1099s and state income taxes in multiple states

[rose1978]

I'm confused about the "Did you make any money in other states" question. Must I file state income taxes if I have 1099s from other states? I'm a consultant that has one-off contracts with universities in other states. Thanks!

[rjs · Accepted solution]

You have to pay state income tax to any state where you work. If you do all the contract work in your home state, you do not have to pay tax to the states where your clients are located. But if you go to the state where a client is located, you have to pay tax to that state on the portion of your income that you earn for work that you do in that state. In most cases you will get a credit on your home state tax return for taxes that you pay to other states. (There are exceptions in a few specific states.)

If you work in multiple states, you should probably find a tax professional who is experienced with multi-state tax filing. The tax pro could also give you some guidance as to how to determine how much of your income is from each state.

[rose1978]

Thank you! I realize I left out a key point, which is that the work itself all takes place in my home state. I'm an editor, so that means I work remotely so all the work happens at home, not in the client's state. Shouldn't that mean that the income tax should be paid in my home state? Thanks again!

[rjs · Accepted solution]

That's right. In the situation you describe, you only pay tax to your home state. You don't have to file tax returns or pay any tax in the states that the clients are located in. When TurboTax asks whether you made money in other states you can answer No.

It's possible that the tax department in some other state, seeing a 1099 from their state, might send you a letter saying that you should be filing in that state. If that happens, you just have to reply explaining that you never worked in that state, that you only did consulting work in your own state for a client in the other state.

[rose1978]

Perfect. Thanks so much, @rjs! 

[1099erGirl]

There is one major exception so far to this answer: 

CALIFORNIA.  (insert big surprise here.) 

Just look up past threads of the nightmare that state has put many of us through. They DO expect you to file tax returns in their states if any of your 1099s are from there no matter where you were when you did the work. It's obnoxious. If every state followed that pattern, many of us would be filing state tax returns all over the place.  (Look up the phrase "California sourced income" on these boards. Ironically when I actually lived there, they had no problem collecting all my 1099 taxes when I worked for clients in TN, NC, VA etc...when I worked out of Burbank, CA home.  But they don't like it in reverse.... you have a CA client and you don't live or work there, they STILL want all the money.