Taxes - student employed out of state

<p>Hello, I claim my daughter as a dependent and this year she's earned a small amount of money via her job on campus in another state. Will I need to be obtaining certain forms to report this? Thanks.</p>

<p>You will need to check the requirements of the state in which your daughter earned her small amount of money. Some states require that you file a tax return in their state (as a non-resident) under certain circumstances. Here, for example, if you have ANY state tax deducted from your earnings, you are required to file a state return.</p>

<p>If your daughter didn't have a lot of earnings...you can go on the IRS website when the time comes and look for the free file option. My son and daughter have used freefile (choosing the program they want to use) for their years in college. For my son, the state in which he attended college also participated in Freefile and he was able to file his non-resident return there (which was required for one year due to the amount he earned). My daughter didn't have state deductions in her state, didn't earn a lot , and their website said she didn't have to file in that state.</p>

<p>You should go to the tax website for the state where the college is located and find the information about your daughter's requirement to file...or not...and how to go about doing so.</p>

<p>Even if you claim her as a dependent she has her own standard deduction (I think around $5450 for earned income for 2008) that she can earn tax free. If she had taxes deducted (WS is taxable) but earned less than the standard deduction she should file her own tax return to get her tax refunded to her. She should get a W2 for her earnings. She also needs to find out if there is any state tax filing requirement for the State she earned the money in. (my D earned in 2 different States this year so we have that to figure out).</p>

<p>Also if she received any grants or scholarships remember that any in excess of tuition/fees/required books are taxable income. She should receive a 1098t from her school that will list scholarships/grants and tuition etc paid.</p>

<p>She will be the one receiving all these forms so, if you are helping her do her taxes or claiming any education tax credits, make sure she knows that you will need to see the forms. meaning nag nag nag if she is anything like my 2!</p>

<p>Don't quote me on this, but from my own memory I believe it depends on where she if officially 'resident.' If it's above the deduction threshold then I believe any tax is due to the state she lives in (your home, if she's being claimed as a dependent). I think the tax gets collected by the state she works in and is eventually transfered to your state after all the forms get filed. </p>

<p>However, there is never a simple answer for tax questions so best to check with an accountant if you have one.</p>

<p>We have two kids attending college and working in other states. For the one who had to file in the state where the college was...he filed his federal income taxes. He filed our home state tax form as a RESIDENT...and he filed the College State as a non-resident. One year, he had to file TWO different non-resident state taxes because he worked in two states in addition to this one where we all live. It's really not hard. BUT you need to check to see whether he MUST file or not. It varies by state.</p>

<p>It completely depends on each state. The state my daughter worked in over the summer has no state income tax for income other than dividends etc and you do not have to file a state return at all unless you are a resident of that state. I thought - "yay she does not have to pay extra state tax on that bit of income". WRONG!! Our state does have state income tax and she has to report all her income including what she earned out of state, and will be taxed on all of it. Grr. If she had had to pay out of state state taxes she would have got some sort of credit for it in our state. And any non residents that earn money (over $1,000 I think) in our State have to file a state return in this state.</p>

<p>It is essential to check the rules for any and every state where income has been earned. They vary enormously.</p>

<p>If DD has 1098T $ from scholarships and attends an out of state school, does the 1098T excess get reported on her in state return or does one have to pursue an OOS non res tax return for those monies?</p>

<p>That is an excellent question. I was just wondering exactly that myself after reading our state tax filing rules. It does not apply to us as my daughter is at school instate but there must be people it does apply to.</p>

<p>The taxable scholarships are included in the wages, salaries and tips total on the 1040 with the amount and sch written next to the words attach forms w-2. For our state the federal AGI is the number she would have to show as income on the state return, so that would include the scholarship/grant even if it were in another state. As far as I can see, from briefly perusing the lengthy and confusing rules on our state tax site, there are no instructions for being able to exclude the out of state taxable scholarships earned by residents of our state (that is confusing - I know what I mean - hope you do too!). I think it would be treated the same as any other OOS income so would be taxed. I can't figure out if an OOS student in our state would have to file here based just on scholarship income - but the non resident tax filing instructions are very very long.</p>

<p>Again something one would have to check with each state.</p>

<p>And I thought federal taxes were confusing :rolleyes:</p>

<p>As swimcatsmom said, it depends on the state. My state is similar to thumper's. Student files (if required) as non-resident in the state where s/he worked, and also files as a resident in his/her home state. If Connecticut is the home state, the student gets a credit for taxes paid in the non-resident state. So it's possible to pay taxes in both states, or one and not the other, or in neither. (Does that clear up the confusion?) As long as the student is eighteen or older, I believe either the parent or the student (or neither, but not both) to claim the personal deduction.</p>

<p>As swimcatsmom says, it depends on the state. My state is similar to thumper's. The student files (if required) as non-resident in the state where s/he worked, and also files as a resident in his/her home state. If Connecticut is the home state, the student gets a credit for taxes paid in the non-resident state. So it's possible to pay taxes in both states, or one and not the other, or in neither. (Does that clear up the confusion?) As long as the student is eighteen or older, I believe either the parent or the student (or neither, but not both) to claim the personal deduction.</p>

<p>For federal taxes the parent can claim the student as a dependent (if eligible) and claim an extra deduction of @ $3000 for that student. The student can still file his own tax return and claim a standard deduction (@ $5400) but cannot claim the personal deduction (the @ $3,000) if his parents have claimed them as a dependent.</p>

<p>
[quote]
So it's possible to pay taxes in both states, or one and not the other, or in neither. (Does that clear up the confusion?)

[/quote]
Sure ;)</p>

<p>I am quite relieved the state my daughter worked in during the summer does not have state income tax so no filing requirement for non residents. Now the place she is hoping for this upcoming summer may be a different story.</p>

<p>So, I am thinking that the student pays tax on income earned in that state. Thus if DD is a student in College State but a resident of home state the question is whether the scholarship was EARNED in the college or home state? If she earned a merit award in HS, is it earned in home or college state? IS it only earned income so scholar $ don't count?</p>

<p>I will ask our business accountant next month and will try to remember to post here.</p>

<p>My PA resident son is working in NY, no official reciprocal agreement. </p>

<p>He will have to file a Non resident NY form and I will use the amount of the tax paid to NY on his resident PA state return. He'll get credit for what he paid to another state. </p>

<p>But, because PA taxes all your income and NY gives you like 3K off for a deduction for yourself, he will end up owing a little bit to PA.</p>

<p>Does that sound like a fun day or what.</p>

<p>somemom - it depends completely on the state. In our state a resident pays state tax on all their income (including scholarships) whether it is earned in another state or not. My daughter earned @ $3200 over the summer in another state - she will have to report it and pay taxes on it in our home state even though it was earned elsewhere. She had to pay state taxes on her scholarship and grant money last year as well as federal taxes. Believe me - for our state scholarship money counts as income :( . For other states it may not.</p>

<p>Our state also catches non residents who earn over a certain amount in the state.</p>

<p>You need to check your home state income tax rules and the rules of the state she attends school in. They vary widely from state to state so there is no one correct answer. The state my daughter worked in over the summer does not even have a state tax on earned income . But our state will tax her on it anyway.</p>

<p>I have been reading the state guidelines, thus far, other than the fact that the college state takes every possible angle that benefits them insofar as increasing the tax they collect, I have seen nothing address a non-resident of that state and 1098T income, yet.</p>

<p>Our home state has no income tax, so it is not critical there, but they make up for it by taxing every other little thing any one does, so it would be great if she only had to declare her 1098T income on the federal return.</p>

<p>Personally I actually prefer that the State tax is linked to my income. My best friend lives in a State where there is no state income tax but the property tax is horrendous. Her house is a little bigger than mine (ok and a whole lot nicer) but with much less land - her property taxes are 7 times mine!! I actually could afford to buy a house there (not much difference pricewise - cheap by E/W coast standards) but I could not afford the property taxes which total more than what I pay in federal and State taxes by a long long way.</p>

<p>I came from a state with a limit on property taxes- limited increases based on the purchase price.</p>

<p>In our new state there is no limit at all, the state determines it's budget and then works the assessment backwards and we are seriously wondering about the long term viability here.</p>

<p>The extra bonus is that when you sell a home there is a 1.5%-2.0% "sales tax" which is 5 digits for most people!! And when you move here no one tells you, it just surprises you when you close escrow.</p>