Do I really have to pay full CO state income tax?

Hi and thanks for reading this.

 

I live in Wyoming but my employer is in Colorado.  I travel in and work about half the year there, the other half or so in Wyoming at my home office (or out in the field at our many locations across the US).

 

On my paystub, they are withholding the full CO State Income Tax amount.

 

Will I really need to have paid the full amount as if I lived in CO?  I'm a nonresident and I don't even work there all the time.  In TurboTax, there is a way to re-create my W-2 by showing an additional state and dividing the number across the two states, but this will not match my actual W-2 so I won't do that.

 

Thanks for any feedback!

 

 

State tax filing

When you do your Colorado return, it will ask how much of the income was earned in Colorado.  Your answer to that question will determine how much you will pay to Colorado.

You do not want to change your W-2, as that will trigger an error when your return is processed by the IRS.  

Hal_Al
Level 15

State tax filing

The general rule is: your report all your income on your home state return, even the income earned out of state. You file a non-resident state return for the state you worked in and pay tax to that state. Your home state will give you a credit, or partial credit, for what you paid the non-resident state. You will have to file a non resident NY state return and pay NY tax on the income earned there.. You will also file a NJ full year resident return and calculate tax on ALL your income. NJ will give you a credit, or partial credit, for the tax you pay NY. So, there will be little or no double taxation, but you have the cost and hassle of filing two state returns. Do the nonresident state return first.

Since FL does not have an income tax, you do not have a non-resident return to file. But you still have to pay tax on that income to your home state.

If you live in one state and work in another state; that income is subject to taxation by both states. This is how it works (in most cases): You file a nonresident return for the state you worked in, reporting only the income you physically earned there.

 

Since you live in a state without an income tax (WY), the next step doesn't apply to you:

You report all your income on your resident state return, including the income earned in the other state. Your home state calculates tax on all your income, but gives you a credit, or partial credit, for tax you paid to the other state. 

 

You also said " I travel in and work ..... out in the field at our many locations across the US".  You technically  may be subject to income tax in other states.  But few people really pay any. See:

 http://money.cnn.com/2013/06/28/pf/taxes/business-traveler-tax-threat/  If you live in a state without an income tax (e.g. WY), it’s more likely you should file in the work states. You can't use the "it all comes out even" rationale for not filing.

 

 

Hal_Al
Level 15

State tax filing

Q.    In TurboTax, there is a way to re-create my W-2 by showing an additional state and dividing the number across the two states, but this will not match my actual W-2 so I won't do that.

 

A.  Maybe.  I'm not familiar with the TurboTax CO software.  Usually the state software gives you a screen  to allocate your income to each state. But some state software uses the W-2 to allocate wages.  You may have to use a work around to get TT to prepare the CO return to get you your refund. At the w-2 screen,  leave CO in box 15 but change box 16 to the amount actually earned in CO; leave the CO withholding in box 17.