1099 NEC in different state than home address

RedditHunting

hi,

I have a W-2 job in my primary residence state, which is Virginia. I also have a 1099 NEC income two different states (Maryland and Colorado) where I physically went to and worked in each state.

Both NEC incomes are then required to be linked to a business income when I file my taxes. My business income is listed as in my home residence state, since that’s my home address, in Virginia.

When I go to file my state taxes, Maryland shares tax reciprocity with VA, so I don’t have to add it. However, when I add Colorado and fill in that I made “X amount” as the business income in this state, it doesn’t change this business income from continuing to be counted on my VA state tax return.

for example, if my Colorado income was $100,000 via 1099 NEC, and my VA income was $200,000 via W-2, when I look at my VA state tax statement, it still shows a grand total of $300,000 taxable VA income despite filling out the Colorado state tax return.

How do I fix this? And my other question, is when I fill out my Colorado state tax return for this 1099 NEC income, it asks me about self employment tax deduction and calculates an amount. Should I just go with the calculated amount? I also contributed $10,000 to a solo 401k with this 1099 income, I would then fill out $10,000 for this on the Colorado state tax return too, correct?

TaxMorgan

Hello RedditHunting,

Regarding your Virginia return showing the full $300,000: this is expected. As a Virginia resident, Virginia taxes all of your income no matter where it was earned. The Colorado income will not be removed from your VA return. Instead, the way to avoid double taxation is to claim a credit on your Virginia return for the taxes you paid to Colorado. This is done through the "Taxes Paid to Another State" section within your Virginia return in the software. You can find step-by-step instructions here: https://community.freetaxusa.com/kb/articles/72-how-to-claim-the-credit-for-taxes-paid-to-another-state

For the Colorado return questions, the self-employment tax deduction the software calculates is based on your federal return and is generally correct as calculated. As for your solo 401k contribution, that deduction is typically taken on your federal return as an above-the-line deduction, not as a separate entry on the Colorado state return. Colorado generally starts from your federal taxable income, so those federal deductions are already factored in.