“Do I have to file state taxes?” is a common question a lot of people may ask. To help you out, we answer some of the most frequently asked questions about filing state taxes.
In this article:
- Do I File Federal or State Taxes?
- Do I Need to File State Taxes?
- Do I Have to File State Taxes If I Don’t Owe Anything?
- How Do You File Taxes If You Lived in Two States?
- What Happens If I Don’t File My State Taxes?
“Do I Need to File State Taxes?” and Other State Tax Filing FAQs
Do I File Federal or State Taxes?
Federal taxes and state taxes are similar in some ways as they both apply a certain tax rate to individuals’ taxable incomes. However, they also have differences, such as:
- The tax rates and how they’re applied
- Type of income considered taxable
- Allowed tax credits and deductions
Another difference is who is imposing the tax.
Federal income taxes are collected by the US Internal Revenue Service (IRS). They levy this on the earnings of individuals, trusts, partnerships, corporations, and other legal entities.
These taxes apply to all types of earnings that make up the taxable income of a taxpayer. This may include earnings from employment and capital gains, among others.
On the other hand, a state income tax is collected by most states on top of the federal income tax. They collect taxes on the taxable income of the residents of their state.
Do I Need to File State Taxes?
It might surprise people to learn that not everyone needs to file state taxes. On a federal level, there are guidelines on who needs to file based on their level of and type of income.
However, on a state level, tax guidelines vary depending on the state. Here are some examples:
- States like Nevada and Wyoming don’t charge state income taxes. You have to pay federal income taxes, but not state taxes. In contrast, other states set minimum income levels to determine who needs to file taxes. The amount they charge also varies on whether they follow a flat or progressive income tax system.
- In some states, taxpayers are required to file only if their income is above a certain level. In Alabama, for example, single taxpayers who earn more than $4,000 or married couples who file jointly and earn more than $5,250 need to file.
- A different set of rules applies in Colorado. If a taxpayer files a federal return, he or she must also file a state return.
- In Connecticut, individuals who earn more than the year’s standard state deduction also have to file. This includes residents of the state who are in the Armed Forces, regardless of their location.
It’s essential to go over your state guidelines to avoid confusion and help you prepare for the next tax season. You can also use these guidelines if you’re considering to move to another state.
Do I Have to File State Taxes If I Don’t Owe Anything?
When it comes to withholding, federal and state guidelines don’t have much of a difference. However, states can only withhold based on their income taxes.
In the following states, individuals don’t have to file state returns regardless of how much they’re earning since they don’t impose an income tax.
- South Dakota
In some cases, such as in the case of part-time residents or students, you may not owe taxes in your home state, but your employer withheld state tax. This means that you should receive a refund based on what you paid.
One can only take this tax refund if he or she files state taxes. One of the refundable tax credits individuals may be eligible for is the Earned Income Tax Credit (EITC).
Certain states also offer special credit programs. An example of this is the renter’s credit in California or the state energy credit for using alternative energy sources in Oregon.
Some states also offer credits for childcare, homeowners, and preserving historic buildings. One can only avail of these if he or she files a state tax return.
How Do You File Taxes If You Lived in Two States?
If a person earned income from or lived in other states, he or she needs to check on the filing requirements of the other state as well.
There are states that require filing only for those who lived in that state for more than six months or were a resident on December 31. Other states determine it depending on total income level, regardless of whether or not that person actually owes any tax or earned income from that state.
In general, one has to file a part-year resident tax return for each state he or she lived in if:
- The taxpayer moved from one state to another
- The taxpayer lived in multiple states
Taxpayers generally have to file nonresident tax returns for every state they worked in but didn’t live in. Resident returns apply for states they lived in and nonresident returns for states they only worked in.
Other situations that require one to file nonresident state returns include the following:
- Earning income from a state he or she doesn’t reside in
- One’s employer incorrectly withholds taxes for a state one doesn’t live in
- Having gambling winnings in a state one doesn’t reside in
- Owning rental property in a state the taxpayer is not a resident in
- Being a partner or shareholder in a business not based in one’s resident state
- Receiving income from an estate or trust with interest in a state that is not the taxpayer’s resident state
Additionally, individuals aren’t required to file state taxes in a state where the employer is based in, unless he or she also works there. The state where the individual earned the income is what matters, not where the employer is headquartered.
What Happens If I Don’t File My State Taxes?
Not filing state taxes when one is required to do so may result in numerous charges and penalties. A taxpayer may face interest charges on the amount owed, late payment penalties, and late filing penalties.
Generally, if one doesn’t owe additional state taxes more than the amount he or she paid through withholding and estimated taxes, then that person won’t face penalties.
The rules for filing state taxes may vary from state to state. As such, it’s best to learn all about state rules when it comes to filing state taxes not only to avoid fees and penalties, but also to take advantage of refunds you may be qualified for.
Do you have other questions about filing state taxes? Ask us in the comments section below!
If you owe back taxes, visit taxreliefcenter.org for more information on tax relief options.