Moved and stayed working remote

[menudude]

I lived in Indiana between 1/1/2019-8/31/2019 and moved to North Carolina on 9/1/2019. In the move I stayed on working for my employer who is based in Indiana and I am working remotely out of home in North Carolina. They are not registered for taxes in North Carolina so all taxes came out of my check for Indiana.

I was told previously that long term I would likely need to file an Indiana state return and use the money paid to the state as a credit on my North Carolina return but the situation is more complex as I was split between the states this year.

What is the best way for me to proceed filing? I was hoping the software would have walked me through the situation but unfortunately it doesn't appear to have.

[KatrinaB48]

This year, you will need to file a part-year resident tax return for each state. When completing the two returns make sure you allocate all of this employer's income to the state of Indiana. 

Moving forward, you should only file a North Carolina resident state return. It doesn't matter where your employer is located on your individual tax return. You only pay taxes in your home state of residency.

Please view how to file a part-year state return. Also, view how to allocate income on a part-year return.

[menudude]

Thanks Katrina. If my employer is only collecting/sending taxes to Indiana how will North Carolina know what I had paid?

[AmyC · Accepted solution]

Because the employer is sending taxes to IN, you will need to prepare a non-resident return to claim a full refund and then prepare your NC return and pay them.

[menudude]

Thanks Amy. Can you confirm how I should file for this year being a part-resident?

[AmyC · Accepted solution]

Yes, the other expert was correct. A part year return for each state will handle things this year. Good luck!

[menudude]

Thanks again. And I should allocate all of my earnings to Indiana and none to North Carolina, correct?

[AmyC]

Unfortuantely, you will claim the income in both states. The Supreme Court announced in 2015 that states would no longer be able to double tax individuals on the same income.

So, you will prepare IN with your dates of living there each year, either part year or non-resident.

Next, you prepare your NC return. NC will credit you for what you paid to IN. The lower of the state tax liabilities based on the duplicate income, will become a credit on NC for you. You may owe NC something due to different tax rates in the states.

You can check out the full filing instructions with the states to make sure you understand. We are here to help!

[menudude]

Both of your answers are opposite of Katrinas so I need to confirm one last time.

For this year, file a return with Indiana. Allocate 100% of my earnings to Indiana and mark that I lived there for the dates I did. Then, file a return with North Carolina, allocate 100% of my earnings again to the state (even though I only technically earned a few months out of the year), mark that I lived there the dates I did, and enter the tax paid to Indiana for a credit.

Going forward, complete a non-resident return for Indiana and pay taxes. After that, complete a resident return for North Carolina and claim the credit for taxes paid to Indiana.

Correct?

[AmyC]

I am so glad you asked. Links and rules should clear things up. Let's go one by one:

Indiana filing requirements:

Part-Year Residents and Full-Year Nonresidents

• If you were a part-year resident and received income while you lived in Indiana, you must file your Indiana income taxes.
• If you were a full-year nonresident of Indiana, but received any income from Indiana sources, you must file your Indiana income taxes.

from IN DOR

IN part year, yes you had IN income, you must file using all of your IN income. Moving forward, nonresident and will receive ANY income, you file.

Going forward, you will be filing IN returns with all of the income.

Let's look at NC. I have bolded the parts that apply to you.

North Carolina fling requirements:

I'm a part-year resident. Do I have to file?

• If you are a part-year resident, you must file if:
  • You received income while a resident of North Carolina or you received income while a nonresident that was (1) attributable to the ownership of any interest in real or tangible personal property in North Carolina or (2) derived from a business, trade, profession, or occupation carried on in North Carolina, or (3) derived from gambling activities in North Carolina and whose total gross income for the taxable year exceeds the amount shown in the Filing Requirements for Tax Year 2019 Chart for the individual's filing status. 

• North Carolina Residents: If you were a resident of North Carolina during tax year 2019, you must file a North Carolina individual income tax return if your gross income for 2019 exceeds the amount shown in the Filing Requirements Chart for your filing status.

 

From NC DOR

For NC part year, you received income while a resident, you file with all of the IN income.

For resident, if your income exceeds the minimums required to file, you file. Yes, you will file NC return each year you have enough income from IN or other sources..

The states know their own rules the best and it is a great idea to double check each year that the laws did not change.

Prepare IN first, calculate the tax liability, then prepare NC and receive a credit.