You will want to file two part-year resident forms, one for Massachusetts and one for her new state.
For the period from January through mid-March, she is a resident of Massachusetts and employed in Massachusetts. That's easy. The tax goes to Massachusetts.
From mid-March through September 13, she was a resident of her new state but she was still considered to be working in Massachusetts. Why? For tax year 2021, due to Massachusetts’ COVID-19 state of emergency, all compensation paid for services performed before September 14, 2021, to nonresidents who would generally perform such services in Massachusetts but are not due to a pandemic-related circumstance, will be treated as Massachusetts-source income.
During this period, she will be taxed by Massachusetts and her new state. She will pay the tax to Massachusetts and receive a credit for the taxes paid to MA on her new state's tax return.
From September 14 through December 31, she is a resident of her new state, and with the COVID-19 emergency in Massachusetts over and the rule lifted, this is now income that is considered sourced in her resident state.
On your Massachusetts return, you will want to apportion her wages from January 1 through September 13.
On her new state return, you will want to apportion wages earned from mid-March through the end of the year. You will also want to receive a credit for the taxes paid to Massachusetts from mid-March through September 13. How this is entered into TurboTax depends on the state she moved to.
The amount she earned solely in Massachusetts should be reflected on her W-2 as the income taxed by MA. The amount earned from mid-March through December 31 should be the amount taxed by the new state on her W-2. As for how much she earned from mid-March through September 13 which is the portion that is being double-taxed, you can either look at her pay stubs, or if she earned more or less the same amount through out the year, attribute half her wages to this period since March 15 to September 13 is 182 days, almost exactly half the year.
