Paying Income Taxes In Two States

Q: My son earned income in another state through a summer job. Taxes for that state were withheld, even though he is a resident of another state.

Should the state taxes paid to the state where he worked last summer be refundable? Would he have to pay tax in our state as well?

I can’t seem to get an answer from the IRS about this.

A: You typically owe tax in the state in which the money is earned. So, if your son worked in California last summer but lives in Georgia, he would pay tax in California on his summer earnings.

But he shouldn’t be taxed twice on the same money. Typically, the state in which you live will offer you a tax credit for the amount of tax already paid in the other state. If your son lived in various states during the year and earned money in each of those states, he may be required to file a state income tax return for each state in which he earned money.

If he worked in California for part of the year and worked in Georgia part of the year, he would file a state income tax form for California and pay tax on the income earned there. In turn, he would file a tax return in Georgia showing income earned there. To the extent taxes earnings are from one state and not another, you generally would pay tax only on the earnings made from the state in which you file a tax return.

You can see how this process of filing in multiple states can be complicated. Now think about professional sports athletes who may have to file state income taxes in multiple states for the earnings they make from each state in which they play. For them, and others who earn income in multiple states, the paperwork can be huge.

Please talk to a competent tax professional for details.