CATIII

Ok, I'm wondering how this would work, if anyone KNOWS the answer based on their own experience, I'd love to hear from you.

IF you live in one state, and work in another, i.e. you commute from State X to State Y where you exclusively fly only within that state, or at lest lets say for arguments sake, you NEVER fly to your own state...

Where do you pay income tax? Can't be both, that would be illegal, right?

rickair7777

Not illegal at all, it's possible and not totally uncommon to pay taxes in more than one state. A savvy commuter understands the rules applicable to the two states involved, and strives to avoid triggering both at once.

Federal law does not say that you only have to pay taxes in one state.

So it's left up to the states...each state his own definitions as to what triggers tax liability. Since they just want your money, paying tax to state A is not going to get you off the hook with State B if you trigger their requirements.

Let's say two states both have a rule that if you reside 50% of your time in the state then you get taxed. Someone who splits his time between those states 50/50 will trigger both (obviously you would adjust to 51/49 in that case).

It's usually going to be very hard (and probably fraudulent) to avoid income tax in the state you actually live in, so commuters should try to avoid triggering their domicile state's rules.

Learn that state's rules and stay below the radar...don't register cars, get a drivers license, apply for government benefits, etc. You are probably safe renting a crashpad since that probably won't be visible to the state government, but I wouldn't get official mail at the crashpad address.

I know CO will withhold income tax from anyone domiciled in the state, but I don't know if they actually consider you a resident based on that. Maybe you can file and get it refunded based on non-residence?

I think there is a federal law that protects transportation workers from getting taxed by every state they pass through or spend the night in so I don't think merely working in a state can trigger tax liability (many folks travel to job sites...miners, oil, construction, salesmen, etc). But working there will certainly count as one strike towards residency...learn and avoid any other strikes.

galaxy flyer

Also, the income tax paid in one state can be credited against your tax liability in your state of residence. States have tax agreements on doing this. I work in one state and live in the adjoining state. I compute the taxes in my work state and apply them toward my residence taxes.

GF

CATIII

thanks, that's what I had hoped/assumed... I'm going to contact my state's dept of revenue and ask what they know.

ehiggins

I was able to contact the payroll department and they withhold my state income tax for the state I live. Since I'm in one of the two states that also has city tax, they were able to accommodate that too.

As long as you are having something withheld you should be in good shape. If nothing is being withheld, I'd recommend an accountant to set you up on a quarterly payment plan. It's not a fun bill at the end of the year.

Grumble

Live in a state with no income tax.

HercDriver130

you will get credit in the state you live for what you pay in the state you work.

Red Forman

And don't live in a city that has a city tax located within a state that has a state income tax!