Temporary work in another state, both states income tax?

[akrutzler]

I was hired for a new position and live in New Mexico and will be working in New Mexico. The company sent me for a training in Arizona for four weeks at which point I will return to New Mexico and work the rest of the time from there.

I just received my first pay statement and they charged me both Arizona and New Mexico state income taxes and when I asked the payroll specialist about it (who is outsourced). Her answer for me was that since I am a resident of one state but chose to work at a facility in another state I have to pay both. She suggested I request a transfer to a position in New Mexico. But I was hired for a position in New Mexico, I am just temporarily training in Arizona.

Am I required to pay both New Mexico and Arizona state income taxes?

[ErnieS0]

Yes. Even though you are in New Mexico temporarily for training you are earning money so your wages are taxed by NM.

New Mexico says:

"New Mexico imposes a tax on the net income of every resident and on the net income of every nonresident employed or engaged in business in, into or from this state or deriving any income from any property or employment within this state."

Arizona will give you a tax credit for tax paid to New Mexico on your double taxed income. You will have to file two tax returns next year - an Arizona resident tax return and a New Mexico nonresident tax return.

[SteamTrain]

@akrutzler 

Ok.....just Reverse the states in the above answer.....then it will be your situation....but the same general tax situation will apply.  You will get a credit on your eventual NM resident tax return for the taxes you end up having to pay to AZ as a non-resident.

.....though, You will have to file an AZ non-resident tax return next year when you file your 2021 taxes.  (assuming the temp training in AZ occurred this year/ 2021)

[akrutzler]

Does the minimum amount required for filing a nonresident tax return not apply. When I looked at it on the Arizona nonresident tax form instructions it said the threshold would be $24,800 for married filing jointly. So if I don't earn over that amount then why would withholding apply?

[SteamTrain]

The minimum amount for filing depends on your total gross income from all sources......after that the ratio of AZ-taxable income will eventually be used in the AZ tax calculation.

Thus if you are filing MFJ and earned $5k in AZ and $24k total Federal , then none of the AZ income will get taxed and you'll get a refund.

But if you earned $5k in AZ, but $30k or more total Federal....then that 5k will get taxed at some level....to be determined when you file next year.  (might depend some on what other deductions you might have)

_______________________

The details on when an employer is "required" to withhold state taxes can vary..... I don't know AZ requirements, but I suspect the employer knows that as their employee, you are expected to earn over the minimum federal income  such that the  are required to withhold some AZ taxes. Since they operate in AZ, they would have to follow AZ tax rules.