topic Double Taxed Income when 2 States in State tax filing

Double Taxed Income when 2 States

habu72 — Thu, 03 Feb 2022 03:08:00 GMT

I got one W2 for all of 2021.

I lived in Virginia for 5 months.

Then I moved to Washington DC for the remaining 7 months.

How do I enter values for this screen when I have open the Washington DC state form?

Correction:

while updating Washington DC tax, this is the correct wording:

Virginia Information

Enter the Income taxed by DC and Virginia, then the taxes you paid to Virginia.

Virginia Amount

Double-Taxed Income ?????

Tax paid to Virginia on Double taxed income ?????

It is confusing what to enter.

Is amount in Double-Taxed Income my W2 Box 1?

Re: Double Taxed Income when 2 States

habu72 — Thu, 03 Feb 2022 03:09:17 GMT

Correction: See original Post

Re: Double Taxed Income when 2 States

ErnieS0 — Thu, 03 Feb 2022 04:25:59 GMT

If you lived in Virginia for five months and Washington DC for seven months then you will file part-year returns for both states. There will be no double taxed income.

Your employer should not have withheld any DC tax if you worked in DC while living in VA. Additionally once you moved to DC you should only have DC withholding.

Check to make sure you are filing a part-year DC return. Then go back and say NO to Credit for Tax Paid to Another State.

Re: Double Taxed Income when 2 States

habu72 — Thu, 03 Feb 2022 14:51:11 GMT

I had the same employer for all of 2021.

I lived in VA. Jan 1 to May 31

I moved to DC June 1 thru Dec 31

Yes, I did enter part year residence for both VA and DC state taxes per the dates above.

Are you saying I should hit Delete on this screen and NOT edit?

Summary of Taxes paid to other States

State

VA Edit Delete

Because if I hit Edit for VA it comes back to this screen:

Virginia Information

Enter the income taxed by both DC and Virginia, and the taxes you paid to Virginia

Virginia Amount

Double-Taxed amount ????

Tax paid to Virginia on Double-Taxed income ????

Re: Double Taxed Income when 2 States

DMarkM1 — Thu, 03 Feb 2022 15:28:36 GMT

As @ErnieS0 states, there should not be any double taxed income. DC has a tax reciprocity agreement with VA (with every state as matter of fact). That means all income earned while working in DC but living in another state is taxed by your resident state only.

You would "delete" the credit for taxes paid to another state. Your part-year VA return should have the VA income from box 16 in the VA line on your W2. That income would be VA residence income.

Your DC return would have the amount from box 16 in the DC line to cover your DC residence period.

Re: Double Taxed Income when 2 States

habu72 — Thu, 03 Feb 2022 16:29:23 GMT

Just to clarify, my workplace for all of 2021 was in Virginia.

I lived in Arlington VA. from 01/01/2021 up to 05/31/2021

Then moved to DC 06/01/2021 thru 12/31/2021

I did NOT work at all in DC in 2021, just moved there.

So I assume the answers still apply to Delete Credit?

Re: Double Taxed Income when 2 States

ErnieS0 — Sat, 05 Feb 2022 20:54:25 GMT

@habu72 Yes. Delete the credit. A resident of a state (or DC) is taxed on income earned anywhere.

Absent of a reciprocal agreement, a resident who works in a different state would be taxed a second time by the work state meaning you would have to pay tax in VA and DC, but because DC has reciprocity, you only have to pay one tax – to the state where you lived (regardless of where the income was earned).

So pay tax to VA while a VA resident and DC tax while a DC resident. There is no overlap so there is no credit.