Tax Paid to North Carolina on Double-Taxed Income

[Aygi]

I worked in North Carolina throughout 2022. In 2022, I was a resident of North Carolina from January 1 2022 to June 29 2022. Thereafter, I was a resident of South Carolina. I have two questions about my state taxes:

1) I have completed my NC state tax (have not filed yet). On my NC return, I have allocated almost half of my 2022 income as "PY-NC Source Income" and the other half as "NR-NC Source Income". Is this correct?

2) Now on SC tax, Turbotax asks me to enter "Tax Paid to North Carolina on Double-Taxed Income". However, I do not have that info and TurboTax does not show me that. All it shows me is the amount I would get from NC. How should I figure this out?

Thanks

[NCperson]

@Aygi 

All the income is NC sourced income - your worked and earned that money in NC, despite the fact that you lived in SC for part of the year. 

The tax on Line 15 of the NC tax return is the number that you should enter.  THAT is what you are liable for to NC.

presuming all you have for income is that W-2, then Line 13 of the NC form should be 1.00. 

In most cases what should occur is there is no or just a little tax paid to SC.  You worked in NC the entire year so most all the tax will be paid to NC; SC gives you a credit for what you paid to NC so that there is no double taxation. 

[SteamTrain]

Well...for #1, I would mostly agree...except the NR-NC sourced income column should only apply for (usually) just your W-2 job income from continuing to work in NC after you moved to SC.   So applying approx half as PY-NC and half as NR-NC is correct for just that one income item.

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BUT...For things like dividends, bank interest, investment capital gains, those should be mostly....or all zero's in the NR-NC source column.   i.e. any of those types of $$ you received after moving to SC...those are not considered NR-NC sourced income.

As an example, say you earned $100 of bank interest during 2022...and $40 was posted to your bank/investment accounts while you lived in NC and $60 after you moved to SC.    Then your PY-NC sourced income for interest would be entered as $40, and $0 for NR-NC sourced income.

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The only $$ in the NR-NC sourced column should thus be just portion of the W-2 income you received after moving to SC, and occasionally a few other rarer items.....like, income from a rental or farm property you maintained within NC after your move.....or income from a business enterprise you might be maintaining physically in NC  (but you may not have any of those).

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[SteamTrain]

Now, some details for your #2   ( @NCperson  has already posted the proper line to sue form the NC D-400):

SC is one of just a couple of states that does PY resident tax returns a bit strangely.   Allowing you to file either as a full-yr SC Resident taking credit for taxes paid to the "other" state...or as a full-yr Non-resident where you just enter ALL the $$ received of every type, after moving to SC as being SC-sourced income.

Since your SC tax return is looking for a tax assessed for double-taxed income, you would appear to be preparing SC as-if a full year resident, so you can get credit for the taxes paid to NC.

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First you need to get your NC PartYr tax return fully prepared and filled out properly so that the proper NC tax has been calculated.

....then the taxes paid to NC is really just the taxes "assessed" by NC.  i.e. you get a credit for only what NC keeps of any taxes you paid them.  That NC value would be shown in line 15 of the NC D-400.

[Aygi]

Thanks!

The thing is I am doing the taxes using TurboTax platform. So I do not directly see the forms, all I see is the TurboTax interface.

When I started with my SC return, TurboTax asked me if I wanted to do resident or nonresident and I selected nonresident. Still, as I said before, TurboTax asks me:

1) Double-taxed income while a resident of SC===>For this one, I enter the same amount that I put in my NC tax as "NR-NC Source Income"; that is, the amount I earned from my NC job after moving to SC (Is this correct?)

2) Tax Paid to North Carolina on Double-Taxed Income===> This is what I have no idea how to do given that TurboTax does not show me my NC form

[SteamTrain]

@Aygi 

Not sure we have any SC helpers with experience in doing SC tax returns, especially for SC part-year residents......so I can't really know enough about the details of TTX software relating to exactly how the SC-as-non-resident tax return Q&A actually flows, and thus cannot really know how to answer that for the SC tax return (just do 20 years of NC stuff myself) ....IF no one here can help with that SC-specific info, you might be better of going to a local professional for the 2022 tax return (the year you moved)......for 2023, preparing yourself be easier as you will be a full-yr SC resident at that time.

or maybe @NCperson has worked with SC tax software and can help with that when they come back in this forum.

[NCperson · Accepted solution]

@Aygi - let's begin with the expecation that the SC form should result in very little or no tax payable to SC.  

1)that seems reasonable since the software is going to eliminate that amount from being taxable in SC. 

2) I think you can back into it.  You know how much was withheld on your W-2 for NC, right? and you know what the refund / additional tax owed is for NC, right? 

so take the amount withheld on the W-2 and subtract the refund.  THAT is the tax liability.

alternatively, take the amount withheld on the W-2 and ADD the additional amount due.  THAT is the tax liability.

I would use that and then check Line 15 of the NC return once you can review it (I suspect you have not paid the Turbo Tax service fees yet and that is why you can't see the NC return). 

the other option is to pay the fees now so you can see the tax returns.