Question

RI Nonresident Taxable Income Calculation

Forum|Forum|5 years ago
February 19, 2021
1 reply
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My wife and I live in MA and she works in RI. We are filing jointly. Why does RI use both incomes when calculating Taxable Income when only one of us works there?

M

mglauner

While it may be a requirement to file a joint return, Rhode Island can only tax the income earned in Rhode Island, even though you report both incomes.

And, on the Massachusetts return, you will receive a credit for the amount of tax you must pay to Rhode Island on the income earned there.

Click this link for more info on Filing a Joint Non-Resident Rhode Island Return.

C

clemma77Author

So TT is transferring Federal Adjusted Gross Income (both incomes) to line 1 of the RI 1040NR, causing Line 4 and 6 to be 0, and calculating Taxable Income using both incomes (we are filling out RI before MA). Then when it credits MA, the allowable credit is $1200 less than what RI taxed us. If just my wife's income was used in RI she would get a healthy return in RI, but with both our incomes getting taxed, she owes. It's a $1400 swing.

AmyC

Employee

As you go through the RI screens, it asks about wages earned in RI. You enter the RI amount. Continue through with business income, etc, entering only RI amount in the boxes. It lists the federal amount beside them.

For example, the numbers are bizarre and for illustration purposes only:

Earn $1,000 in RI and earn $9,000 in MA
RI says you earned 10% in RI (because 1k/10k is 10%)
RI taxes you 10% of the liability on the full amount of $10k- total earnings.
RI tax on $10k is $800
Your tax would be $800 x 10% = $80.

After you prepare the RI return, then you do the MA return.

Your resident state taxes all income but gives a credit for income taxed by another state. Please carefully follow these directions.

You will need to prepare the states in a special order. You may need to delete both states and begin again.

First, prepare your non-resident return. This creates your tax liability for the non-resident state. How do I file a nonresident state return?
THEN prepare your resident state return and it will generate a credit for your income already being taxed in the non-resident state.
The credit will be the lower of the state tax liabilities on the same income. You may owe your resident state.

It isn't possible for the program to create a credit before it knows the liability. Your returns may be wrong if you do not prepare the states in this order.

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