COVID19 work from home different state

[yz493]

My wife and kids live in NC and I work in PA (used to live in NC as well but moved to PA late 2019). Since March 2020, I came back to NC and stayed with my family while working from "home". I plan to use NC as my residency because that's where I stayed in most of 2020. A few questions:

1. For federal return, we will file jointly (MFJ). For state return, my wife only need to file NC return, but I need to file both PA and NC return, right? Shall I file PA state return as non-resident or part-year resident?

2. I've reviewed past questions regarding this topic. It has been suggested that we prepare a mock MFS for each of us and then file state return based on each mock MFS. Do I have to do that?

3. I had some excess contribution to both HSA and 401k during 2019. So at the beginning of 2020, I got some distributions from both HSA and 401k. For 401k distribution, I got 1099-R. For HSA, it's a 1099-SA. Question: shall I count them as income? If so, where shall I put them in the TurboTax?

Thank you very much!

[yz493]

1. For federal return, we will file jointly (MFJ). For state return, my wife only need to file NC return, but I need to file both PA and NC return, right? Shall I file PA state return as non-resident or part-year resident?

2. I've reviewed past questions regarding this topic. It has been suggested that we prepare a mock MFS for each of us and then file state return based on each mock MFS. Do I have to do that?

3. I had some excess contribution to both HSA and 401k during 2019. So at the beginning of 2020, I got some distributions from both HSA and 401k. For 401k distribution, I got 1099-R. For HSA, it's a 1099-SA. Question: shall I count them as income? If so, where shall I put them in the TurboTax?

Thank you very much!

[MaryK4]

Since you will be using North Carolina as your domicile for 2020, you can file a Nonresident Pennsylvania tax return.  You can then file North Carolina jointly with your wife and get a credit for the taxes paid to Pennsylvania.  This way you do not have to do the state separate/mock returns at all.

Yes, you will have to enter your 1099-R and 1099-SA in TurboTax.  You can find them on the list under Income.  

[yz493]

Thanks! One more question: how can I get a credit for the taxes paid to Pennsylvania? Is there any specific tax code/rule for the credit you mentioned? Thanks!

[MaryK4]

You will want to prepare the Pennsylvania tax return first (so you know how much tax you pay to PA).  In the North Carolina state tax return section of TurboTax, look under Credits- Other state tax credits. (see below)

@yz493

[yz493]

Thank you! Very helpful.

[yz493]

One more question: when I prepare the Pennsylvania tax return, shall I file on my own or still married filing jointly? (Note that my wife does not have any income in PA, but she has some capital gain from stocks.) If MFJ, do I need to include those capital gains (belonging to her) in my PA tax filing? Thank you!

[MaryK4]

You can file joint or separate (because you are not required to use the same status as on your federal return.)  

Your wife's capital gains would not be taxes in Pennsylvania because she was not a resident, but if you file separate you would not have to report it to Pennsylvania.   In TurboTax, you do not have to file an "as if" federal separate return to prepare the separate state return so it will not be difficult to prepare the return separate. 

@yz493

[yz493]

Thanks a lot! One more question: for the stock trades we had last year, do we need to explicitly list every single trade in our tax return? Say we have 100 trades last year, listing all of them would be too much work. In TurboTax, I see that there is an option of lump sum. May I just use that option so that we can avoid listing all the single trades? Appreciate your time!

[DMarkM1]

Yes, you can summarize 1099B transactions by category (for example A is short-term basis reported to IRS, D is long-term basis reported).  If you have transactions in categories other than  A and D then you will need to send a copy of the applicable 1099B pages showing those transactions.  TurboTax will walk you through that process.  The pages and along with a form 8453 will be sent by mail separately from your e-filed return.

[yz493]

Thanks for your reply. I only have short-term and long-term capital gain. In the Schedule D of Form 1040, TurboTax has filled both Part I and Part II. Over there, it refers to Form 8949. In my Form 8949, what TurboTax fills in the Description of Property is something like this:  "MyBrokerName - see attached statement". However, it seems to me that nothing like 1099-B was attached at all (TurboTax didn't even ask me to upload my 1099-B). Question: is it normal? Thanks!

[DianeW777]

Yes, this is normal.  It's not necessary to actually send the Form 1099-B with your return. The IRS gets an exact duplicate of the form you received.  What you may have to send in is the Form 8949 and statement that details all of your transactions. They will be looking at cost basis and combined total sale proceeds.

If you are e-filing your tax return, then mail your statements along with Form 8453 to the following address within three days after the IRS accepts your tax return: 

Internal Revenue Service

Attn: Shipping and Receiving, 0254 

Receipt and Control Branch 

Austin, TX 73344-0254

[yz493]

What is "statement that details all of your transactions"? Is it the 1099-B from my brokerage account? So I should mail 1099-B and Form 8453 together to the IRS? Is it correct? Thanks!

[MaryM428]

TurboTax will prompt you to print and mail the 8453 and a copy of your 1099-B.  You need to mail it within 3 days of filing your taxes.

@yz493

[yz493]

I will send them to IRS for the federal return. For the state return, do I need to send these documents to NC and PA Department of Revenue as well? If so, do you have the addresses? Thank you!

[yz493]

Do I need to send PA-8453 along with the 1099-B to the PA Department of Revenue? Thank you!