I was on the phone with a TurboTax CPA specialist and we realized that we believe my wife's W2 is wrong.
Background: my wife and I moved from MA to CA. My wife continued working for her MA company remote for 1 month while she lived in CA. Her MA company W2 wage Box 1 is 32k, but her Box 16 State Wage for CA is 21k and Box 16 State Wage for MA is 34k. Adding up the two Box 16 State Wages is way over the Box 1 wage!
After looking at her paycheck and corroborating the numbers, we believe the error is her Box 16 State Wage CA is correct at 21k and the Box 16 State Wage MA should be the difference between her overall Box 1 Wage of 32k and the CA State Wage. So Box 16 MA should be 32k minus 21k = 11k.
The CPA told me to file under the assumption that Box 16 MA should be 11k for now, and ask for a corrected W2 from my company since we are so close to deadline. If the corrected W2 is different from what we assume, then we should file an amended tax return then.
Is this the right way to do this? I don't want to get in trouble for assuming the wrong correction!
MA can tax all the income she earned as an MA resident. CA can tax all the income she earned as a CA resident, including the income for her one month of remote work done in CA for the MA company. MA cannot tax a non-resident on income from work not actually performed in MA. You became CA residents when you moved into your new home in CA.
If you can't get a corrected W-2 from the employer, and you want to correct the W-2, you do so by filing a Substitute W-2 using IRS Form 4852. https://www.irs.gov/pub/irs-pdf/f4852.pdf
To do this, revisit the W-2 in TurboTax, go through the questions. You'll be asked "Do any of these uncommon situations apply to this W-2?" Check the box that says "Substitute form". That should cause TT to generate Form 4852.