Received severance pay in 2017 that was taxed by MS, where I lived at the time of employment. However, I lived in PA all of 2017. Do I owed income tax in both PA and MS?

iancole28 · ‎June 4, 2019

Lived in PA all of 2017 where my entire income came from a severance agreement that was taxed in MS. The company said they needed to withhold MS tax because that is where I lived at the time I was employed. Trying to find out if I am subject to state tax in both MS and PA on the same income, even though I lived in PA the entire 2017 calendar year.

DS30 · ‎June 4, 2019

Yes - MS is a state that considers severance pay to have accrued during the time you worked so you will need to file an MS nonresident state income tax return (to report your MS severance pay only).

Some states do not tax severance pay at all, or at least not nonresident severance pay. Georgia, for example, taxes income nonresidents earn for work in the state, but doesn't consider severance to be pay for work. Therefore, there's no tax. Mississippi, on the other hand, does tax nonresident severance pay if it accrues over time. If you earn one week of severance pay for each year you work in Mississippi, the state will tax that income when you collect it.

You will want to work on your nonresident MS state income tax return first. You will then take a tax credit from your nonresident MS state income taxes on your resident PA state income tax return. (Please note that you will only get a tax credit for your MS state income taxes up to the amount of PA state income taxes that would have been paid if the income was earned in PA). The credit for taxes paid to another state section will be at the end of your residence state's interview process.

Just follow the TurboTax guide when working on your states (remembering to do your nonresident state return first) and TurboTax will do all the calculations and credits to your resident states return.

Here is additional information about filing in multiple states (select "see more answer" to view the entire attachment)

https://ttlc.intuit.com/replies/3300797

View solution in original post

DS30 · ‎June 4, 2019

Yes - MS is a state that considers severance pay to have accrued during the time you worked so you will need to file an MS nonresident state income tax return (to report your MS severance pay only).

Some states do not tax severance pay at all, or at least not nonresident severance pay. Georgia, for example, taxes income nonresidents earn for work in the state, but doesn't consider severance to be pay for work. Therefore, there's no tax. Mississippi, on the other hand, does tax nonresident severance pay if it accrues over time. If you earn one week of severance pay for each year you work in Mississippi, the state will tax that income when you collect it.

You will want to work on your nonresident MS state income tax return first. You will then take a tax credit from your nonresident MS state income taxes on your resident PA state income tax return. (Please note that you will only get a tax credit for your MS state income taxes up to the amount of PA state income taxes that would have been paid if the income was earned in PA). The credit for taxes paid to another state section will be at the end of your residence state's interview process.

Just follow the TurboTax guide when working on your states (remembering to do your nonresident state return first) and TurboTax will do all the calculations and credits to your resident states return.

Here is additional information about filing in multiple states (select "see more answer" to view the entire attachment)

https://ttlc.intuit.com/replies/3300797

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Received severance pay in 2017 that was taxed by MS, where I lived at the time of employment. However, I lived in PA all of 2017. Do I owed income tax in both PA and MS?