If you are full time residents of one state but received unemployment from another state do you have to file state returns in both states?

[LenaH]

Per the State of Massachusetts, non-residents are subject to Massachusetts income tax on unemployment compensation that is related to previous employment in Massachusetts. The amount of your taxable unemployment compensation should be on Line 10a of Form 1-NR/PY. Since only Massachusetts sourced income is shown on this form, this should be the only amount on Lines 5-11 unless you had additional Massachusetts income. Please review your Form 1-NR/PY. 

You would also pay tax on your income in your resident state of Rhode Island. To avoid double-taxation, Rhode Island should have given you a credit of taxes paid on Form RI 1040-MU. Your credit would flow to your Rhode Island Schedule II, line 28, which is on your 2021 Form RI-1040 (page 3). Please review your forms to ensure you have a credit on your Rhode Island return. 

@Sailynnej

[kam428]

I am trying to file taxes for my husband and I. I moved in the middle of the year from AZ to SC. My husband stayed in AZ until this current year he joined me in SC. He had received unemployment (1099-G) in AZ. When I add that info in it is taking away my SC state tax refund and making us owe SC state tax?? Why is unemployment from AZ making me owe money in SC?

[PattiF]

From the South Carolina individual income tax faq:

Does South Carolina tax unemployment compensation?

Unemployment compensation, taxed on your federal return, is taxable to South Carolina if it was paid by South Carolina or received while a resident of South Carolina.

Arizona unemployment is taxable to South Carolina if your husband was a resident of South Carolina when he received the payments. If your husband did not move to South Carolina until 2022, that income would not be taxable to him. He would not need to file a South Carolina return if he wasn't a resident in 2021.

[kam428]

@PattiF 

Thank you for the help.

How do I fix it on the turbotax website?

I have his info set as an AZ resident so why is SC still taxing it?

[AmyC]

When you mark SC as a part year return, you must choose to file part year as a resident or a non-resident. When you choose part year as non-resident, the program asks who lived in SC and residency dates. After clicking Done with Income, you enter only the amounts that are taxable to SC. Please review what you selected, I suspect your residency setting is the issue.

@kam428

[callmeselby]

I have a similar, but different, scenario: 

In 2022, I worked a contract job in the state of WA until mid April, then received unemployment from MA (where I was a resident for 20+ years), then accepted a full time gig and relocated to WA in August.  I lived in WA during the entirety of my contract but my partner continued to live in my MA house. I had a WA resident ID but did not fully change my drivers license and registration until August.

WA has no income tax

MA took 15% out of my unemployment for taxes (presumably 5% for state and 10% for federal)

I am now a fulltime WA resident

Can I file only in WA? Is there any way MA can try to claim income tax on my WA earnings?

[TomD8]

@callmeselby --

Regardless of your residency, MA can tax the unemployment compensation that you earned by working in MA.

You're considered a resident of MA for tax purposes until you abandon your domicile in MA and establish it in WA.  Your domicile is your main, primary home.  You can have only one domicile at a time.  You establish a new domicile when you begin living in the new location and show by your actions that you intend to make it your new main home.   MA can tax all the income you earn as a legal resident of MA, regardless of the income's source.

From your description ("I relocated to WA in August") it appears that you abandoned your MA domicile and established your WA domicile in August.  If so, MA would be able to tax 100% of your unemployment compensation, plus 100% of the income you earned prior to August.

[Brett585]

This solution must not apply to Illinois.  The IL Dept of Revenue told me that, even if a full-year non-resident, you still pay Illinois tax on Unemployment that was paid from Illinois.  The funny thing is that I cannot find that anywhere in IL documentation, and the IL Dept of Rev cannot point to it either.  It would be nice to know if I should pursue unemployment compensation tax withheld with Illinois.  (I lived in Texas for the full 2022 tax year). 

[TomD8]

@Brett585 --

From Illinois Statute Article 3, Section 303/e-5, Allocation and Apportionment of Base Income:

"Unemployment benefits. Unemployment benefits paid by the Illinois Department of Employment Security are allocable to this State."

https://www.ilga.gov/legislation/ilcs/ilcs4.asp?DocName=003500050HArt%2E+3&ActID=577&ChapterID=8&Seq...

In other words, unemployment compensation paid by Illinois is taxable by Illinois, period. 

If the recipient has relocated to another state with an income tax, the Illinois unemployment compensation would also be taxable by the "new" state, on the basis that a taxpayer's state of residence may tax all his income, regardless of source.  In that instance, the taxpayer would be able a claim a credit on the "new" state return for the tax paid to Illinois on the unemployment received after the relocation.

[Brett585]

Thanks Tom!  Strange that he Turbotax software completed an Illinois Schedule NR (including the amount from the IL 1099G), showing nothing owed to Illinois and a full return of the tax paid to IL (which I filed that way)!  The Illinois Dept of Rev couldn't point me to their tax law where unemployment compensation is mentioned specifically, but you did, although it's hidden way down in there (in Section 303, which appears to be miscellaneous income sources).  While I understand that Unemployment Compensation is Income, the best information that I could obtain from reputable Internet sources (including yourself), is that tax on Unemployment Compensation is paid to the state of which you are a resident.  I more easily found it . . . In Wisconsin's Dept of Rev docs!!  Wisconsin's website states that "Illinois law provides that unemployment compensation paid by the Illinois Department of Employment Security to a nonresident of Illinois is taxable to Illinois."  Thank you, Illinois!  Glad I moved back to Texas!  Thanks again for your reply, Tom!  I am very appreciative!

[TomD8]

@Brett585 --

In defense of Illinois, I know of no state that taxes unemployment but excludes former residents.  The usual rule is that if the unemployment was earned because of work performed in State A, it is taxable to State A, even if the taxpayer is a resident of State B at the time he receives it.

Of course, several states do not tax unemployment benefits at all.  These include Alaska, Alabama, California, Montana, New Jersey, Pennsylvania, Virginia, and the District of Columbia.