If I lived in a state for 2 months during the summer for a paid internship, do I claim that I lived in another state in 2015?

[BarbL · Accepted solution]

Yes.  You will need to file a non-resident return for the other state to report the income earned during your internship.  The non-resident state will only tax you on the internship income. 

You will also file a return with your resident state to report all income (including the internship).  Your resident state will allow a credit or adjustment for any tax paid to the non-resident state.  (You will not be taxed on the same income by both states.)

In TurboTax, after completing your federal return, move on to the non-resident state before doing the resident return.  It is important to do the non-resident return first so the credit or adjustment can be calculated and applied to your resident state return.

[RoseKo]

I know this thread was years ago but I need assistance. 

I'm working on my daughter's taxes in Turbotax. She is a resident of Kansas (in school full time) but spent the summer in Washington state for an internship. Washington has no state income tax and no state taxes were withheld. When filing in Kansas, it is showing a pretty large tax liability due to grossed up living expenses. What do I do here? She did the same thing in Michigan last summer but we filed a non-resident return and got credit for taxes paid in another state, which doesn't apply this year. She said the company said she should file as a non-resident for those two months but I can't figure out how to tell turbotax she didn't live in Kansas from mid-May to mid-August as there is only one start/end date. Help? Thanks!

[Hal_Al]

Q.   I can't figure out how to tell TurboTax she didn't live in Kansas  from mid-May to mid-August?

A.  You don't tell TT that. It's not relevant.  She was never a WA resident. She was only temporarily away from her home state of KS. 

You report  all your income on your resident state return, including the income earned in the other state. Your home state calculates tax on all your income, but gives you a credit, or partial credit, for tax you paid to the other state, if any. 

When you worked in a state without an income tax (e.g. Washington), there will be no credit, since there was no WA tax. In other words, having worked in a state without an income tax does not get you out of paying state tax on that income, to your home state.

"She said the company said she should file as a non-resident for those two months".   That means non-resident of WA. Since WA doesn't have an income tax, the statement is irrelevant. 

[RoseKo]

I understand what you are saying... that was why I was hoping TurboTax experts would know how to treat this. They told her to file as a resident of WA for those two months and she wouldn't have to worry about the Kansas impact. (I wasn't at her orientation so trusting what she remembers. 😀) Something just seems wrong that a 20 year old would be paying thousands in state taxes because the company underwithheld state taxes in a state that didn't have them.  (They grossed up for federal purposes so she is ok there.)

[VikTax]

Found this thread, I know it's been a while but this is an exact a situation for my son (internship in WA) and I can't get a good answer 🙂  Hope you see this. Have you ever figured out whether there is a way to avoid home state taxes for an intern who worked in WA? Thank you!!! 

[Hal_Al]

Q. Have you ever figured out whether there is a way to avoid home state taxes for an intern who worked in WA?

A. Yes. There is no way. Having worked in a state without an income tax does not get you out of paying state tax on that income, to your home state.