Determining Whether or Not I Need to File Out of State Taxes (Iowa)

[KAH_777]

Hi.  My wife and I am currently residents of Oklahoma and we were both residents of Oklahoma for the entirety of 2020.  Not surprisingly, all of the income that I earned at my job (my wife does not work) is taxed to Oklahoma (and the federal government, of course).  That part is straight-forward, and I am comfortable completing those pieces.

The tricky part is that there was some "carry-over" income reported on my 2020 W-2 for Iowa.  The vast majority of my income was reported for Oklahoma -- as I would expect.  But, Box 16 is showing 636.95 for Iowa.  I am not 100% certain why this was reported for Iowa, but [product key removed], from some other discussions I had, I believe it is related to the fact that I had become vested in company stock options that had been awarded to me in 2018.  So, to be clear, they were awarded in 2018 and vested in 2020.  My understanding is that these are "Restricted share rights" and that at least part of the value would be Iowa income.  Again, I am not 100% certain, but that is the only thing I can think of regarding this $636.95 amount.  If it matters for my question, Box 17, for Iowa, shows 38.00.

Finally, according to https://tax.iowa.gov/im-not-iowa-resident:

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If Iowa-source income is $1,000 or more, a nonresident isn't required to file IF:

• All-source net income (line 26 of the IA 1040) is less than $9,000* and their filing status is single. ($24,000* if 65 or older )
• All-source net income (line 26 of the IA 1040) is less than $13,500* and their filing status is other than single. ($32,000* if either spouse is 65 or older)

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Putting it altogether, since Box 17 of my W-2 is showing $636.95, and the above information seems to indicate that I do not need to file taxes if Iowa-sourced income is less than $1,000, it would appear as though I do not have to file taxes for Iowa -- just Oklahoma.

Not knowing how this would work out, I purchased the Iowa state product from TurboTax.  Filling it out, it shows "LOW INCOME EXEMPT" on line 26 (on the dotted line) of the 2020 Iowa 1040 form....but it does not say anything about not needing to file.

Can someone help me with this?  Given the circumstances described above, I am just looking for confirmation as to whether or not I need to file in Iowa.

Thanks in advance,

Kevin

[AmyC · Accepted solution]

You do not need to file an Iowa return. Iowa nonresident says: Have net income from Iowa sources of at least $1,000, etc 

Those stock options are based from an Iowa company. 

I want to urge you to create a financial notebook that is kept separate from your tax return. Keep it safe and each year, add your year-end statements from all your financial accounts plus a copy of your W2’s, 5498, and any 8606 forms.

This will protect you down the road as proof of your basis in your various investments. As you go through life, rollovers, RSU & ESPP sales, and more will be captured for you. 

When you do sell, your notebook will be invaluable with knowing what was first, the order, the basis, and the lot size for stocks.

[KAH_777]

Thank you very much for the quick confirmation and overall response.

Kevin