One of our readers asks a question about how to file state taxes when he lived in New York and his wife moved from Ohio to New York
In 2012 I was a full-year resident of New York State and got a W-2 in NY. However, my wife was a part-year resident of NY (the other state being Ohio) and got two W-2s, one from NY and one from OH. So for our NY State return are we full-year residents or not?
The above is a (slightly modified) comment from a blog reader left on a different post. I thought it was an interesting enough topic to merit a whole post of its own.
The first important thing all married couples should note before they try to deal with a complicated state tax situation is that they can actually file separate state tax returns, even if they file a joint federal return.
Most married couples will opt to file their federal taxes together, using the married filing jointly filing status, because it provides the greatest benefit. It’s only advantageous to use the married filing separately status in very limited situations.
Even though it makes sense to file a joint federal return, if your state situation is complicated enough, it may make sense to file separate state returns, as in the situation above. The primary problem is that it’s impossible to determine the residency of a joint state return when each spouse is living in a different place.
The man’s situation is pretty simple. He was a resident of NY for all of 2012. It’s pretty clear that he has to file a NY resident return. This will tax him on all of his income for the entire year, no matter where it was earned.
His wife’s situation is more complex because halfway through 2012 she moved from OH to NY. This means that she needs to file an OH part-year resident return and then a NY part-year resident return.
Her OH part-year resident return will tax her on all of her income (no matter where it was earned) for that portion of the year that she was a permanent resident of OH. Her NY part-year resident return will tax her on all of her income (no matter where it was earned) for the portion of the year that she was a permanent resident of NY.
Even if the residency of the two spouses differed during the year, New York actually allows them to file a joint return if they want to. The only problem is that both of them will be treated as residents for the entire year. In this scenario, it would mean that the wife who moved from OH to NY would end up paying more to NY that should would have to if they filed separate returns.
Some taxpayers may opt to go ahead and file a joint return even though one spouse was a part-year resident. It’s certainly more convenient, and if you moved early in the year, it probably won’t end up making that much of a difference. Plus it could actually end up saving you money on tax preparation fees.
Phew! That’s a lot of state tax information for one couple. But the good news is that for 2013, when hopefully they’ll both be settled in NY the whole time, they will only have to file one joint NY resident return.
For more information about the supremely complicated world of state taxes, check out some of our other blog posts:
Or, if this post has answered your questions, you can go ahead and file your state tax return(s) right here on RapidTax.
Photo via Meathead Movers on Flickr.
Tags: state taxesThis entry was posted on Thursday, March 14th, 2013 at 2:16 pm and is filed under Tax Tips.