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.
