Yes, you do. The normal rules for interstate taxation are -
· you file a non-resident return for the states where you worked but did not live, reporting only the income earned in that state.
· you file a resident return for the state you live in reporting all of your income, no matter where it was earned. You claim on your home state resident return a credit for taxes paid to other states that you worked in. If the out of state income was from a state without an income tax, you would have no credit.
The result of these rules is that you will pay tax on the income, but only once, and the net result is it will be at the tax rate in the higher tax state.
In Turbotax you must follow this sequence:
· Prepare your federal return,
· Prepare your non-resident state return, then
· Prepare resident state return.
After completing his federal and NC state return, we learned he should have completed his non-resident SC state return before doing the NC returm?
How does he recovery from this missed step??
It is not critical to do the returns in the correct order. The reason it is recommended that you do the out of state return first is that you may need the tax from that state to enter in your resident state return to get a credit for it.
You can review the credit for taxes paid to another state on your North Carolina return to make sure you entered the correct tax from your South Carolina return. If it is correct, then you do not need to redo the returns.
You can delete the two returns and start over if you want, however.
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