State to State move . How bonus is taxed

Forum|Forum|4 years ago
March 10, 2022
1 reply
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I moved from one state to another in 2021 (for arguements sake, lets say 60% of yr was spent in State 1 and 40% in, my new state, State 2 . I received a bonus payment in Feb., 2022 , which was based on my 2021 performance. Do I owe income tax in State 1 because the bonus received in 2022 was based on my 2021 performance? Since moving to State 2 my employer has only been withholding tax for State #2. However on my separate bonus check they withheld tax on 60% of this income in State 1 and 40% in State 2. Looking to understand what is correct so I know how to file 2022 tax return, next year, appropriately.

HelenC12

What two states are you referring to? There might be some states that tax your bonus if it was sourced in their state.

Generally, individuals are cash basis taxpayers. A cash basis taxpayer is a taxpayer who reports income and deductions in the year that they are actually paid or received.

You received your bonus February 2022 so your bonus is taxable in 2022 for both federal and state.
No, you don't owe state income tax to state 1 because you received the bonus in 2022 and you lived in state 2. You'll have to file a 2022 nonresident state income tax return for state 1 to get back the 60% state income tax that was withheld from your bonus (unless it's a state that taxes based on sourced income).

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SeamenultimateAuthor

Thank you, HelenC12. I moved from NJ to NC.

DianeW777

It can be taxable in both states. The key is where the source of that income is (where the employer is situated). However your resident state will give you credit for any state tax you are required to pay to another state on the same income.

For state 2, North Carolina. This is your resident state when the money was received and therefore you must include it in full because you are required to report all of your worldwide income to your resident state. However, if the income must be reported on another state, then the resident state will give you credit for taxes paid on the same income.

New Jersey Rules: The state of New Jersey requires you to pay taxes if you are a resident or nonresident that receives income from a New Jersey source.

The credit for taxes paid to another state on the same income is used on your resident state because they do not want you to pay taxes twice on the same income. Complete the nonresident state return first then your resident state. This will allow TurboTax to do most of the work for you.

The credit for tax paid to another state on the same income will be the lesser of: