State tax return in state that you temporarily live in

[hb66]

Asking 2 questions for a friend:

Do you pay tax to the state that you are temporarily living in?

If someone is getting paid by his/her employee in one state to go and temporarily work in a site in a different state for a couple of month, does he/she has to file for tax return in the state that he temporarily lived in?

He ended up renting a place on a monthly basis and get reimbursed for it from his employer. Does he has to report the reimbursements as taxable income?

[DavidD66]

The answer to your first question is it depends.  Different states have different standards for requiring workers to file tax returns when they work for periods of time in a state where they don't live. The rules also dictate how employers withhold income tax for those employees. Some states have a “first day” rule, which means if you work there for one day, you owe that state income tax. Other states have varying periods of time when the nonresident income tax kicks in, ranging from 10 days to 60 days.  So if your friend worked more than 60 days the answer is probably yes.

If the rent was reimbursed on an "actual basis" whereby the employee reported the expense and the employer reimbursed that amount, or if the employer paid the rent directly, then it would not have to be reported.

[hb66]

Thanks for the response.

He is the resident of IA and his employer is in IA too and he said that IA is listed on his W-2 (box 15, I think) and he lived in IL from Nov. 1 until Dec. 24th and went back to IA until after January 4 that he went back to IL again and is there for now (again temporarily for another month or two). So, does he have to file for both IA and IL taxes?

[SteamTrain]

No...he should not file for IL in that situation.....as long as only IA is listed for box 15 on his W-2, and only IA taxes were withheld.

IA and IL have a reciprocal tax agreement, whereby a resident of IA, can work in IL and only pay IA taxes.  

An IL resident working daily, or temporarily in IA gets the same treatment for their IL tax return, as long as only IL taxes were withheld, and only IL is in box 15 of their W-2.

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He and his employer need to be careful though...if he spends too many days/nights in IL, then IL may start to consider him as an IL resident, and want to tax all of his income for the time he spent in IL....the usual break-point is staying in a state more than 183 nights  (but I have no idea if IL uses that limit or not )