W2s with double taxation in two nonresident states

[dr-nmayeda]

We have two W2s (from two separate companies) which both have the wages listed as taxable income in CA & MD. Only the MD portion shows any income tax withholding off the wages, but the state wage amounts are the same as the total. I'm assuming this is a double taxation situation, but in this case, deals with two states we are nonresidents of (i.e. we live in OR). I've only seen this addressed in TT between a nonresident & resident state, and need help ensuring we aren't double taxed in these nonresident states. Thanks.

[Vanessa A]

Ok, so you live in a state that does not give a credit for taxes paid to CA, so your taxes will not be done the same way as what you have probably read on how to do the resident and non resident returns.

Start with your MD return.  As you walk through, you will see an area to remove income that is not taxable to MD.  So, any income that you did not earn while present in the state of MD, would be removed from the MD screen.  

Next you will do your OR return.  Here you will take a credit for taxes paid to MD for the income you included as taxed by MD.  OR will include ALL of your income since it is your home state.

Next you will do your CA return.  On your CA return, you will only include the income that was earned while present in CA.  You will remove the income when it asks about income adjustments that was earned in MD, leaving only the income earned in CA.  Also, you will come to a screen asking you about income double taxed in OR.  Since OR does not give a tax credit for taxes paid to CA, you will enter all of the income that was included on your OR return.  TurboTax will have it filled in above the line, but you will have to enter the amount in the box in below.  

[dr-nmayeda]

Thank you so much for your thorough answer. Another complicating factor is that majority of our household income comes from my self-employment (sole proprietor) as a therapist. It also has multistate implications - CA has jurisdiction over my income because it is largely CA sourced. Does that change the MD --> OR --> CA return order...? I thought one discussion I saw said something about inverting the usual order when it's between CA & OR. So complicated, thanks for helping me try to sort through this!

[Vanessa A]

No.  You will still stay with the MD> OR> CA order.

Normally, you will do the non resident state before the resident state.  That is why you would do MD before OR.  However, since you then have CA and OR, this is where the order is reversed and you are doing the resident state before the nonresident state.  So that is the discussion on reversing order. 

No, having self-employment income does not complicate anything as far as how  to report or who gets to tax you.  You will still report all the income on your OR resident return and then the CA portion on your CA non resident return, taking a credit on your OR resident return for the taxes paid to CA.