Don't worry––just because you're living in one state and working in another doesn't mean you have to pay double the taxes! Your Tax Preparer will complete returns for the applicable states and may file resident returns and non-resident returns.
Reciprocal agreements in your state
Reciprocal agreements are arrangements between states that allow you to work in a neighboring state without paying income taxes to the other state. For example, California residents do not need to pay income tax on wages they earn in Arizona.
Please Note: reciprocal agreements only apply to wages from employment. If you're receiving income from a different state outside of employment, you'll need to file a non-resident return.
If reciprocal agreements don't apply to you, you will file a resident tax return and a nonresident tax return.
For the state you live in, you'll file a resident tax return, which includes all of your income sources earned in the state, including the income earned from the other state. Depending on the state you practice but don't live in, you may need to file a nonresident tax return, listing only the income you made from that state. In most cases, filing in your home state will allow you to claim a tax credit for the taxes you paid to the state you work in. Each state is different, so your Tax Preparer will review your return and inform you.
Please note that S corporations have different income-sourcing rules, which require separate guidance. If you are an S corporation practicing in multiple states, the Heard Tax team will assess your income tax filing needs.