States expect tax payments from all residents of the state -- full-year, partial-year and even nonresidents earning income in the state. Income earned from state-registered corporate investments, trusts, community property, installment sales, partnerships and state-issued compensation also has state tax liabilities for full- and part-time residents and also for nonresidents. States tax full- and part-year residents and nonresidents on income earned from the sale of real estate, stocks and bonds. If you don't pay taxes, no problem. The state will send you a bill for the delinquent taxes -- with added interest.
Each state establishes residency rules, but most define a resident as everyone living in the state, except temporary or transitory workers and visitors. Residents have domiciles where people voluntarily keep a family. Laws use the terms "true," "permanent," "fixed" and "principal" to define your domicile. Your fixed, true or principal residence is where you return for permanent living with your family. Full-time residents don't need to live in a state for the entire year, and some states, including Indiana and Wisconsin, require only that you maintain a residence in the state. States deal with student residents in various ways. States with college education systems typically require students to establish a domicile in the state and pay state taxes before qualifying as a resident for in-state college fees.
Every state sets its terms of residency recognizing a full-time resident. Snow birds, people who leave cold-weather climes to live in warm-weather ones, would appear to be part-time residents, but taxpayers who keep a state driver's license, voting registration and have a legal residence in the state qualify as a permanent resident of that state. People moving a permanent residence from one state to another qualify for part-time residency tax status. The number of months necessary for permanent residence depends on when you permanently move your home location. Students living in a state less than the entire year file as a part-time resident or file in the state where the family has a permanent residence when parents include children as dependents on their tax returns.
Even though you may not live in a state, you might need to pay taxes there. Some states require anyone working in the state to pay tax on the income earned on the job, even when workers live in another state. Employees hired for temporary jobs located in the state, including film actors, directors and crew, must pay taxes in most states, even when the film workers keep a permanent residence in another state and the film company in charge of the production has headquarters in yet another state. Laws require filing special forms for non-source income as a nonresidents.
You may need to pay state taxes on income throughout the year from trusts and estates, even when you live only part of the year in the state. States also assess nonresidents tax on income earned from interest in corporations, including small S corporations recognized under state laws. Trusts and estates filed in one state also collect taxes from beneficiaries living in another state. The estate executor files on behalf of all of the beneficiaries and submits a copy of the federal and state tax filings to all beneficiaries listed in the will or trust, according to the American Bar Association.
- California Franchise Tax Board: Nonresidents and Part-Year Residents
- California Franchise Tax Board: Do I Need to File?
- Indiana Department of Revenue: Residency Status
- State University of New York Financial Student Affairs: Residency -- Establishment of for Tuition Purposes
- New York State Department of Taxation and Finance: S Corporations
- American Bar Association: Guidelines for Individual Executors and Trustees
- Wisconsin Department of Revenue: Individual Income Tax -- Students
Lee Grayson has worked as a freelance writer since 2000. Her articles have appeared in publications for Oxford and Harvard University presses and research publishers, including Facts On File and ABC-CLIO. Grayson holds certificates from the University of California campuses at Irvine and San Diego.