two state tax and spouse working


F

freakoutgenius

Got a question for all you tax gurus:
I'm married, working in CT on a W2(as employee with income
being withheld on a monthly basis) and wife started working
on 15-Dec-2005 in NY on a 1099 (independent contractor-no
income tax withheld). My wife commutes on a daily basis
from CT to NY.

Here are my questions:

a) If I file my 2005 return as married filing jointly how does
it take care of the fact the my wife was not working till
15-dec-2005 and then started working. I'm worried about the
fact that my tax return may not reflect that my wife was my
dependent for the maximum part of the year. Is there any
section of the tax return that tells the IRS this? (have the
same doubt about my state taxes).

b) Also me and my wife need to file CT state tax, NY state tax
(as wife was working there), Fed Tax, Med Tax and Soc sec tax.
In that case if I file as married filing jointly, do I have to
pay tax on my income as well to NY state as only my wife
worked there and not me ?

Appreciate all your help folks.
 
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K

Katie

Your wife is never your dependent from a tax standpoint; she
is always just your spouse. Even if you filed separately,
you could not claim her as a dependent. The fact that she
only worked for a small part of the year will average out in
the calculation; in other words, if you had 12 months of
income at $1,000/mo, and she had 2 months at $1,000/mo,
together you would have 14 months at $1,000 or $14,000 total
income. In applying the graduated income tax rates to a
joint return, you get the same result you would have if each
of you had earned $7,000 (i.e., part of your income may be
taxed at a lower rate than if you had filed as a single
taxpayer). That's the income-splitting effect of the joint
return.

The same principle works for state purposes.

It will be to your advantage to file jointly for federal
purposes, and if you do so, you must also file a joint
nonresident return in NY. However, only your wife's NY
source income will be subject to NY tax. Your income will be
taken into account only to determine the average tax rate
that applies to her income.

Katie in San Diego

P.S. I forgot to mention that CT will allow you credit for
the tax you pay to NY on your wife's income, limited to the
proportion of your CT tax liability that relates to that
income.
 
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S

Seth Breidbart

a) If I file my 2005 return as married filing jointly how does
it take care of the fact the my wife was not working till
15-dec-2005 and then started working.
All that matters is total income, not which weeks it was
earned during (except for some minor stuff about paying
estimated tax on time).
I'm worried about the
fact that my tax return may not reflect that my wife was my
dependent for the maximum part of the year. Is there any
section of the tax return that tells the IRS this?
It doesn't matter; married filing jointly, 2 personal
exemptions. The IRS doesn't care if you supported both, she
supported both, you each supported yourselves, you each
supported the other, or you switched every Wednesday.
b) Also me and my wife need to file CT state tax, NY state tax
(as wife was working there), Fed Tax, Med Tax and Soc sec tax.
In that case if I file as married filing jointly, do I have to
pay tax on my income as well to NY state as only my wife
worked there and not me ?
The form will explain. Basically, as I understand it, you
don't pay tax on your out-of-NY income (since you live and
work out of NY), but the amount of that income may affect
the rate paid on the in-NY income.

Seth
 
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M

Missy

Got a question for all you tax gurus:
I'm married, working in CT on a W2(as employee with income
being withheld on a monthly basis) and wife started working
on 15-Dec-2005 in NY on a 1099 (independent contractor-no
income tax withheld). My wife commutes on a daily basis
from CT to NY.

Here are my questions:

a) If I file my 2005 return as married filing jointly how does
it take care of the fact the my wife was not working till
15-dec-2005 and then started working. I'm worried about the
fact that my tax return may not reflect that my wife was my
dependent for the maximum part of the year. Is there any
section of the tax return that tells the IRS this? (have the
same doubt about my state taxes).

b) Also me and my wife need to file CT state tax, NY state tax
(as wife was working there), Fed Tax, Med Tax and Soc sec tax.
In that case if I file as married filing jointly, do I have to
pay tax on my income as well to NY state as only my wife
worked there and not me ?
Your wife is not your dependent, she is an exemption. You
will want to file married filing jointly. You include both
of your incomes on your federal return. You should see a tax
professional in your area. The states can be confusing when
you have more than one state, as well as your wife working
as an independent contractor. The tax pro probably will
save you money, not cost you money... You do not have to
worry about as much as you think you do.

Missy Doyle
 
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F

freakoutgenius

Thank you all of you guys for your comments and suggestions.
Really appreciate it.
 
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