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Merlo
Merlo, Accountant
Category: Tax
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Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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My boyfriend, whos self-employed with a web-based business

Customer Question

My boyfriend, who's self-employed with a web-based business (so he could essentially work from anywhere) currently lives in Massachusetts, but is thinking of coming to live with me in Virginia for six months to a year, until we can buy a house and ultimately move back to Massachusetts. One of our biggest hang-ups on this though is the state income tax issue.
He's currently established in Massachusetts to file quarterly tax pre-payments, so he won't have quite the "sticker shock" that he did this past tax season. We know that if he was to continue with this, he would have to continue paying the remainder of the quarterlies, which, if he had to pay Virginia tax in addition to that, would definitely hurt him financially. Is there any way he could get out of these payments?
What would the qualifications be for maintaining Massachusetts residency, so he could avoid paying Virginia state taxes, if he had to continue paying Massachusetts taxes?
What else should we keep in mind?
Submitted: 4 years ago.
Category: Tax
Expert:  Merlo replied 4 years ago.

Hello JA Customer,

 

Here is the way your boyfriend's state taxes would essentially work.

 

It sounds as though he intends for MA to remain his permanent state of residence although he may come to live with you on a temporary basis. There is nothing he needs to do to officially to maintain MA residency. He simply should leave all of his registrations such as car registration, drivers license, voters registration along with his bank accounts, etc. all in MA. That serves as proof of the fact that he intends for MA to be his state of residence. There are no official forms that determine a person's state domicile.

 

Taxpayers are essentially responsible for paying taxes to:

 

1. Their resident state

2. Any state where they physically work and earn income

 

What would happen here is that your boyfriend would file a return with the state of VA as a part year resident, and he would report the income he earned while living with you in the state of VA and pay taxes to VA on that income. He would then continue to file a resident return with MA as he has always done in the past and he would report his income for the entire year from all sources, including what he earned while living in VA. However, on his MA return, he would then be allowed a credit for the taxes he already paid to VA, thereby eliminating any double taxation on that same VA income at the state level.

 

Your boyfriend does not have to continue making estimated payments to MA for the rest of the year or he can adjust the amount he is paying down to the amount he thinks he would actually owe to the state based on how many months he will actually reside there. But at the same time he should probably begin making estimated payments to the state of VA to cover what he thinks he will owe to that state based on the total months he intends to live there and have income while living in VA.

 

If this was helpful please press the Accept button.

 

Thank you JA Customer

 

 

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Merlo
Merlo
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25+ years tax consulting. Specializing in returns for US citizens living abroad