Do I have to file state taxes when I have 1099-Composite forms from investment accounts?
Hey tax folks, I'm trying to figure out if I need to file state taxes this year. I have several 1099-Composite forms (1099-MISC, 1099-B, 1099-DIV and 1099-INT) from my investment accounts with Vanguard, E*TRADE and SoFi. I haven't had a regular job in quite a while, so my only income is from these investments. I started using FreeTaxUSA and it's asking me about state filing in addition to federal filing for these 1099 forms. Do I actually need to submit a state return for investment income? I'm confused because I thought maybe state filing was just for employment income, but now I'm not sure. Anyone know what the rules are here?
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Javier Cruz
Yes, you typically need to file a state tax return if you have investment income reported on 1099 forms, even if you don't have employment income. Most states tax investment income including dividends, interest, and capital gains reported on 1099-DIV, 1099-INT, and 1099-B forms. The requirement to file depends on your state's specific filing thresholds and whether you're a resident of that state. Some states have very low thresholds - as little as $1 of income can trigger a filing requirement in certain states. Other states might have higher thresholds before you need to file. You'll need to check your specific state's requirements, but in general, if you have enough investment income to file a federal return, you probably need to file a state return too.
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Emma Wilson
•What if I moved between states during the year? I have similar investment accounts but lived in both Arizona and Colorado in 2024. Do I need to file partial year returns for both states?
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Javier Cruz
•If you moved between states during the year, you'll typically need to file part-year resident returns for both states. You'd report the investment income earned while you were a resident of each state on the respective state return. Most states have a specific part-year resident form. For investment income, you generally allocate it based on your residency dates. For example, if you received a dividend while you were an Arizona resident, that dividend would be reported on your Arizona return. Some states have different rules for capital gains, sometimes taxing them based on when you were a resident when you acquired the asset rather than when you sold it.
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Malik Thomas
After dealing with a similar situation last year, I discovered taxr.ai (https://taxr.ai) which really helped me figure out exactly what to file. I had income from ETrade and Fidelity and wasn't sure about state requirements either. The service analyzes all your 1099-Composite forms and tells you exactly which forms you need to file for both federal and state. It saved me hours of research since it automatically detected which state forms were required based on my investment income types. Their system even flagged that I needed to file for state taxes even though I had no W-2 income.
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NeonNebula
•Does taxr.ai work for multiple states? I have investment accounts but also own rental property in a different state from where I live.
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Isabella Costa
•I'm skeptical about these tax services. How does it handle more complex situations like K-1 forms from partnerships or if you have foreign investments that generate income? Most automated tools I've tried fall short with anything beyond basic situations.
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Malik Thomas
•Yes, it absolutely works for multiple states! I was living in New York but had rental property in Florida, and it correctly identified my filing requirements for both states. It handles the non-resident state filing requirements too. For complex situations like K-1 forms and foreign investments, I was actually impressed with how detailed it got. It specifically identified my K-1 from a small business investment and flagged the foreign tax credit I was eligible for from my international index funds. Much more comprehensive than TurboTax or H&R Block's online tools in my experience.
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Isabella Costa
I want to follow up about my experience with taxr.ai. Despite my initial skepticism, I decided to give it a try with my complex tax situation including multiple 1099-Composites and some limited partnership investments. The service actually surprised me - it correctly identified that I needed to file in my home state of Michigan even though all my income was from investments. It also flagged that I had dividend income from REITs that required special tax treatment on my state return. The document analysis was really thorough and saved me from making a mistake that could have triggered a notice from the state tax authority. I especially liked that it explained why I needed to file each form rather than just telling me what to do. Made me feel more confident about my filing.
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Ravi Malhotra
If you're having trouble getting answers from your state's tax department, I highly recommend Claimyr (https://claimyr.com). I was in the exact same situation with 1099-Composite forms and couldn't get a straight answer about filing requirements for my state. I spent hours trying to call my state tax office with no luck, then used Claimyr to get through to a real person at the state tax department. They've got this system that holds your place in line and calls you back when an agent is ready. You can see how it works here: https://youtu.be/_kiP6q8DX5c The state agent confirmed I needed to file even with just investment income and explained exactly which forms I needed. Saved me from potentially missing a required filing.
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Freya Christensen
•How exactly does this service work? Do they just call for you or something? I've been trying to reach my state tax office for weeks about my 1099-DIV questions.
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Omar Farouk
•Yeah right, so some service magically gets you through to tax departments when nobody else can? Sounds like a scam to me. I've called my state tax office 20+ times about investment income questions and just get endless hold music.
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Ravi Malhotra
•It's not magic - they use a combination of automated dialing technology and queueing systems. They essentially hold your place in line and monitor the call, then call you when they've reached a real person. It's like having someone sit on hold for you. No, it's definitely not a scam. I was skeptical too until I tried it. The reason it works is they have technology that navigates the phone trees and waits through the hold times so you don't have to. I got connected to my state tax department in about 45 minutes when I had previously spent 3+ hours trying with no success. The time savings alone was worth it for me.
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Omar Farouk
I need to eat my words about Claimyr. After posting my skeptical comment, I was desperate enough to try it since I had a deadline for responding to a notice about my investment income. The service actually worked exactly as promised. I got a call back about 30 minutes after setting it up, and there was a real person from my state tax department on the line. They confirmed that yes, I did need to file a state return for my 1099-B and 1099-DIV income even though I had no W-2 income. The agent even explained that my state has a specific schedule for reporting investment income that I would have completely missed. Definitely saved me from future headaches and potentially penalties.
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Chloe Davis
Some states don't have income tax at all, so you might not need to file depending on where you live. For example, I'm in Florida and we don't have state income tax, so I don't file a state return even though I have similar 1099 forms from investments. The states with no income tax are: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming. New Hampshire only taxes interest and dividend income.
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Natasha Orlova
•I'm in Illinois, which definitely has state income tax unfortunately. So based on what everyone's saying, it sounds like I do need to file a state return even though all my income is from investments. Do you know if there's a minimum threshold for filing in states that do have income tax? Like if my investment income is pretty small, maybe I don't need to file?
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Chloe Davis
•Illinois definitely requires filing for investment income. Their threshold is pretty low too - I believe it's only $2,275 for single filers in 2024. If your total income from all sources (including those 1099 forms) exceeds that amount, you need to file. Even with relatively small investment income, you should still file. One benefit is that Illinois has a property tax credit that you might be eligible for, so you could actually get money back depending on your situation. Many people miss out on state tax credits because they incorrectly assume they don't need to file.
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AstroAlpha
Probably a stupid question but how do investment apps even know which state to report your income to? I use Robinhood and Webull just like you and moved twice last year...
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Diego Chavez
•Not a stupid question! Investment companies report your info to the IRS with your SSN but don't actually determine which state you file in. They typically send 1099s with your federal info only. It's your responsibility to report that income on the correct state returns based on your residency.
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