State income tax advice needed

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Quattro Pete

Quattro Pete

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This may sound a bit complicated, but maybe it really isn't - I just never had to deal with this before...

Say I take a job with a company based in Georgia. They require that for tax reporting purposes I fill out a W4 that shows an address in Georgia. However, over the course of next year I may end up working for them remotely, spending majority of my time in another state (say Illinois), which would make me a resident of Illinois for state income tax reporting purposes.

Now, when it comes time to do my taxes, the company has already withheld my state income tax and sent it to the state of Georgia. But because I spent most of my time actually living in another state (Illinois), the company says that I can request that Georgia state income tax be returned to me. Is this actually doable? Is it really possible to get that money back from the state of Georgia? What would I have to do to get it back?

Basically, I don’t want to end up paying double the state income tax: once in Georgia because the company withholds it automatically, and once in Illinois because I would be residing here majority of the time.

Thanks for the help.
 
I live in IL and work in MO. I file both a MO income tax return and an IL income tax return. I have to do my federal, then my MO, and finally my IL.

IL gives you credit for income taxes paid on income earned in other states. So while I file in IL, I typically don't owe much, just taxes on any interest, etc.

In MO, I only pay taxes on the income actually earned in MO.

I suspect if you are working remotely for an office in GA, you are technically working in GA, so you would owe GA taxes on the wages earned "in GA." But since you live in IL, you have to file in IL. Fortunately, IL will grant you credit for the taxes you've paid on the income earned in GA. So you really won't be taxed twice. However, you will have to pay the highest tax rate of the two states.

So if GA taxes you at 2% and IL at 3%, you will get credit for the 2% paid in GA, while still owing IL the 3%.

Those are not actual rates, just an example.

If the rates were reversed, you would pay GA 3% and that would cover the 2% rate owed in IL.

IL only gives credit for the portion of income earned out of state.

So if you earned 95K in GA and made 5K in interest, you only get credit for taxes paid in GA on that 95K upto the percentage of that income.

Example:

GA Income 95K
IL Income 5K

IL Tax Due $2K
GA Tax Paid 3K

Tax credit allowed for GA taxes paid.

($95K/$100K) * ($2000) = $1900
(GA Income/Total Income) * IL Tax Due = GA Tax Credit towards IL taxes

Size of check you will write to IL $100

(IL Tax) - (GA Tax Credit) = Tax Due

Again, those percentages are just made up numbers, but that's how it has worked for me and I've lived in IL and worked in MO most of my working life.

Working in GA and living in IL would be no different.

BTW, the GA tax credit is not based on withholding, but based on what I actually paid in taxes in GA. That's why one has to complete the out of state return first, then the IL return.
 
Ye gads... That makes my head hurt.

When I lived in MI and worked in Ohio, I had to file taxes for both, as well as City of Toledo and county of Lucas. To make matters worse, my official city of employment was Sylvania, which had their own income tax. There were treaties, credits and cross credits, I ended up paying an accountant to keep it all straight. It was a nightmare..
 
Roughly speaking you will be taxed as a Nonresident for Georgia income, and taxed on the total income as an Illinois resident. Illinois will recognize some or all of the amount paid to Georgia as a credit against Illinois state income tax.

My wife works in Mo, while we live in Kansas. I work in Kansas. We go through this every year, with a Mo nonresident return and a Kansas resident return. In our case. 100% of the amount paid MO is taken away from my Kansas total tax bill. If we were MO residents, then MO would not recognize all of the taxes paid to Kansas, but only a pro-rated portion. That is why I use the term "some or all" above. Each states sets their own rules about how to credit taxes paid to other states.

We do Federal first, Mo nonresident next, and then KS resident returns in that order.
 
I think that you will file with the state of Georgia to get the taxes back that you paid since you are not a resident of the state and you don't live here more than 180 days per year.

It's like hitting the jackpot in a casino out of state. You had earnings in the state and those earnings are taxed. You pay your taxes when the payout is transacted. If you want to get those state taxes back you have to file with the state that you paid them in.
 
New Hampshire residents (no state income tax) pay Maine income tax if they work at the Portsmouth shipyard, and cannot get it back from Maine. (Incidentally Maine fights to keep the border island "theirs" so they can collect this tax.)

I'm with Jayhawk, generally you'll receive a credit to your home state tax for taxes paid to other jurisdictions... up to (down to?) zero, so if Georgia's tax is worse, you pay the higher rate.
 
And don't forget "reciprocity". It's possible that Georgia and whatever state you work in may have an agreement not to "double" tax people in your situation, and not make you file non-resident returns and take credit on taxes paid to other states. Given the economic climate now, I doubt many states still do this, but it's something to keep in mind.
 
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Regardless of where you're residence is, if you make income in another state, you pay income tax in that state. Plain and simple.

You'll fill out a non-resident income tax return for Georgia. You'll only pay income tax in Georgia on income earned in Georgia, not your entire income.
 
Reminds me of the way the LA Dept of Revenue put it to me when I called them with a similar question: If you work in Louisiana, you pay taxes in Louisiana.
smirk2.gif
 
Originally Posted By: Drew99GT
Regardless of where you're residence is, if you make income in another state, you pay income tax in that state. Plain and simple.

Yeah, I realize that, but throughout the year, my employer will be automatically deducting GA state tax from my paycheck and sending it to the state of GA, so I will have to find a way of getting it back somehow or having it applied toward the IL state tax.

Quote:

You'll fill out a non-resident income tax return for Georgia. You'll only pay income tax in Georgia on income earned in Georgia, not your entire income.

Right, but what will that return show? That I paid X dollars of state income tax in Georgia even though I did not earn any income in Georgia and therefore I want this money back?

Others mentioned that as part of my IL state income tax return I need to show that I already paid GA state income tax and therefore request an IL state income tax credit.
 
If your workplace is considered to be in GA, then you will likely owe GA the taxes. Working from home, even if home is IL is not likely to get you out of paying GA income tax.

Now if your company has offices in IL, then for simplicity, I'd suggest getting "transferred" to the IL office, so you don't have to file GA income tax.

You are probably stuck for this year, as it's unlikely GA is going to just let go of that money and give it back. Your employer has likely been calling it income earned in GA, so GA will want to tax it.

Now if your employer would consider that income earned in IL and then process IL withholding and send that money to IL, you can likely live and "work" in IL.

But if your employer is a small operation, only in GA, it's unlikely they are going to consider your earnings earned in IL.

I don't think IL has reciprocity with GA. I think they have reciprocity with few states. IIRC, it's only WI and IN due to their proximity to Chicago. But nothing like that with MO which is a border state, so probably no hope for GA on the reciprocity front.

So it's likely your situation will be similar to mine. Both my wife and I work in MO and live in IL and we file Federal, then MO, and finally IL taxes.

Since you are living in IL and I'm assuming your work will be considered working in GA, you will do the same thing. Figure your federal, then GA, and finally your IL return.

GA likely has a non-resident state tax form, so you will not pay any taxes on your non-GA income, such as interest, etc. But I doubt GA is going to give up taxes on wages you earned working out of GA. (Even if you work from home, I suspect that where your companies home office is located is what will drive the train here.

So I'd prepare to file three returns, but you are not likely to double pay.

You will pay the highest of the two rates on that income, as both GA will tax it and then IL. As I said before, if IL taxes are higher than the GA rate, you'll owe IL the difference between what you paid GA (you'll get a 100% credit, but still owe IL if it has a higher rate.)

If IL has a lower rate, you will not get a credit higher than the IL taxes due on that portion of income.

So like I said, you'll pay in essence, the higher of the two states income tax rates, whether you write a check to IL for the difference, or don't get back from GA the difference between a higher tax rate there and a lower tax rate.
 
Oh, and be glad you are not an entertainer or athlete. I think many states go after a portion of income from those folks who travel to those states for games.

So imagine you play baseball for the STL Cardinals. Everytime you go to IL, or WI or CA to play a game, someone figures out how many games you've played there, and how much your contract is, and what percentage of your total season was played there in order to tax a percentage of your baseball earnings.

Insane!
 
It depends. GA probably lets you deduct more than IL which allows few if any deductions.

MO has the same thing, 6%, but a lot more is deductible, so it ends up being a wash. After talking all the deductions MO allows me to take, my effective rate is close to IL's 3%.

Don't give up yet. It probably won't be even, but it will likely not be as bad as you think.
 
Originally Posted By: Quattro Pete
Originally Posted By: Drew99GT
Regardless of where you're residence is, if you make income in another state, you pay income tax in that state. Plain and simple.

Yeah, I realize that, but throughout the year, my employer will be automatically deducting GA state tax from my paycheck and sending it to the state of GA, so I will have to find a way of getting it back somehow or having it applied toward the IL state tax.

Quote:

You'll fill out a non-resident income tax return for Georgia. You'll only pay income tax in Georgia on income earned in Georgia, not your entire income.

Right, but what will that return show? That I paid X dollars of state income tax in Georgia even though I did not earn any income in Georgia and therefore I want this money back?

Others mentioned that as part of my IL state income tax return I need to show that I already paid GA state income tax and therefore request an IL state income tax credit.



What are you talking about? They deducted GA taxes because you owe taxes in Georgia!!! You can't "get it back".
 
OK, perhaps you should expand on your situation: did you actually do work in GA for business/clients/people in GA? Or, did your employer, like you say, "make you fill out a W-4 with a Georgia address", even though you've done no work in GA or for anyone in GA? If your employer made you do the latter, I'd consult a CPA about things, especially if they are trying to tax your entire income in GA and IL. That doesn't sound right.
 
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