Filing Taxes in Multiple States
If you worked, lived, or earned income in more than one state during the year, filing taxes can get complex. Whether you’re a remote worker, business owner, or traveling professional, understanding multi-state tax filing rules is crucial to avoid double taxation and stay compliant.
Key Tax Codes and Forms
- IRC §83 – Taxation of personal services across jurisdictions
- Form 1040 – Federal income tax return
- Schedule A – State and local tax (SALT) deduction
- Schedule C – Business income if self-employed
- Form W-2 – May report multiple state wages
- Form 1099-NEC – Freelancers/contractors with out-of-state income
- State Forms – Each state has its own resident and nonresident tax return (e.g., CA 540NR, NY IT-203)
When Do You Need to File in Multiple States?
- You moved from one state to another during the year.
- You worked remotely for a company based in a different state.
- You own rental property in another state.
- Your business sells across state lines or has employees in different states.
- You are a partner/shareholder in a business operating across states.
Real-World Example
Priya lived in California but worked remotely for a company headquartered in New York. She spent 3 months visiting her parents in Texas while continuing to work.
- California: Requires tax on all income as her state of residence.
- New York: May require filing as a nonresident if the employer allocates income there.
- Texas: No income tax.
Priya must:
- File CA resident return (Form 540)
- Possibly file NY nonresident return (Form IT-203)
- Use allocation worksheets to split income
Step-by-Step Compliance Guide
- Determine Residency Status
- Full-year, part-year, or nonresident per state.
- Collect All State Documents
- W-2s, 1099s, rental income statements, business revenue by state.
- Use State Allocation Worksheets
- Split income based on days or earnings per state.
- File in the Correct Order
- Start with nonresident state returns, then file your home state.
- Claim Credits for Taxes Paid
- Avoid double taxation using credits (e.g., CA Form 540 with Schedule S).
- Consult a CPA for Complex Situations
- Multi-state business, K-1s, sales tax nexus, or remote work nuances.
Conclusion
Managing multiple state returns is tricky but manageable with the right approach. Always gather all your records, understand your residency, and use each state’s rules to determine where and how much you owe. Filing correctly avoids audits and maximizes credits.
Call to Action
Anshul Goyal, CPA EA FCA is a U.S.-licensed Certified Public Accountant and IRS-authorized Enrolled Agent. He assists remote workers, founders, and freelancers in preparing accurate multi-state tax returns and claiming all legal deductions.
Disclaimer
This content is for educational purposes only. Tax laws and state rules change often. Always consult with a CPA for tailored tax advice.
Top 5 FAQs
1. Do I pay taxes to every state I work in remotely?
It depends on the state laws. Some states tax nonresidents on sourced income.
2. How do I avoid double taxation?
Use resident state credits for taxes paid to other states.
3. Which state do I file first?
Nonresident returns should be filed before resident state returns.
4. What if I worked in a state with no income tax?
You may still need to allocate income to that state but won’t owe tax.
5. Are state tax credits refundable?
Usually not. They reduce your tax bill but won’t result in a refund.
About Our CPA
Anshul Goyal, CPA EA FCA, is a Certified Public Accountant, Enrolled Agent, and Fellow Chartered Accountant with deep expertise in cross-border and multi-state taxation. He represents clients before the IRS and provides solutions for complex U.S. state filings.