Unemployment

[bobdski]

I lived and working in NJ January and February of 2020.  I was laid off at the end of February and moved to NC at the same time.  I live in NC for 10 months.  I received unemployment from NJ which is not taxed by the state on NJ.  NC taxes unemployment. If I'm receiving unemployment from NJ do I need to pay state tax on it in NC?

[Opus 17]

Someone else will have to answer that, but the first thing we need to clarify is where is your residence?

Your domicile is your permanent residence.  It is your main home.  There is no one factor that controls this, but things that are considered includes where your job is, your church, your bank, doctor, dentist and lawyer, your significant social relationships, your car registration, voter registration, and so on.  You only have one domicile at a time, no matter how many homes you might live in.

If your move to NC was permanent, and you surrendered your domicile in New Jersey, then you were a resident of NJ for 2 months and a resident of NC for 10 months, and you file in both states as a part-year resident.  If your domicile remained in NJ and your move to NC was temporary, then you file a NJ return as a full year resident and you also file a NC non-resident return.  Your NC non-resident return reports income earned in NC only, and your NJ return reports and pays tax on all your world-wide income.

As a side note, if you changed your domicile and permanently moved to NC, that might have affected your eligibility for NJ unemployment benefits.  You will have to check the state unemployment commission. (For example, how did you certify that you were continuing to look for work, if such certification was required.)

Once you tell us where you were domiciled, we can start to look into whether NC will tax your NJ unemployment income and if there is a difference whether you file a resident or non-resident NC return.

[bobdski]

My domicile in NC (10months) , I registered to vote here and voted. I lived in NJ for the first 2 months of the year, so I was a part year resident in each state.  This I clearly indicated in Turbo Tax.  Before filing for unemployment I contacted the NC Dept. of Unemployment to ask if I file here or NJ, they said since I worked in NJ  I file in NJ so this does NOT affect my eligibility in NJ.  The NC state section of TT asks for the source of income, the source of unemployment is NJ.  I am reasoning that I only pay tax on unemployment in NJ.

[Opus 17]

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@bobdski wrote:

My domicile in NC (10months) , I registered to vote here and voted. I lived in NJ for the first 2 months of the year, so I was a part year resident in each state.  This I clearly indicated in Turbo Tax.  Before filing for unemployment I contacted the NC Dept. of Unemployment to ask if I file here or NJ, they said since I worked in NJ  I file in NJ so this does NOT affect my eligibility in NJ.  The NC state section of TT asks for the source of income, the source of unemployment is NJ.  I am reasoning that I only pay tax on unemployment in NJ.

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If NC taxes unemployment compensation, you very likely owe income tax, even though the payer was New Jersey.  The key point is that you received the income while living in North Carolina.  Turbotax should automatically know which of your income is from unemployment, automatically exclude it from your NJ state income, and not exclude it from your NC taxable income.  (Unemployment is subject to federal income tax of course.). You should be asked how much your various income sources you received while living in New Jersey or North Carolina; if you answer that all your NJ unemployment was received while living in NJ, you may find that NC audits you.