How Will Temporary Relocation During a Pandemic Affect Your Taxes?

If you moved out of state during the coronavirus pandemic, stay with family members, or stay at a vacation home or Airbnb, you might want to know if your temporary change will complicate your taxes in 2020.

Here’s why: If you have worked remotely from a state other than the state associated with your permanent address, you may need to file two state tax returns. As Marketwatch explains:

Experts believe that if the “new normal” means a new address – even a temporary one – it could mean a new set of tax issues. This is because states have different rules about how long it takes before a non-resident has to start paying them income tax.

In nearly half of the country, it can take one day for a requirement to work. Elsewhere, the countdown starts after two months. Meanwhile, 13 states have said they will not require income tax on people who temporarily stay within their borders during the pandemic.

The 13 states that currently waive income tax on COVID-19 relocation are Alabama, Georgia, Illinois, Indiana, Massachusetts, Maryland, Minnesota, Mississippi, Nebraska, New Jersey, Pennsylvania, Rhode Island, and South Carolina. … If you’ve moved to one of the 37 states that aren’t on this list, it’s time to familiarize yourself with the tax laws in your temporary home or (this is my personal recommendation) talk to the CPA.

The non-resident income tax situation can be daunting as not all states follow the same rules. Some states have so-called “reciprocity agreements,” according to which people who live in one state and work in a neighboring state must pay income tax only in their home state. In most cases, any tax you pay in a non-resident state will be credited to the tax you pay in the resident state (i.e. you will not be taxed twice on the same income), but there may be exceptions. … rule. You may need to talk to your employer about adjusting your withholdings so that each state gets its share of the money that comes from your paycheck, and you may have to file a non-resident tax return in the state you moved to, even if the rules dictate. that you do not have to pay taxes in this state.

If this all sounds confusing and time-consuming, don’t let it upset you – and don’t put it all off for later, as it can get even more confusing and time-consuming by then. Keep a record of when you lived where, how much money you made living in different states, what tax deductions and / or estimated taxes were paid in each state, and so on.

And then, when your records are in order, talk to the CPA. They can answer your questions, prepare non-resident state tax returns, and make the whole process a lot less of a nightmare.

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