Taxes and working in multiple states

JohnnyBiggles

I will be temporarily working in another state for a few months (I'll be put up in a hotel) for a company who is relocating their operation to another state which I will be moving to from my current location. I will maintain my current residence during that time (at least that's the plan for now). Anyone have any suggestions for the best way to handle state/federal income taxes.. since technically this year, I'll be working in 2 states, will have worked in a 3rd (current job) and will live in 2 places (possibly a third, if the hotel is considered residence)? I realized recently that I would most likely be submitting 3 separate tax returns. is this correct? Should I be using my current home as a primary residence? What's the best, least-expensive, least-paperwork way to handle this? Anyone experience something similar?

apr911

Different rules apply for different states and different situations so your going to need to look into that.

For example, if I live in PA but work in NJ, I only have to pay taxes to PA because PA/NJ have a reciprocal agreement... But if I live in CO and work in NJ for even 1 day, I technically owe taxes in both states because NJ has what is known as a "jock tax" where any wages earned in the state are taxed in the state regardless of residence or how many days were actually worked in the state. The Jock Tax is intended to target athletes and other traveling performers. The Broncos and Seahawks had to pay tax on a portion of their salary because they worked 1+ day in NJ for the Superbowl...
So even attending a work conference in a state with a jock tax could find you technically owing taxes to that state, though it may be hard to prove/disprove the amount earned in state.

States that dont have jock taxes may have other definitions of "residency" for tax purposes, things such as consecutive days in state or consecutive days worked in state.

By living in 1 state, working in another state and returning to work for 1 day a week in the 1st state, it may be possible to avoid paying taxes in the 2nd state but again it depends on that state's laws and definition of residency.

You should also check with your company to see how they are going to report things. Your company may report to the state you are working there and for how long and how much you made within the state but if they dont, then it is up to you to self report. The numbers can get sketchy for self reporting too since "days in state" may differ from "consecutive days in state" and "days worked in state" which can all impact "taxable income earned in state" especially if you receive any sort of commission since a commission contract can be started in a state say NJ and finalized in another state say CO... In that case it's hard to say what you made in NJ vs CO since the contract might not have been possible without visiting NJ but you weren't paid until you were in CO.

Finally, keep in mind if the company does report, your numbers need to match what was reported.

Bottom line, to be of any assistance, we would need to know the states involved... Id also strongly recommend contacting a tax professional.