Since it was the employer's error, the best solution would be for the employer to pay back to your wife the tax that was mistakenly withheld, and issue a corrected W-2 with zero Massachusetts wages and tax. If the employer won't do that, you will have to file a Massachusetts nonresident tax return to get a refund of the tax that was withheld. The Massachusetts Department of Revenue will almost certainly question the return, since your tax return will show no MA income, but your wife's W-2 shows MA income. A letter from the employer would help when you have to convince the MA DOR that you really did not have any MA income.
What state did you work in? Your pay is taxable by the state where you work, even if you live in a different state.
Certain states have special rules. So that we can properly advise you, please answer the following questions.
What state did you live in?
What state did you work in?
What state did the employer withhold tax for?
We live in NH, my wife works for a company based out of Massachusetts, however she works from home and Massachusetts taxes weren't supposed to be deducted. Her company messed up and has adjusted for this year...
Since it was the employer's error, the best solution would be for the employer to pay back to your wife the tax that was mistakenly withheld, and issue a corrected W-2 with zero Massachusetts wages and tax. If the employer won't do that, you will have to file a Massachusetts nonresident tax return to get a refund of the tax that was withheld. The Massachusetts Department of Revenue will almost certainly question the return, since your tax return will show no MA income, but your wife's W-2 shows MA income. A letter from the employer would help when you have to convince the MA DOR that you really did not have any MA income.