1, You want to enter your W2 information as it is reported:
The amounts for state taxes on your W2 are not necessarily based on your state wages- they are reported as required by the state for TAX WITHHOLING purposes. (When you fill out your W4 or state form, the employed is required to withhold based on formulas so the amount of state wages on the W2 is supposed to coincide with the amount of tax withheld and is matched with the employment withholding tax forms that the employer files with the state.). Also, the state employer withholding rules vary on corrections so it is more difficult than not for the employer to correct the withholding and refund employees after the quarter ends and especially after the end of the tax year.
This definitely does not make it easy for the individual taxpayers when a situation like your happens.
2. Yes, for Massachusetts, you will want to adjust the income to include the total you earned since you did work remotely in the state.
3, Yes, for Virginia, you will file the 763-S as you described to get your withholding refunded and attach the Mass tax return.
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