Author Topic: Taxes between states (income allocation, and IRA, HSA, solo 401k allocation)  (Read 8247 times)

terran

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We moved between 2 states (New York and Arkansas) this year, so I put our projected numbers into some 2016 tax software (taxact and turbotax) to see what things might look like, which has brought up a couple of new questions for me.

When did we move?

> My wife's last day of work at her old job was 6/16
> We left NY 6/22. We have hotel receipts out of state starting that day.
> We arrived in AR 7/5 where we checked in to a temporary AirBNB rental for the month.
> My wife's first day of work at her new job was 7/10
> Our apartment lease started 8/1
> The sale of our NY house closed 8/11
> We moved in to our new permanent address 8/4. We have a receipt from the mover for this day.
> We transferred the car title and got new licenses 8/17 (today). We will mail the NY plates back 8/18 (tomorrow). NY considers plates surrendered on the date of postmark.

For simplicity's sake I'm inclined to say we were NY residents until either 6/30 or 7/31 and became AR residents the following day 7/1 or 8/1, but I'm concerned that the states may not agree with these approximations. Given the facts above, when would you say each state would consider us to have officially moved?

What income to claim in which state?

Our income:
> My wife's last paycheck from her previous employer was 6/31
> She received a vacation payout from her previous employer 7/31
> Her first paycheck from her new employer was 7/31
> I am self employed (1099) I constructively received various payments 7/10, 7/15, 8/7, 8/10, 8/12. The payments were typically for work performed in the previous month, though some of them are advance payments. I am a cash basis tax payer.
> None of my income was from a company or individual in either NY or AR

Questions:
> For my wife's income I'm inclined to allocate the income to the source's state since the employer is withholding for, and presumably reporting to the relevant state. Is this ok, or do I really need to be allocating to the state of residence at the time of the payment? For example, if we say we moved 6/31 then her vacation payout could arguably be said to "belong" to NY (where she earned the money) or AR (where she was when paid). Similarly, if we say we moved 7/31 her first paycheck at the new job could be allocated to either NY (where she was still a "resident") or AR (where she earned the money and was actually living).
> Am I correct that as a cash basis tax payer my income should be allocated to the state I was a resident of when I received the payment, not where I was a resident when I did the work?

What deductions to claim in which state?

Deductions
> We both made 2017 traditional IRA contributions 1/3.
> In addition to paycheck withheld HSA contributions from her previous employer from before any possible residence change date, we will make an after tax HSA contribution this year after we are AR residents.
> I mailed a large solo 401k contribution 8/12. It has not been received by the record keeper or withdrawn from my account as of 8/17. The dates only matter if you tell me the change of residence occurred when we change the vehicle registration and drivers licenses.

Questions
> Since the IRA contributions were made when we were NY residents, I believe this deduction should go to NY? If it turns out to be better to deduct from AR instead, is there any way to undo the contribution and then recontribute?
> With the HSA, the confusing bit is that the contribution is based on the HSA eligible health plan from my wife's previous employer which ended 6/31. Since the contribution will be made once we are AR residents I believe it should be allocated to AR?
> Assuming I was an AR resident as of the solo 401k contribution date, do I deduct this from AR, or do I deduct in proportion to the income that is allocated to each state? The AR income allocation will not be large enough to account for all of the solo 401k contributions I will make while an AR resident since the NY income will be included in the contribution calculations.

Whew, this interstate tax stuff is confusing -- Thanks for any help you can offer!

YttriumNitrate

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Well, what situations result in the lowest tax paid?
https://taxfoundation.org/state-individual-income-tax-rates-brackets-2017/

SeattleCPA

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I basically never suggest this, but you probably want a CPA who lots of multistate tax returns to do this year's return...

I usually suggest people DIY their returns with TurboTax... just for the record.
My blog Evergreen Small Business
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