next year, you will file a return for South Carolina and a return for Alabama. Tennessee does not have state income tax.

You will show that you paid taxes to South Carolina and assign those taxes back to Alabama. When it asks what percentage of the income was earned in South Carolina, you will put zero. You will then put 100% for Alabama on the Alabama return.

Just remember to do your non-resident state first. That way TurboTax will compute this correctly.

You are correct that your employer should be withholding taxes for Alabama. If they make that correction, you will not have to file two state returns in future years.

The law is that you cannot be forced to pay more than one state for the same income. No double taxation is allowed.

V

VAM54Author

Level 2

Thanks for the great response.

Just to be certain I understand... when you say that my employer should be withholding taxes for Alabama, does that mean they should be withholding for Alabama and not SC? So, only withholding for one state, correct?

Also, can you point me to the actual law that states you can't be taxed by more than one state for the same income?

Thanks again!

G

GeorgeDenseff

Level 8

Your employer should only be withholding Alabama taxes for you. This might mean more work for their accounting department. But it is what they are expected to do.

This is an article on the double-taxation case:
Comptroller of the Treasury of Maryland v. Wynne

K

kanaankassab

Level 2

my residence is NC and I worked all year 2021 in SC and paid taxes in SC do I have to file in NC where I did not have any income ?

Hal_Al

Level 15

Q. My residence is NC, do I have to file in NC where I did not have any income ?

A. Yes.

The general rule is: your report all your income on your home state return, even the income earned out of state. You file a non-resident state return for the state you worked in and pay tax to that state. Your home state will give you a credit, or partial credit, for what you paid the non-resident state. You will have to file a non resident SC state return and pay SC tax on the income earned there.. You will also file a NC full year resident return and calculate tax on ALL your income. NC will give you a credit, or partial credit, for the tax you pay SC. So, there will be little or no double taxation, but you have the cost and hassle of filing two state returns. Do the nonresident state return first.