Wages Allocation for NC & SC

[js295]

Moved from SC to NC.

Still continued working in SC.

W2 Box 1: $100,000

W2 Box 15: NC & SC

W2 Box 16: NC $40,000 & SC $100,000

I don't understand why SC has the full amount. I don't want to pay double taxes.

How do I properly allocate these wages when they add up to more than W2 Box 1?

Do I identify each amount as PY NC Income or Not NC Source Income?

Thanks for your help!

[DianeW777]

South Carolina (SC) does not have a reciprocal agreement with any state.  Simply put that means they want their tax dollars on any money earned in that state.  Since you worked in SC after your moved to North Carolina (NC), then you must pay tax to SC on all income earned in that state.

Good News:  The credit for taxes paid to another state on the same income is used on your resident state because they do not want you to pay taxes twice on the same income.  As the resident state all worldwide income must be included during your residency period.

The credit for tax paid to another state on the same income will be the lesser of:

1. the tax liability actually charged by the nonresident state, OR
2. the tax liability that would have been charged by your resident state

You should prepare the SC return first then calculate the portion of the tax that is actually charged on the residency period.  The balance will be the amount of the credit for NC return.  The way to do this is to use the NC income/total income = percentage of tax being paid to SC and NC.

• 40,000/100,000 = 40% 
• 40% of total SC tax = Tax Liability that can be used as a credit for NC return.  

Watch the screens as you step through the NC return to be sure you enter the necessary information.  

[js295]

Thank so much for the reply! Can you give me just a bit more info considering these details?

1 - I am assuming that when NC asks for the "Amount of tax imposed by another state or country" it would not be my actual SC tax amount due for the year including 1099-INT and 1099-R amounts.  Would I need to do my taxes without the 1099-INT and 1099-R amounts to find out just what my tax would have been based on my W2 wages?

2 - Then I'd take that SC tax amount due and figure out what it would have been at NC's lower rate. Then I take that number and multiply it by 40% to get the amount I'm supposed to enter for "Amount of tax imposed by another state or country" and that is the Out-of-State Tax Credit that I receive? At which point I can go back and add my 1099-INT and 1099-R.

[DianeW777]

Yes, you would consider only the SC tax on the portion of wages that was earned while living in NC. The tax on the SC return for the wage portion you earned during the NC residency period.  Without the interest and dividends you can use the formula to arrive at the correct SC tax imposed on your NC residency period.

So to be clear, you do have a part year residency in SC and you must pay tax on wages earned during that period to SC.  Those wages should have no affect on the part year residency in NC. 

Yes, once you have that calculated (use the formula from the previous answer) and enter the appropriate wages and tax paid on SC for the NC residency period. Your question number 2 is exactly right.