State tax filing
OK, I see the column B now on the NC D-400, Sch PN. I was looking at the worksheet that feeds into it, which doesn't have a column B.
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1) For a W-2, where you-yourself telecommuted from outside of NC all year, you mark that W-2 as being "Not NC Source Income" during the NC nonresident interview income allocation section. In the desktop software (which I'm using), it looks like the following (not sure how they present it in the Online software) Situation: a) Telecommute W-2 $50k, & b) Spouse worked in NC W-2 $18k
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That removes that W-2 as being subject to NC taxation...since it shouldn't be taxed by NC since you were physically located in SC NC when you did that work. The follow-up page on Desktop software would then look like:
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And the D-400, Sch PN would look like (Name and SSN are fake):
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1) You fill out the NC nonresident tax return first, and error check it.. Then work on the SC resident tax return last. The SC tax returns will calculate a tax on ALL your income, but give you a credit "up-to" the taxes you ended up having to pay to NC. (i.e, not what was withheld for NC taxes, but only what NC is keeping after whatever refund NC is "expected" to send you)
Now...potential complications.
2) I have no idea if NC will allow this to be e-filed. Many states have a cutoff, where if State withholding on W-2 forms is above a certain % of that state's income, the state then requires paper filing. And you've effectively removed a lot of NC income. The software will know that and block e-filing NC forms if that ends up being yoru situation....but I don't know if it uses the NC-income $$ before you removed the telecommuting $$, or after removing those $$.
3) NC computers might kick your tax file for agent review, even if you can e-file it. Their question becomes...why does your W-2 show all that income as being NC...and you claim it isn't. IF they send you a letter asking you to explain.....you'd indicate you telecommuted from SC all year ( a letter from your employer might help too). It would be great if such a note could be attached to an e-file, but the software doesn't allow it right now.
4) Certainly, if you are forced to paper-mail file the NC forms, you could attach a signed note to your own W-2 forms, explaining that you telecommuted from SC all year. NC reviewers might still challenge it and ask for confirmation from the employer......but perhaps telecommute issues like this were so common for 2020/2021...they might just shrug and pass it on. No way to know.
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5) For 2022, if you telecommuted at all early in the year, (more than just a few occasional days)....talk to your employer/payroll NOW about breaking the $$ up properly to SC vs NC for the 2022 W-2, so that you aren't again stuck in such a situation for the 2022 tax filing. Certainly, it may depend on how sophisticated the payroll department is, and whether they are even willing to try to break it out. It would also depend on you and your immediate boss keeping track, and indicating that time in SC vs NC to the payroll department...even if they are willing to parse it out ~properly between the two states.
