Back when we went to Paradise for my leave, we spent hours and hours researching the tax situation. We read lots of stuff online. We read articles published in tax journals available from the uni library. We talked to friends and colleagues who had taken out-of-state leave recently, including one who had both gone to Paradise for leave and who had used a professional accountant. We called up the tax board in Paradise and asked.
Everything was unanimous (well, except a couple of random internet Q/A things that didn’t really look legit)– if we lived there less than a year, kept our residence here, didn’t register to vote or get a driver’s license etc., then we would only have to pay taxes on income directly from places in Paradise. We would be considered non-residents, and non-residents only have to pay taxes from Paradise-sources, not from, say, my University salary.
So, of course, the other day in the mail we got two scary tax documents from the Paradise tax board asking us for our 2015 Paradise state taxes. Apparently the fact that we sent our federal taxes from a Paradise address meant that they expected us to file a return.
Which freaked us out, because our state taxes where we normally live are a pittance compared to state income taxes in Paradise. We’re talking thousands of dollars if all of our income counted.
So we redid the internet searching and DH called the tax board in Paradise again.
Turns out we had a 1099 from an honorarium I got in Paradise, and although I normally don’t have to pay Paradise state-income taxes on honoraria from Paradise (which I tend to get once every few years), since I was living in Paradise at the time, I did need to pay state income taxes on that income.
So we just needed to file a non-resident tax form, which is a pain, but the only part we’re going to be taxed on is the honorarium plus a small penalty.
We’re talking maximum $100, not the thousands we’d been envisioning.
That was a bit terrifying there, but we can handle $100.
Update: After about 6 hours of dealing with Paradise non-resident state tax forms, we ended up owing $46 plus $48 in late penalties and interest, for a total sum of $94. So I guess the penalty wasn’t so small after all!