Work in on state, get hosed in two.

February 27, 2008 1:06 PM

TaxFilter: I work in VA and live in NC. My state taxes are already a nightmare...

I have a dev job in metro Virginia (Norfolk), but we live in North Carolina because it's so much cheaper. We've just discovered that apparently my company hasn't been taking any state taxes out of my salary, and NC is asking for its penance.

Friends had told me I could file in VA, get a refund, and pay NC with it; that was before we found out I haven't had any deductions taken. We're giving up and taking everything to an account, but before we do does anyone have any idea what I'm in for? To top it all off, this is the first year we're filing jointly and my poor wife is bracing for impact.

Isn't your employer required to deduct something for taxes for the state? I mean, obviously your mileage may vary, but this is Virginia we're talking about; I'm surprised they don't tax the air you breathe here. It seems they'd be pretty gung-ho about employers covering taxes.

posted by littlerobothead to work & money (10 comments total)

does anyone have any idea what I'm in for?

"Depending upon your filing status and your taxable income, the North Carolina tax rate ranges from 6 to 8 percent."
posted by dersins at 1:31 PM on February 27, 2008

Don't know how much you're in for, but taxes in NC seemed pretty low the year I was there. I also had problems with out of state earnings, but it was more a matter of NC wanting me to pay NC taxes on money I had earned while living and working in a different state. From what I understand you won't have NC state taxes withheld by another state unless there is some kind of reciprocity agreement in place; NC will credit you for taxes paid to another state, but as your employer withheld nothing, I don't know.

On the other hand, a house is a nice tax break. If you're looking for one, I'm selling one in Elizabeth City. It's nice but my job didn't work out, so I had to move out of the area.
posted by caution live frogs at 1:42 PM on February 27, 2008

Ugh, I got bit by this once too. My understanding of this from ten years ago is that if you work in VA, you need to pay VA taxes. If you live in NC, you need to pay NC taxes. There is no VA legal requirement for VA companies to pay NC taxes, though.

It screwed me a decade ago, and now I pay close attention to residence requirements, witholding exemptions, etc.
posted by infinitewindow at 1:45 PM on February 27, 2008

@caution live frogs: Thanks for the thorough answer! I'm in Elizabeth City now actually. And here I thought the interwebs were so vast. Odd we never bumped into each other, or did and never knew. Cheers.
posted by littlerobothead at 1:56 PM on February 27, 2008

VA isn't required to take out NC taxes, but since you work in VA, your employer should be taking out VA taxes. You then have to file two state tax returns. You would file as a non-resident in VA and a resident in NC. On some state tax returns I have filled out, there is a space where you can enter a credit for taxes paid to another state. On others, you have to file in the non-resident state, get your refund (since you are a non-resident, you have no tax liability there and should get 100% of what you paid in refunded), and then file the resident return later and pay what you owe.

Since your employer didn't take anything out, you will have to pay NC directly. You should speak to an accountant about it and ask them to help you sort it out.

You should also speak with your employer's payroll department and get this remedied for 2008, so you're not in the same situation again next tax season.
posted by bedhead at 2:07 PM on February 27, 2008 [1 favorite has favorites]

In particular, you need to fill out a W-4 form for NC and note how much you want to give them

I am in the same situation wrt NY (work) and NJ (live). NY gets most of the money. NJ tax is calculated on total income, but then the amount to pay is only total tax times (NJ income)/(total income), which is a small fraction.

Your states may well have a different way of computing this.
posted by hexatron at 3:40 PM on February 27, 2008

You should also speak with your employer's payroll department and get this remedied for 2008, so you're not in the same situation again next tax season.

This isn't always possible. My NJ employer has told me they don't have any way of taking out NY tax. I have to do all of the withholding myself.
posted by oaf at 12:16 PM on February 28, 2008

I am in the same situation wrt NY (work) and NJ (live). NY gets most of the money. NJ tax is calculated on total income, but then the amount to pay is only total tax times (NJ income)/(total income), which is a small fraction.

If you live in NJ, anything you earn in NY is part of your NJ taxable income, just as anything you earn in NJ is. The only way that something doesn't count as part of your NJ income is if you earned it outside New Jersey and did not live in New Jersey when you earned it.
posted by oaf at 12:22 PM on February 28, 2008

New York (and California too, to my knowledge, and doubtless many other states) taxes income earned in the state no matter where you live. But the taxes paid to New York are deductible from New Jersey taxes, up to the proportion of NY/Total income. Since the NY taxes are greater than NJ taxes times the proportion, that entire proportion is deductible.

My New York employer had no trouble deducting NY and NJ withholding amounts and sending state W2 forms for both states. This is with ADP handling payrolls. I recommend that oaf growl harder at his employer, especially (as is likely) if ADP is handling payroll deductions (its on the W2s) . If your W2 forms are written in on carbon-paper forms, please disregard this comment.
posted by hexatron at 6:27 PM on February 28, 2008

I recommend that oaf growl harder at his employer

I don't think there's anything mentioning an "ADP" on my W-2. I think they won't do NY deductions probably because a relatively tiny number of employees here live in New York, and for whatever reason, they've decided it's not worth it.
posted by oaf at 6:15 AM on March 3, 2008