Do states tax you on income made in other states?

February 8, 2010 5:59 AM

Why do I owe Maryland $400+ in taxes when I made less than $16,000 last year and moved to New Jersey mid-way through the year? Do states tax you on income you made in other states? Generic tax advice appreciated.

Last year I made, in total, less than $16,000. I'm single, no dependents, not anyone else's dependent.

I moved to New Jersey at the end of June, and the bulk of my income has been made here (perhaps $10,000-$11,000 of it).

After doing my taxes, I came out with a wicked Federal refund that has been promptly eaten up by owing taxes to Maryland and New Jersey. Almost $500 to Maryland, less than $100 to New Jersey. I'm trying to figure out why. It looks like I was taxed properly on all of my paychecks, I never claim exemptions on my W-4s, and I didn't think I made enough to owe anything. My only guess is Maryland is taxing me on the income I made while living in New Jersey, but that doesn't make much sense.

Is there a way to figure out why I owe so much money and how I prevent this in the future?

posted by anonymous to Work & Money (11 answers total)

Perhaps you took too many deductions while working in MD.

It'd be impossible for anyone to answer your question accurately without looking at your tax return.
posted by dfriedman at 6:05 AM on February 8, 2010

Response by poster: I was afraid of that, but I was hoping someone could at least let me know if states tax income made in other states.

I don't take any deductions beyond the standard deduction, for what it's worth.
posted by Anonymous at 6:09 AM on February 8, 2010

Best answer: Did you file as a partial year resident in both states? These links may be helpful:

Maryland Residents Who Lived in Maryland Only Part of the Year

NJ Income Tax - Part-Year Residents
posted by Cat Pie Hurts at 6:14 AM on February 8, 2010

Best answer: More specifically. It looks like #9 contains the pertinent info regarding Maryland.
posted by Cat Pie Hurts at 6:17 AM on February 8, 2010

Best answer: Did you try to use Turbotax or the like to do your state returns? I haven't used TurboTax for a few years or filed a state return, but when I had to file a partial-year return in California in 2006, TurboTax totally screwed it up, and I just ended up doing it by hand. I can't even imagine how they would be screwed up if I had to file two partial-year returns!
posted by muddgirl at 7:14 AM on February 8, 2010

Response by poster: Muddgirl, I was using TurboTax to file my Federal return, but for Maryland state returns I switched to their iFile service. Perhaps doing it by hand is my best option.

Cat Pie Hurts, thank you for the link--looks like I will add up my income from when I was in Maryland and file under that. The iFile service was not clear that under "Total Income" I should not be reporting the total income on my Federal return, but the total income of just what I earned in Maryland.
posted by Anonymous at 9:48 AM on February 8, 2010

dfriedman is right that you aren't going to get a definitive answer here.

But I can definitively say that a state where you maintain your primary residence can and will tax income earned in other states. Many states actually have reciprocity agreements set up to handle these issues.

You're going to want to look very carefully at your residency status. You may have lived in New Jersey long enough to have that count as your primary residence for the term you were working there.

This is probably getting to the point that some expert advice may be appropriate, as it's likely to cost you way less than the $400-500 you're spending on taxes now. Even $200 wouldn't be too much to spend if you can knock $200 off your bill.
posted by valkyryn at 10:34 AM on February 8, 2010

valkyryn - that's generally the case IF you are maintaining residency in one state while working in another. But if you are a resident of Maryland with income in Maryland, and then move to New Jersey with income in New Jersey, Maryland can't look into the future and tax you on income that you earn after you relinquish residency. And New Jersey, as far as I know, can't look in the past and tax you on income that you earned while living and working in Maryland.

Disclaimer: I am not a tax attorney. I am just someone who has done partial-residency tax returns before.
posted by muddgirl at 10:42 AM on February 8, 2010

muddgirl that's true as far as it goes, but given what we know about the logistics of the OP's situation, i.e. just about nothing, it's hard to say how this will work out. We don't know if he had one job or several, and don't know whether he earned that income entirely before moving, entirely after, or moved while working.

There's really no way to tell what his liabilities are. I just wanted to correct the notion that a state can't tax income earned in another state. It can.
posted by valkyryn at 11:03 AM on February 8, 2010

Response by poster: I have had two jobs in Maryland, both while living in Maryland, income earned entirely in Maryland.

I have had two jobs in New Jersey, both while living in New Jersey, income earned entirely in New Jersey.

There's been no income overlap--i.e. earning in one state while living in another. Thank everyone for their advice so far.
posted by Anonymous at 5:48 PM on February 8, 2010

Response by poster: I ended up doing the state taxes by hand, and when I read the directions carefully and figured in the subtractions I came up with refunds from both states, as expected. I was wary of trusting tax prep software that chose to communicate almost entirely through pictures, and it looks like I was right.
posted by Anonymous at 8:36 PM on February 9, 2010