Hi,
For the record I am not a resident of DC or VA but I am just trying to understand how DC handles the flip side of the bonus situation someone brought up earlier. DC does not tax nonresidents to the best of my understanding, plus DC has a reciprocal agreement with VA to not tax each others residents.
The situation I am thinking of is a 2023 DC resident (assume full year) who moved on 1/1/24 to VA. They were paid a bonus in early 2024 based on work performed during 2023. The work was performed while a DC resident and in DC. However, it was paid while the taxpayer was a VA resident.
Where I live, in NY, this bonus paid in the next year would be considered NY income to the extent the taxpayer worked in NY in the prior year, the year the bonus was earned. NY has no reciprocal agreements and has a nonresident tax form.
I think in the situation I mention, the 2023 earned, 2024 paid bonus is only taxed by VA, neither taxable or reportable in DC. If the employer were to withhold DC tax on the bonus income, taxpayer would file for a full refund. Do you not agree with this?
Separately, what is the DC employers responsibility for withholding. Are they required to withhold VA tax and are they allowed or required to not withhold DC tax, in this situation.
Thank you al!
