My wife and I reside in NY. My wife started a job in Jan-2022 with a company based in CT. She works 100% remotely from our home in NY. We noticed on her W-2 that both CT and NY are shown as having state wages (box 16) and state income tax withheld (box 17). The wages associated with NY match what's shown in box 1 for Federal and the wages associated with CT are a little bit less (no idea why they're different or if it matters...)
When she asked her employer why she had taxes withheld for both states, they admitted that when she was hired, they erroneously set her up in their payroll system as if she was going to be working from their CT office. They said they have now fixed it in their system going forward but that they will not be issuing a corrected W-2. In addition to our NY filing, they advised filing a non-resident CT state tax return to have the CT state taxes refunded. Conceptually, this makes rational sense to me, but looking for someone with "subject matter expertise" to validate if this is true? And if true, what is the correct procedural way to perform this using the TT software (desktop version), as I am confused as to the proper way. I have seen references in online searches to "zero'ing" out the "CT source income" on CT1040-NR/PY, but I'm unsure how to do this properly. We are married filing jointly and our joint Federal AGI automatically flows to line 1 on CT1040-NR/PY. It looks like I can "mathematically" get the software to produce what I think is correct by doing either of the following:
A) Use the "subtractions to Federal AGI" function to enter in a value equal to the Federal AGI (schedule 1, line 52), which will make CT AGI (line 5 of CT1040-NR/PY) equal to 0 ($Fed AGI minus $Fed AGI = $0). And then also use Part 1 of schedule CT-SI (non-resident schedule of income from CT sources) to show gross income from CT sources equal to $0 (line 15 of CT-SI), which then flows to line 6 of CT1040-NR/PY.
B) Don't bother with the "subtractions to Federal AGI" function. Let it flow. Still use Part 1 of schedule CT-SI to show gross income from CT sources equal to $0 (line 15 of CT-SI), which then flows to line 6 of CT1040-NR/PY.
As long as line 6 of CT1040-NR/PY shows $0, total CT tax is $0 and our refund will be generated. "A" allows the ability to provide a small explanation of the situation that we're trying to remedy. "B" does not. And we're not sure if either is correct or if another approach is required? I also see in the NY tax section of the software, the ability to enter taxes paid to another state as a credit on the NY taxes, which I'm guessing does not apply if trying to handle getting the CT taxes that were incorrectly withheld back through the CT1040-NR/PY?
Calls to the Connecticut Department of Revenue Services yielded little help on "how to correctly" navigate this through the filing process. We would greatly appreciate any guidance here! We're sorry for the long note, but we were trying to be specific in hopes of getting specific feedback. Thank you!
