My wife and I are SC residents, but we both worked remotely all of 2020 for an IN organization. The W-2s show money withheld for IN only. In using TurboTax Deluxe, I completed state tax returns for both IN and SC. On the IN interview when asked how much of the $XX did I earn while working in IN, I said $0 (because I was working in SC the entire time). That basically is getting me all of the IN tax withholding back as a refund. On my SC interview when asked about double-taxed income, I entered the full income earned from IN employer, and for the tax paid to IN on double-taxed income, I entered all IN state and local taxes withheld. That reduced my SC tax burden considerably. However, if on the IN tax return, I'm basically getting all state and local taxes withheld back, should I have not answered the SC double-taxed income and taxes paid as I did? I'm unsure of the best way to handle my tax liability in IN vs SC to reduce my overall taxes.
I did two variations that had large differences in my net taxes. 1) I changed my response in the IN interview to say all of the earnings were while I worked in IN, so I paid all of the taxes to IN. Then for the SC return, the double taxing questions were the same as before. 2) I kept the IN interview response as $0 of the earnings were while working in IN, so I will get all of the IN taxes withheld back. Then for SC, I changed the double-taxed income and taxes questions to 0, which added a huge tax liability to my SC tax return. The first variation has a ~$2200 HIGHER overall tax liability than the second variation. I need to know if I can do either or if one is correct and the other one incorrect or could cause issues?
