Nonresident Income Allocations. How do I report multiple state earnings and unemployment?

[JTR84]

I have a business in SC but earning income in SC as the business and contract work under a 1099 in NC.  I have two questions under Nonresident Income Allocations.

1. Under Business Income (Loss), should subtract the amount earned in SC and put the difference under NC income while nonresident?
2. On Underemployment Compensation, I earned my 1099-G in NC as that is where a bulk of my income comes from.  Should that entire amount be listed under NC income while nonresident?

[DianeW777]

Yes, you should report the income earned in the nonresident state. Complete your nonresident state return first, then your resident state. 

1. You should determine the amount of net profit from your business that was earned in North Carolina (NC) as a nonresident and only that income should be taxed to NC.
   • This income is also subject to South Carolina (SC) tax because all income is taxable to your resident state.
   • SC will allow you a credit for taxes paid to another state so that you are not actually taxed twice on the same income. 
     • Credit will be the lesser of the amount of tax liability to the other state or the tax that would be required from your resident state.
2. The unemployment is not one of the deductions from federal income that is allowed on NC. This means that it is considered as derived from NC sources and also would be taxed for nonresidents. the same credit applies to this income for SC.

Nonresidents. NC Income Tax Instructions

If you were not a resident of North Carolina at any time during tax year 2020 but you received income in 2020 from North Carolina sources that was (1) attributable to the ownership of any interest in real or tangible personal property in North Carolina, (2) derived from a business, trade, profession, or occupation carried on in North Carolina, or (3) derived from gambling activities in North Carolina, and your total gross income from all sources both inside and outside of North Carolina exceeds the amount in the Filing Requirements Chart on Page 6 for your filing status, you must file a 2020 North Carolina individual income tax return.