I am a resident of NY and earned income from competitions in multiple states. I have a sole proprietorship, I file a schedule C. My total income is reduced by my total expenses and nets to only approx $4k. Some expenses are competition-specific and other expenses are overhead. How do I allocate my schedule C for state tax purposes in each state? Some states likely result in a net income that is negative or zero, so do I need to file in those states at all?
You will need to split the income and expenses by state, regardless of profit or loss. Keep in mind, if this is your sole income, it will draw a red flag if you lose money or break even each year. Baseball, basketball and football players file a tax return in each state they play the game
every state is different so the following will not apply in all cases. if you have a loss in a state it may allow you to use it to offset income in a following year. to be able to use it you need to file a timely return.
Thank you. So if the net income does not meet the threshold for filing in that state, but the gross income does, I should file? Also, I guess I would need to allocate all of the overhead on a state by state basis, correct?
Correct. If you have state specific deductions, they you will have to do a profit/loss calculation for each state as top Tax Expert @ZoltanB45 said. You could not use any type of proration.
TurboTax allows you to prepare five states.
Each state has different filing requirements based on gross and or next income. Some states require you to file a return if you file a federal return. You will have to look up the filing requirements of each state. TurboTax has links to each state tax website at How do I track my state refund?
I see you are using CD/Download which means you will have to buy each state first.
If you use TurboTax Online you are prepare a state, see whether you owe and delete the state without paying. You still may be required to file, but if you don’t owe, there is no non-filing penalty.
However, as top Tax Champ @Mike9241 says, in some states it pays to file to record a net operating loss that can be used against future income in that state.