My husband works for the federal govt. He changed agencies and job title within his branch in the middle of 2007 which required a move across the country and to attend a federal training academy in GA. We were residents of AZ, the the job required us to move to MN. He was not ever deemed to be a resident of GA as he lived at the training facility.
Once he switched to the new agency and arrived in GA for the training, taxes from MN were withheld on his biweekly pay while I continued to reside in AZ to sell the house. His W2 states how much he made for his old job in AZ and and the new one in MN on two separate lines. I did not work and we file MFJ.
He went to GA in early August 2007, I stayed in AZ until Dec. 12/07 and started my drive to MN. I arrived in MN on Dec. 18/07 and stayed in hotels and moved into a short term temp rental on Jan. 1/08 until we found a house on which we closed on Jan. 28/08. He arrived in MN to reside on 1/18/08 after graduating the Academy.
I did arrive in MN prior to the end of 07, although I did not get a driver's license or anything for residence purposes since we didn't have a home yet. Add to that, I have relocation expenses from my drive here that were incurred on 2007.
How do I state the date of residence in this case? I understand there are tax provisions in terms of expenses etc. when two spouses move at different times. Turbo Tax says it's easier to have the date at the beginning of the year. Of course, I want to accurately report.
Can I deduct the relocation expenses we incurred in 07 for 2007 taxes and then for what we paid in 08 on next year's taxes for temp living expenses? It would be quite easy if all this occurred in one year, but it overlapped into two, so I'm a bit confused.
Also, because we owned our home in AZ until nearly the end of the year but I was the only one residing there, are we responsible for AZ state taxes for the entire year in addition to MN State taxes? How does the MN tax work since we weren't residents, but taxed because that is where his employment was based while he was in GA?
Is there anyone who can help with this? I am from Canada and this is only the third time I have done US taxes which were quite simple in the past. I'm not familiar with the US tax system at all.
There are some basic principles of multistate taxation that may help you understand.
First, each state defines residence for tax purposes by its own statutory provisions. So Arizona, Georgia and Minnesota each has its own, somewhat different, definition of a resident.
Second, the state where an individual is a resident generally taxes all of that person's income, regardless of source.
Third, states generally tax nonresidents on income from sources within the state. Income from personal services generally has its source at the place where the services are performed -- not where the paycheck comes from. A person who lives in State A and works in State B will be taxed by both states on the same income. Generally, the double taxation is mitigated by the residence state allowing a credit for the tax paid to the source state.
Most state definitions of a tax resident include persons who are domiciled in the state. Domicile is a person's true, fixed home; the place to which, whenever absent, the individual intends to return. It appears that you and your husband began the year as Arizona domiciliaries (and residents). In order to change domicile, generally you must have taken all of three steps: (1) moving away from the previous domicile; (2) moving to and residing in a new location (not just intending to do so); and (3) intending to remain in the new location permanently or indefinitely.
Arizona defines a tax resident as a person who is either present in the state for a purpose that is not temporary or transitory, or domiciled in Arizona and absent for a temporary or transitory purpose. Minnesota defines a tax resident as a person who is domiciled in the state, or a person domiciled elsewhere who maintains a place of abode in Minnesota and is present in the state for more than 183 days of the taxable year.
You and your husband were still domiciled in Arizona until you arrived in Minnesota -- you in December 07 and your husband in January 08. However, for tax purposes, I believe your husband became a nonresident of Arizona in August 07, because he was absent from the state with no intention of returning there to live -- i.e., absent for a purpose that was not temporary or transitory. His earnings are subject to AZ tax up to the date he left AZ to attend the training in GA. However, since he was still domiciled in AZ, which is a community property state, your community 1/2 of his earnings is subject to AZ tax until December 12, when you left the state.
Unless your husband's employer had an agreement to the contrary with the state of Georgia, his earnings during the period of his training are subject to GA tax. Minnesota has no power to tax any of his earnings in 2007 unless he spent some time working in Minnesota while he was in training.
This is one of those weird situations, which do happen from time to time, in which an individual is not a resident of any state for a period of time. That's the case, I believe, with your husband. He became a nonresident of Arizona, by Arizona's definition, in August
2007, and he did not become a resident of Minnesota, by Minnesota's definition, until January 2008. The only state that has the power to tax his income during that period of time is Georgia.
I would file a nonresident return with Minnesota to get the withholding back. Both of you were nonresidents for the entire year. If he worked in Minnesota at all, I'd prorate his earnings from the new job to Minnesota by the days. Also, technically MN is entitled to your community 1/2 of his earnings from December 18 to the end of the year, although being a separate property state, that may never occur to them. In any case, you would be entitled to a credit from Minnesota for the Georgia tax paid on that income.
You should file a nonresident Georgia return to pay the tax on your husband's earnings there, unless you learn that the agency your husband works for has an agreement with Georgia that attendance at training in that state does not generate source income to a nonresident. My former employer had such an agreement with the state of Illinois.
You definitely need professional help to do these returns, and it is a little late to try to get it before April 15.
Thank you so much for your detailed and most helpful post. I suspected we needed help with this, although I didn't realize it was so complicated!
I will file for an extension. It's been a crazy few months with moving across the country, looking for and moving into a new home, trying to get settled and unpacked with my husband's crazy hours. Add to that, over the Easter Weekend, we had a toilet overflow for which we had to file an insurance claim to the tune of 12K and will be undergoing some remodeling because of it. Luckily, we anticipate a refund this year, so I presume in that case, we won't owe any interest to the IRS for not making the April 15th deadline.
Thanks again. I really appreciate the time you took to explain and for letting me know we need professional help for our situation this year.
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