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Prof-X
New Member

If I moved to CO in September, earning income that is MA sourced, does it make sense that my CO taxes as a part-time resident are ZERO?

I am working remotely in Colorado (since Sept) earning income that is Massachusetts sourced.  I filled out Federal and State.  For Massachusetts, it's a part-time and nonresident form with all of my income distributed between the two. For Colorado, it's a part-time resident form.  TurboTax is saying my taxes are zero in Colorado.  Is that right?

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Accepted Solutions
DanielV01
Expert Alumni

If I moved to CO in September, earning income that is MA sourced, does it make sense that my CO taxes as a part-time resident are ZERO?

It depends.  If your situation is as you describe it, then yes, this could be correct.  In the scenario you present, Colorado gives you a credit for the tax you pay to Massachusetts for the income you earn in Massachusetts while living in Colorado.  If this amount is equal to or greater than the amount of tax Colorado assesses on that income, then you would in fact have no Colorado tax.

However, this is not your situation.  Once you moved from Massachusetts, the income you receive telecommuting actually belongs to Colorado and only Colorado.  For Massachusetts, Massachusetts-sourced income is income earned while physically present in Massachusetts only.  There are states (NY for example), that would tax your telecommuting income.  But Massachusetts does not.  This website provides more information on this:  http://www.thetaxadviser.com/issues/2010/feb/apractitionersguidetothetaxationoftelecommuting.html

Therefore, you actually file part-year returns (only) for Massachusetts and Colorado.  You will allocateapportion, or designate, the amount earned telecommuting in Colorado as Non Massachusetts Portion Income.  If unsure of the amount, then use percentages.  Determine the percentage of the year you were living in Colorado, and multiply your entire income from that job by this percentage.  This amount will be taxed in Colorado.

Obviously, you may see a Colorado tax due as the tax credit no longer would apply.  However, your Massachusetts refund should increase by at least that amount, and likely more.  More importantly, it is the correct way to file this year.

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5 Replies
DanielV01
Expert Alumni

If I moved to CO in September, earning income that is MA sourced, does it make sense that my CO taxes as a part-time resident are ZERO?

It depends.  If your situation is as you describe it, then yes, this could be correct.  In the scenario you present, Colorado gives you a credit for the tax you pay to Massachusetts for the income you earn in Massachusetts while living in Colorado.  If this amount is equal to or greater than the amount of tax Colorado assesses on that income, then you would in fact have no Colorado tax.

However, this is not your situation.  Once you moved from Massachusetts, the income you receive telecommuting actually belongs to Colorado and only Colorado.  For Massachusetts, Massachusetts-sourced income is income earned while physically present in Massachusetts only.  There are states (NY for example), that would tax your telecommuting income.  But Massachusetts does not.  This website provides more information on this:  http://www.thetaxadviser.com/issues/2010/feb/apractitionersguidetothetaxationoftelecommuting.html

Therefore, you actually file part-year returns (only) for Massachusetts and Colorado.  You will allocateapportion, or designate, the amount earned telecommuting in Colorado as Non Massachusetts Portion Income.  If unsure of the amount, then use percentages.  Determine the percentage of the year you were living in Colorado, and multiply your entire income from that job by this percentage.  This amount will be taxed in Colorado.

Obviously, you may see a Colorado tax due as the tax credit no longer would apply.  However, your Massachusetts refund should increase by at least that amount, and likely more.  More importantly, it is the correct way to file this year.

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Prof-X
New Member

If I moved to CO in September, earning income that is MA sourced, does it make sense that my CO taxes as a part-time resident are ZERO?

Thanks for the reply.  Makes complete sense.  As I understand it, a nonresident in Massachusetts is someone who may live in another state, but physically travels to Massachusetts to work.  For example, many people live in NH, but drive to Boston for work.  What was odd on TurboTax was that the CO return allowed me to allocate, but the MA one wouldn't let me and kept the non-MA portion grayed out.  It happens no matter which state I do first.
DanielV01
Expert Alumni

If I moved to CO in September, earning income that is MA sourced, does it make sense that my CO taxes as a part-time resident are ZERO?

I've been working on this one.  I see what the system is doing.  To work around this, you will need to add a Colorado line to your W-2, even though you put a zero income there.  Then, the system will allow you to enter allocation information into the Mass return.  When I selected the PY & NR, it was returning all of the taxes paid to MA, which is also incorrect.  So it was necessary to create a way to get the Non-MA portion into the system.  When I did this, I could.  As you mention, allocating in Colorado is not difficult.  This is how you can get it right, but there's a good chance that you might not be able to e-file.  If this is the case, mail in the return and explain the time of the move as well as the amount you earned telecommuting from Colorado.  But a PY return is the correct return, because you had no NR income technically speaking.
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Prof-X
New Member

If I moved to CO in September, earning income that is MA sourced, does it make sense that my CO taxes as a part-time resident are ZERO?

I added the CO line to my W-2, but MA still grays out the non-MA portion.  I am allowed to get the tax credit for the state tax to CO later on.  The difference between the two seems to be the same as if I filed as if I were in MA the entire year, so it's probably right.  At least I know CO is correct - it's so much simpler - you just input the CO income and done.
DanielV01
Expert Alumni

If I moved to CO in September, earning income that is MA sourced, does it make sense that my CO taxes as a part-time resident are ZERO?

I actually entered an amount on a "CO" line with the W2, then I was able to edit the MA part-year return non-MA amount.  Admiteddly, that's not the easiest way to go about it, but it may be necessary.  In addition, you are almost certainly going to need to mail-in the return with an explanation of the apportionment.  But if you do it the way you suggest, as a full-year MA resident with a CO nonresident credit, I'm sure MA will find that acceptable and you probably don't have a large tax difference.  I was away for two days so I apologize I didn't comment back sooner.
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