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VAer
Level 4

Salary/Stock investment in one state and business in another state

Currently, I live in Virginia, Virginia is the state for me to report salary income and stock/option capital gain.

 

Now if I do some business in another state, e.g. open a gas station (or convenience store or something else) in NYC (hire my brother or relative to run it; or partnership, both sides invest some money), how does tax filing work in this case?

I will buy a small apartment in NYC if doing business there, and would like to go there almost every weekend. Virginia is still my primary residence address.

 

If I report all income sources in form 1040, how TurboTax  know which income is from which state? How can TurboTax correctly direct me to both states? Business is in different state (not my address in 1040 form).

 

It is a general question, can software correctly direct me to different states?

 

I don't always use TurboTax, sometimes I use FreeTaxUSA. I post here because it is great public forum.

 

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6 Replies
rjs
Level 15
Level 15

Salary/Stock investment in one state and business in another state

When you prepare your New York nonresident tax return in TurboTax, it will ask you to identify which income is from New York.


All of your income is subject to tax by Virginia, the state that you live in, no matter where the income is from. You will get a credit on your Virginia tax return for part or all of the tax that you pay to New York. Prepare your New York nonresident tax return first, then your Virginia resident tax return, so that it can correctly calculate the credit.

 


@VAer wrote:

I post here because it is great public forum.


Well, that's a good reason to use TurboTax, isn't it?

 

VAer
Level 4

Salary/Stock investment in one state and business in another state

@rjs 

Thanks. so I do need to file with IRS, NY, and VA.

rjs
Level 15
Level 15

Salary/Stock investment in one state and business in another state

Yes, you have to file your federal tax return, a New York nonresident tax return, and a Virginia resident tax return.

 

VAer
Level 4

Salary/Stock investment in one state and business in another state

@rjs What do I need to pay attention if it is partnership with someone else (relative, or my brother who lives in NYC). I could either hire someone there or partnership (both sides invest some money, I will put majority of money, while the other party actually runs it most of time).

 

rjs
Level 15
Level 15

Salary/Stock investment in one state and business in another state

As far as income tax is concerned, if you form a partnership, the partnership has to file its own Form 1065 partnership tax return, separate from your Form 1040 personal tax return. The partnership tax return includes a Schedule K-1 for each partner. Each partner has to enter information from his Schedule K-1 in his personal tax return.


You might be subject to other business taxes, besides your regular income tax, in New York. This would be true whether it's a partnership or some other form of ownership. If you hire someone as an employee you would have to deal with New York employment taxes. For at least the first year you should have a tax professional, preferably in New York, show you how to handle the taxes and prepare the tax returns for the business.


There are other considerations that you have to pay attention to besides taxes. You should consult a small-business lawyer in New York for advice on how to set up the business. And consult an accountant (who might also be your tax expert) to show you how to keep financial records for the business.

 

VAer
Level 4

Salary/Stock investment in one state and business in another state

@rjs Thanks for the explanation.

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