Question for Accountants

[930addict]

Wife and I are preparing our tax returns and became somewhat overwhelmed with our situation.

We own a home in state A but I work in State B every other week. While in State B I pay monthly rent. I have no car in State B. My drivers license is still in State B only because I haven't gotten around to getting one in state A. My employer withholds taxes only for State B.

State A says that for tax purposes we are domiciled and residence of State A. And that I have to claim my income even if it was earned out of state. State B says that I am a resident if I'm present in State B for other than a temporary or transitory purpose. I think then I am not a resident since I'm only there for the job (work full-time, telecommute when home in State A). My income has no connection to State A. Regardless, state B says because it was earned in state b I owe state b taxes.

How should I go about filing?

[jwasbury]

file returns in both states. state b will tax the income you earned there, and should tax nothing else. state a, your state of residency, will likely tax all your income (earned income and also investment income, if any). for state b you will probably need to file as "part year" or "non resident"which may be a different form than a resident files. there is usually a section where you can apportion your income between taxable (for the time you spent in state b) and non-taxable (for the time you telecommuted from home). state a will tax you on 100% of your income, but should allow a credit for the taxes you pay to state b - this is the way you avoid double taxation.