What is the purpose/reason of the following question? "Did either of you make money in any other states?"

[BrotherRick]

Contrary to what all of the experts continue to say, if you're thinking intelligently, this question can have multiple answers.

For example, I own a business in my home state.  My office, my billing, my bank, my tax filing, and everything associated with this business is done in my home state.  What if I perform service in service in a neighboring state?  I did the work in another state, but the money is billed, earned, deposited, and reported in my home state.

If I consult with someone in another state via zoom (or similar product), am I earning money in another state?

What if I work on their computer systems remotely, is this work in another state?

Knowing the context of the question would help immensely! 

[rjs · Accepted solution]

The purpose of the question is to determine whether you have to file a tax return in any other state. The key factor is where you were when did the work that you got paid for. If you performed services in another state, you have to file a nonresident tax return in that state and pay tax on the income that you earned there. It doesn't matter where you do your billing or where your office or your bank are. What matters is where you did the work.

If you consult via Zoom, or work on a computer remotely, as long as you are sitting in your home state when you do it, you are not working in the other state or earning money in the other state.

[TomD8]

To elaborate on @rjs 's correct answer, with only a handful of exceptions states tax non-residents only on income "sourced" within their state.  Income is "sourced" where the work is actually (physically) performed.

If you tell us which specific states are involved, we could give you a more specific answer.

[BrotherRick]

Three reasons why I asked this question. Only #1 applies in 2021.  The other 2 bullets are from previous years.

1) I am a 50% owner of an LLC that owns rental property in Florida.  We have owned the property for about 10 years and we have management company that takes care of everything.  I go months, sometimes years without stepping foot on the property.  The LLC has NEVER been required to file a Florida return.

2) I have a very small business that does home improvement projects.  Once or twice over the last 8 years, I have done work 10 miles away in another state.  I only filed taxes in my home state.

3) As a consultant for a major IT vendor, I worked all over the country.  I only filed taxes in my home state.

[rjs]

It looks like you have gotten away with failing to file required state tax returns for years. When TurboTax asks whether you made money in any other states, if you answer No it is not going to prompt you to file tax returns in other states. TurboTax relies on you to give it accurate and truthful information. It has no way of knowing that you had income from other states if you tell it that you didn't.

The "Learn More" link next to that question gives some examples of money earned in other states, including owning rental property in another state and working in a state other than the state you live in.

You actually have a somewhat complicated multi-state tax situation. I suggest that you meet with a local tax professional who can advise you about your state tax filing obligations.

[BrotherRick]

This is the first year I have seen this question in TurboTax.  And i have had tax advise for my LLC.

[Texas Roger]

The question has been in one of the early screens of personal info as far back as 2014. I didn't look at any other years. 

[TomD8]

Been there since 2011, which is as far back as I can go.

[Mike9241]

Florida does not have a personal income tax. the other two situations may require filing tax returns in those states.

[rjs]

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@Mike9241 wrote:

Florida does not have a personal income tax. the other two situations may require filing tax returns in those states.

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@Mike9241  The OP's business in Florida is a multi-member LLC. It might have a filing requirement, depending on the tax classification of the LLC and who the other owners are.

[BrotherRick]

Thank you to all!  I have a better understanding of the question and the ramifications now.