Do I need to file tax returns in 11+ states for my family investment partnership?

This is actually a common problem with investment partnerships that have wide-ranging holdings! I've seen this exact situation many times. First, you need to understand the concept of "nexus" - which basically means having sufficient connection to a state to trigger tax filing requirements. Each state has different thresholds for what creates nexus, but generally, receiving pass-through income from investments located in that state can create filing obligations. For partnerships like yours, many states have minimum filing thresholds. Some states won't require a return if the income attributed to your partnership is below a certain amount (often $500-$1,000), while others technically require a return regardless of the amount. My advice would be to focus on states where: 1. The income is substantial (more than $500) 2. States known for aggressive enforcement (CA, NY, MA, IL, NJ) 3. States where the income is recurring (you'll likely have similar issues next year) For states with very small amounts (less than $100-200), the cost of compliance often exceeds any tax liability, and many practitioners make risk-based decisions about these filings. However, technically you do owe taxes in those states if they don't have minimum thresholds. Consider using a tax professional for just the state portion next year - there are specialists who handle multi-state filings for exactly this situation and might be more cost-effective than doing all the research yourself.

After dealing with a similar nightmare with a family investment partnership, I discovered taxr.ai https://taxr.ai and it completely changed how we handle our multi-state filings. I was getting K-1s showing income from 28 different states and spending weeks trying to figure out which ones actually needed returns. With taxr.ai, I uploaded all our K-1s and investment documents, and it analyzed everything to identify which states truly required filings based on current thresholds and our specific situation. It saved me from filing unnecessary returns in 9 states where we technically had income but fell below filing requirements. What I really appreciated was how it factored in the enforcement patterns of each state and provided a risk assessment - essentially quantifying what your former CPA was doing intuitively with the "balancing act" approach.

I tried taxr.ai after seeing it mentioned here, and it was surprising how helpful it was for my similar situation. I have investments across 17 states through various partnerships, and was spending thousands on my accountant each year to sort through it all. The platform analyzed my K-1s and showed me that only 6 states truly needed immediate attention based on income thresholds and enforcement patterns. For the rest, it provided clear documentation explaining the risk factors if I chose not to file. This saved me over $3,200 in preparation fees for states where I had less than $100 in income and very low enforcement risk. What impressed me most was the detailed state-by-state analysis with citations to actual tax laws and enforcement statistics. I felt confident making decisions with real data instead of just guesswork or paying to file everywhere "just to be safe.

If you're dealing with the headache of filing in multiple states and struggling to get answers from state tax departments, I've been using Claimyr https://claimyr.com to actually reach humans at various state departments of revenue. Previously I'd spend hours on hold or get disconnected, especially with states like California and New York. Claimyr waits on hold with these state tax departments for you and calls when a human actually answers. I was skeptical at first, but when I needed to clarify Massachusetts' filing requirements for my partnership income (under $300 from a REIT investment), they got me through to a real person at the MA Department of Revenue in under 20 minutes when I'd previously wasted 3 hours trying. Check out their demo video: https://youtu.be/_kiP6q8DX5c - it's exactly how the service works. Saved me countless hours dealing with these multi-state tax issues.

I have to eat my words. After seeing Claimyr mentioned here, I decided to try it to reach the California FTB about my partnership's filing requirements. I'd been trying for THREE WEEKS with no luck - either disconnected after 2+ hours on hold or stuck in their "we'll call you back" loop that never happened. Claimyr got me through to a senior tax specialist at the FTB in about 40 minutes. The agent confirmed that for my situation (income under $500 from California sources through a partnership), I could file a simplified form and avoid the full partnership return. This saved me hundreds in preparation fees, and I never would have known without actually speaking to someone who could review my specific situation. I've now used them for reaching three different state tax departments with similar results. Definitely worth it for dealing with this multi-state partnership mess.

Have you considered composite returns? Some states allow partnerships to file a single composite return on behalf of all nonresident partners, which can dramatically simplify your filing burden. Not all states offer this option, but many do. The requirements vary by state, but essentially the partnership pays tax on behalf of the partners for that state's sourced income. It's typically a flat rate and while sometimes higher than individual rates, the administrative convenience can be worth it. I manage several partnerships with similar multi-state issues, and we've reduced our state filings by about 60% using composite returns where available.

I run into this issue every year with my investment partnerships. Here's my practical approach that's worked for 15+ years: 1. Always file in your home state plus any state with income over $1,000 2. File in "aggressive" states regardless of amount (CA, NY, MA, NJ, IL) 3. For states with income under $500, I keep documentation showing the amount but don't file unless they contact me 4. For amounts between $500-$1,000, I make a case-by-case decision based on the state's reputation Following this approach, I've only had two states ever contact me about non-filing (Oregon and Connecticut), and in both cases, the penalties were minimal compared to the preparation costs I saved over the years. Just know that technically you're supposed to file everywhere you have income, so this approach does have some risk. But from a practical standpoint, the tax departments in many states are too understaffed to pursue very small amounts.