Are mutual fund investments subject to state tax?

[lovetobike]

Hi,

I had some investments in mutual funds at Edward Jones. I had some dividend income and sold some of the funds and had cap gains. Did I have to pay state taxes on that income or only federal tax? I haven't lived in the state that is claiming that I owe them taxes since 1992. The year they are trying tax me on is 2007.

thanks,

[lovetobike]

They are regular mutual funds (small cap, mid cap etc). The key is I didn't live in the state at the time they are saying I owe them taxes. The mutual funds were in a joint account is in both my father's and my name and he lives in MO. I don't. Does this make a difference?

[mwcpa]

"Did I have to pay state taxes on that income or only federal tax?"
Depending on the state you live in, yes you may be liable for state level of income tax.

"I haven't lived in the state that is claiming that I owe them taxes since 1992. The year they are trying tax me on is 2007."
Did you work in that state... and if so, did you properly prepare a non resident income tax filing?

[lovetobike]

No. I didn't work in the state. I haven't worked or earned any wages in the state since 1992. I sent them a copy of my W-2 from 2007 to document where I was working and earning wages. I hope this fixes the problem.

[mwcpa]

what is the address on the investment statement.....
that could be the reason for the issue.... states and the IRS share data.... they see your name, and an address in MO....
Yoy may be better served drafting a letter noting the fact that you live in State X, do not live in MO and as such MO cannot tax your investment income from a mutual fund.

[taxref]

I would agree that this is probably some kind of mixup regarding your address. While the results of investment activity are taxed differently in different states, no state should be taxing a non-resident on investment activity.