Taxes in 2 states

[icazier]

I work in Washington DC and lived in Virginia for the majority of 2020.  Partway through the pandemic I moved to DC and want to make sure I filed my state taxes correctly.   When I filed for 2020 I had to pay both DC and Virginia income taxes despite having deductions for both on my paystubs every month.

[DemiW]

Greetings @icazier 

For 2020, you are correct with filing a tax return for DC and Virginia, which you would have filed part year for both based on the time frame you live in both states.   Depending on how you allocated your income, determines how much taxes you owed in each state. 

Note that DC and Virginia have reciprocal agreements that means that as a resident of Virginia, you did not have to pay taxes to DC, your work state.  Since your employer withheld taxes for both while you were a resident of Virginia, it's possible you would have received a refund of the taxes paid to DC during that time you were a Virginia resident when you filed DC taxes.   You would still be responsible for filing your resident return that also includes that income and pay tax on it.   

If you were paying taxes in both states prior to your move to DC, it would be recommended to review your prior year state returns and if you did not file for DC, your work state, then you will need to file a nonresident tax return for those years.  You may need to amend Virginia, your resident state to note any tax paid to another state, if you did not note that initially. See Virginia Reciprocity

Since you moved, you want to be sure that you update your tax forms with your employer.

Per DC office of Tax and Revenue, “A DC taxpayer present in DC for 183 days or more and not domiciled in DC during the tax year is a part-year resident for the period not domiciled in DC.²” In keeping with the former OTR published guidance, an individual who was considered a Statutory Resident was taxable as a part year resident, which permitted the allocation of income received in the District and excluded by means of a subtraction any income received when that individual was not a resident of the District³.

Per Virginia Tax, Part-Year Resident -- A person who moves into Virginia during the year with the intent of becoming a resident, or a person who moves out of Virginia during the year to become a resident of another state, is a part-year resident for income tax purposes. Part-year residents generally file Form 760PY. 

@icazier Hope this helps.  Feel free to contact TurboTax for assistance if you need to review.

[KochuK]

Hi icazier, thank you for joining the "Ask the Experts: Moving" special forum today. I am happy to assist with your questions.

For tax year 2020, you were a part year VA resident, and a part year DC resident.

DC has a reciprocal agreement with all the other states, i.e. you report income in your resident state, not DC.

Before you moved to DC, you were a part year VA resident. You should have reported all DC income earned during this period in VA part year resident return.

After you moved to DC, you should have reported all DC income earned during this period in DC part year resident return.

Once the income is properly reported, the TurboTax state program calculates state tax liability respectively. The fact that you had balance due on both VA and DC tax returns indicate the payroll withholdings were not enough to cover the respective tax liabilities.

Hope this helps.