Working in one state while living in another? (Taxes)

[Coleroo]

This question is for a friend - how are state taxes handled if you work in one state and live in another? She just got a new communting job that will start July 1 in the next state over. I suggested we come here first and see if you guys knew how all thats handled... how is withholding done? is there any special paperwork that needs to be filed, etc?

Thanks!

[catlinye_maker]

It depends on the states involved. Some states have reciprocal agreements where they send the state tax monies collected from your pay to the state you live in. Some do not, but there's usually a credit available in the state you live in. Usually, you wind up filling out two state tax returns.

I know that when I lived in PA and worked in DE, DE withheld state tax and did not pay it to PA. I filed a DE return and a PA return and on the PA return I got a credit for the tax that I had paid to DE. Because of differences in the tax laws between the two states, I usually got a small refund from DE and owed a small amount to PA (under $100.)

[Coleroo]

Thanks!

We're in SC and she'll be communting to Georgia.

[tabbycat31]

That depends on the state. Some states have reciprocity with each other where if you live in State X and work in State Y you only have to file for your own state.

I'm a tax preparer in NY, and they have reciprocity with NOBODY. However they do give you a dollar for dollar credit to taxes paid to another state (assuming you are a full year resident)