NURSING HOME RESIDENT WITH ALL 1099 IN ANOTHER STATE

[ddranalli]

My relative has dementia and resides in the memory care unit of an assisted living facility in NJ.  Her mailing address is in PA with her sibling who is her POA/Trustee/etc. All of her mail and her tax documents show PA as her state of residence including Social Security, 1099-INTs, 1099-R and State Tax Withholding, etc.  If she ever left the NJ facility, she would be relocated to PA.  Do I file a NJ Resident return for her but with No Income or Deductions and a PA Non-Resident return with all the Income and Deductions - or - just file a PA Resident return?

[MaryK4]

Physical presence at the memory care facility is not enough to change her Pennsylvania domicile.  Since intent is another factor for state residency, her placement in the facility would raise capacity issues, and you stated that if she were able to leave the facility, she would return to Pennsylvania so you should file only a Pennsylvania state resident tax return only.  

[ddranalli]

Does it matter if she was a NJ Resident before we placed her in a NJ nursing home in 2024?  We then sold her NJ house in 2024 and changed her address to her sibling/POA's PA address for Social Security, Medicare, all banking and financial investments, etc. All of her affairs are managed by her sibling POA in PA.

[MaryK4]

Yes, this changes everything.  If she was a New Jersey Resident, then in all likelihood she retained it.  Changing the addresses for administration purposes only is usually not enough to change residency.  @ddranalli 

[ddranalli]

How do I deal with the fact that her bank 1099-INT, life insurance 1099-INT, IRA 1099-R and Social Security (SSA-1099-SM) all identify her state as PA and the 1099-R only withheld taxes for PA?

[MindyB]

You should contact the bank, the insurance company, and the IRA custodian to update her "legal residence" or "domicile" to New Jersey while keeping the PA address as the "mailing address" only.

The main priority is correcting the IRA withholding so they stop sending her money to the wrong state treasury.

[ddranalli]

I will ask her POA/Trustee to update her State of Residence to NJ while maintaining her Mailing as PA.  The POA/Trustee is not at this point going to contact all financial institutions and have them retroactively change 2025 residence and any state withholding to NJ.

How do I handle the amending State, especially for the 1099-R where taxes were already withheld for PA?

One note: PA does not tax qualified IRA distributions so the PA withholding on that 1099-R was all to be refunded on the PA return already filed.

1) Amend State and move *all* income to NJ Resident, even for the 1099-R that had PA withholding, and then

2) For the 1099-R which had PA withholding, take a credit on the NJ return for taxes already paid to PA,

3) Change the PA return, already filed, to Non-Resident and *only* report the 1099-R income and taxes withheld as "PA source income"). (This seems like I would be double-taxed on the 1099-R.)

[MarilynG1]

1. Yes, report all her income as a New Jersey resident, including the 1099-R.
2. Yes, she will get credit on her NJ return for tax paid to Pennsylvania.
3. If the PA return has already been filed and accepted, yes, you would need to amend it to change her to a 'non-resident'.  Since PA only taxes non-residents on PA source income, she will get the tax paid there refunded.

Here's more info from the Commonwealth of Pennsylvania and TurboTax info on How to File a Non-Resident State Return.  

If preparing a nonresident return solely to recover erroneous tax withholdings, enter 0 on the screen that asks for the amount of income earned in that state. This will eliminate your tax liability for that state, resulting in a full refund.

@ddranalli