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I live in Georgia and worked in South Carolina. When I did my tax return, it says I get a refund from South Carolina but have to pay a state tax in Georgia. Can somebody explain this please?

2 Answers 2

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In most cases, if you live in State A and work in State B, you will pay income tax to State B, and State A will give you a credit for that in calculating how much income tax you owe to State A. This might not be a dollar-for-dollar credit, though. In some cases, where people cross over in both directions, the two states might have arranged a tax treaty whereby each state taxes only its own residents on all income.

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You pay tax for the state you live in, so that you chip in for the environment you live in. However when you work in another state your employer pays taxes in that state. You now get that payed tax refunded, but have to pay it to the state you live in.

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  • Do you have examples of states for which "You now get that payed tax refunded but have to pay it to the state you live in" especially with regard to the taxes that your employer paid? Why does the employee get a refund of taxes that the employer paid? Jan 20, 2014 at 14:13
  • I believe @Duci meant "taxes the employer paid on behalf of the employee via tax withholdings."
    – Josh
    Jan 20, 2014 at 14:59
  • I live in one state and work in another, and my employer withholds state income taxes for the state I live in, not the state I work in. I thought this was standard practice, but if @Duci is correct, it is not standard practice. It would basically mean you have to file two state tax returns, and you'll pay your taxes to your state out of pocket (hope you have the cash available!) and wait for your refund from the other state. Sounds like a lousy arrangement!
    – Josh
    Jan 20, 2014 at 15:01
  • @Josh In that case, the employee still paid the tax. The employer merely acted as a convenience vehicle and didn't actually pay anything. Much like how a bank doesn't pay my bills, but acts as a convenience vehicle by which my money reaches my creditors. Jan 20, 2014 at 15:14
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    ... continuation But, an employer withholding income taxes in the state of employment, and that money being refunded while the employee pays income tax in the state of residence is sheer nonsense. The state of residence typically wants to collect income tax on all the income of its residents, but usually gives credit for taxes paid to the state of employment: none of this "income tax withheld is refunded by the state of employment and the taxpayer is liable for income taxes in the state of residence." Jan 20, 2014 at 20:40

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