My daughter worked for a Massachusetts employer the full year 2021.
She was a resident of Massachusetts until mid-March 2021. Then, she moved to another state and worked remotely.
The new state taxes her on income earned while living in that state (despite being from a Massachusetts income source).
Her employer withheld MA state taxes while she was living in MA and withheld the other state taxes (although the wrong amount) the rest of the year. So, she received a W2 with income and tax amounts for each state.
Massachusetts seems to require she complete a FORM 1-NR/PY MASSACHUSETTS NONRESIDENT OR PART-YEAR RESIDENT TAX RETURN and make income adjustments using SCHEDULE R/NR - RESIDENT/NONRESIDENT WORKSHEET. These are also the forms TurboTax is having us complete for Massachusetts.
My understanding is that MA taxes 5% on the full income earned from a MA source but allows a credit to be taken for taxes withheld by another state to avoid being double-taxed.
My issue is that the language in TurboTax is confusing or maybe I'm being too literal in my interpretation of the question. TurboTax says:
"Enter the total income taxed by other states which is also included in the income reported to Massachusetts while you were a part-year resident of Massachusetts.
Also enter the actual tax owed from the other state tax return for the income reported in both states while you were a part-year resident of Massachusetts. (This is not your W-2 withholding)."
If I literally interpret "while you were a part-year resident of Massachusetts" as the period from Jan to mid-March, then none of the income is reported to the new state (as the W-2 for the new state only includes the portion of income while living there). Similarly, the tax owed to the new state during this time is $0.
But, the double-tax occurs during the time when she lived in the new state and received Massachusetts income --- not during the Jan - March period she lived in Massachusetts. So, strictly following the literal interpretation of the question results in no credit being applied to the Massachusetts tax return for the March - Dec time frame she lived in and was taxed by the new state. So, she is taxed at 5% tax rate by Massachusetts for the full year AND is taxed by the new state at the applicable tax rates from mid-March through December.
Am I using the wrong form or am I interpreting the language in TurboTax incorrectly?
Thank you.
