After selling ESPP from my previous company, I received a W2 including two States. Should I file taxes for both states?

[Julia22]

I received a W2 from my previous company after I sold its ESPP in 2022. There is no withholding on W2, but it includes two states, NC and UT. NC was the state where I lived when I worked for the company, but I moved out in 2021. UT is my resident state in 2022. Should I file taxes for both states? Thanks!

[MonikaK1]

You only need to file the additional state return if you have enough income from that state to exceed their filing requirement, if you were a part-year resident of the state during 2022, or if there was withholding and you would like it refunded.

From your explanation, you didn't live in North Carolina in 2022 and there was no withholding, so you need only file if the income exceeds the filing threshold.

See North Carolina filing requirements here.

See Utah filing requirements here.

[Julia22]

Hi, thanks for your explanation. I was a full-time resident in UT and did not live in NC in 2022. I read NC tax filing requirements and saw below. If I understand correctly, I have to file UT tax no matter what. However, I need to file NC tax too if my fed gross income exceeds the filing requirements even though the amount reported on my W2 is only a few hundred, right? Another question is, will the income reported on W2 be double taxed in two states? (I got this one. I can get tax credit from the non-resident state and claim it on the resident state.)

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Every nonresident who received income for the taxable year from North Carolina sources that was (1) attributable to the ownership of any interest in real or tangible personal property in North Carolina, or (2) derived from a business, trade, profession, or occupation carried on in North Carolina, or (3) derived from gambling activities in North Carolina and whose total gross income from all sources both inside and outside of North Carolina for the taxable year exceeds the amount shown in the Filing Requirements Chart for Tax Year 2022. 

[GeorgeM777]

You don't need to file a NC return if you moved out of that state in 2021.  To follow-up on the comments from @MonikaK1, if you had an income source in North Carolina in 2022, such as a rental property, or a trade or business, then even though you moved out of NC in 2021 and now live in UT, you would still have to file a NC return as a non-resident.  You would need to report the income to NC and pay whatever tax is due.  However, if you have no income source in NC, and no longer live there as of 2021, the year you moved away, then you don't have to file a NC return.

Also, if your former employer sent any tax withholding to NC in 2022, and you want to reclaim that withholding as a refund, then you would need to file a NC return to get that tax refunded to you.  You would file as a non-resident.  

@Julia22

[Julia22]

Hi @GeorgeM777 , thanks for your comments! I don't have any other income source in NC. Are my earnings from ESPP sell considered income from NC or UT, or both? I'm not sure because I earned ESPP discount from a company in NC but the profit was realized when I already became a full-time resident in UT. 

[GeorgeM777]

You need to make an allocation based on the time you were in NC versus the time in UT.  Some of the gain you realized relates back to the time you were in NC.  You could calculate the total number of months you owned the shares while you lived in NC, and then divide that number by the total of all months you owned the shares.  Convert the resulting number into a percentage and then multiply your gain by that percentage to determine how much of the gain to allocate to NC.

As @MonikaK1 discussed in a prior post, there is no need to file a NC return if you did not earn enough to meet NC's filing requirement.  Another way to handle this is to first determine what is the filing requirement for NC, and if you total gain is less than that filing requirement, you don't have to calculate the allocation expressed above.  Therefore, you could then just focus on preparing your UT return.  

@Julia22

[Julia22]

It appears NC state has filing requirements based on Federal gross income. I might have to file NC tax no matter how much I gained from ESPP.  Thank you so much @GeorgeM777, I think I know what to do now.