Multiple States

[dp12]

I moved from Idaho to South Carolina July 1, 2019.  I earned 50% of my income and paid 50% of my taxes to each state. 

I am filing an Idaho State Tax Form 43 as a "Part year resident and non resident Income tax return".  I am also filing a South Carolina state tax form as "Resident or part year resident filing as a resident".  I have the following two questions / comments:

-- It appears I am getting 100% of the Idaho taxes I paid back as a refund - is that correct?

-- It appears South Carolina is taxing my income as if it were earned 100% in South Carolina and no credit for taxes paid to Idaho.  Is that correct?

Please advise, thanks

[MayaD]

You must allocate your Income between the two states. 

Revisit your state returns and make sure you are dividing the income correctly between Idaho and South Carolina.

Turbotax will ask you to separate the income you earned or to verify the allocation amounts that the software calculated.

[SteamTrain]

1) The Idaho part-year sounds like it is wrong.  Make sure you go thru all of the income allocations in the ID interview, and assign the proper $$ amounts to Idaho.  i.e. any income while living there. 

Is it possible you are getting a full refund form ID...yeah..if your gross income for the year was low enough. IF line 41 of the Idaho Form 43 ends up as a zero, then you get all your ID withholding back...BUT, you must really print out the Form 43 to make sure all of the entries are correct on the lines above it.

...especially line 39, that line MUST be a % of total yearly income that was received/earned while you were still an ID resident. So if half of the total year's income was earned in ID, then that lien must be 50%

2) When doing part-Year SC, Filing as a resident.....(The ID tax return must be filled in and fully correct first ). 

The big IF here is whether  ID really is refunding you everything.  IF they are, then yes, there is no credit for taxes paid to ID, since ID didn't "keep" anything.   IF there is a positive non-zero value on line 53 of the Idaho Form 43, then SC should be allowing that value as a credit for taxes paid to another state.....but as I said, the ID Form 43 must be complete, and fully correct first....before you venture into the SC tax return..

[dp12]

 Below is an excerpt from Idaho form 39NR which calcluates the Idaho credit for taxes paid to South Carolina

Total earned of $137k.  $61k of that was earned and taxed in Idaho, $67k of that was earned and taxed in South Carolina, and the Idaho portion only was taxed in both Idaho and South Carolina.

I filled out form 39NR section C as follows:

1. Idaho adjusted income from Form 43, line 32, Column B ............................ $61k
2. Federal adjusted gross income earned in other state adjusted for

Idaho modifications. See instructions ..................................................... ……...$67k

1. Amount of income taxed by Idaho and also taxed by another state ............. $61k
2. Idaho tax, Form 43, line 42 .......................................................................... $3.5k
3. Divide line 3 by line 1. Enter percentage here ............................................. 100 %
4. Multiply line 4 by line 5 ..............................................................................................$3.5k
5. Other state’s tax due minus its income tax credits ....................................... $3.2k
6. Divide line 3 by line 2. Enter percentage here ............................................... 92%
7. Multiply line 7 by line 8 ............................................................................................. $3k
8. Enter the smaller of lines 6 or 9 here and on Form 43, line 43 .............................. $3k

Of the $3.5k Idaho tax owed based on the income earned in Idaho, the Idaho return is getting a $3k credit (line 8 - 92% of SC tax on that same amount) resulting in a tax liability to Idaho of $500 for $61k of income which seems low and basically SC is getting that money ... The bottom line net of both states to me is correct it just seems Idaho is being under paid and SC overpaid.

[SteamTrain]

61k + 67k = 128k........so 10k of other income?

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I see what you've done but I guess I differ from what you are doing. .....while it's counter-intuitive....due to the way SC does Part-year in a screwball way......my (non-legal) opinion is that you do NOT take ID the credit for taxes paid to another state for that 61k.   

Properly, only ID get to tax that income.   By taking the credit in the ID form, you are essentially indicating that SC gets to tax all of it...no way !   SO, you would delete the taxes paid to another state in the ID interview, and let it assess the proper ID tax on the entire 61k. That would make the ID form correct.  (as long as you were able to indicate the other 67K was not ID income (so line 39 of the ID form 43 ends up at ~45-55%  ? )

Then, once it is properly taxed on the ID form 43, you get to  the SC tax return, and you avoid the double-tax there when you do get the tax credit for earning AND being taxed on the  61k you actually earned in ID. 

 The 61k was actually earned in ID.  So, for teh way the SC does it,  SC calculates a tax on everything for teh entire year, but then removes the tax on the ID income by using the tax credit..where it belongs.

________________________

Yeah...that's just my strong opinion .

[SteamTrain · Accepted solution]

Annnnnnd, looking at it another way.

You allow ID to do the proper full tax on the 61k.

.....And then You get a bigger credit on the SC tax return for the taxes that ID did keep for taxing the entire 61k, which essentially removes the 61k from being double-taxed in SC..so double-taxation no longer exists, as far as ID is concerned.

[dp12]

Thanks, I looked at removing the amount in line 3 (amount taxed by both states) which doesn't change the tax paid when looking at both states combined, and also is a more equitable way of distributing the tax between ID and SC, I just didn't know if that was legal since that is not what the form is asking.  I'm going to do it though because it makes sense ... and the IRS is all about making sense, right?

[emilynicole73]

Yeah, you can't do simple math, $61K + $67 =$128, not $137, so get a tax expert to do your taxes.