Can I allocate wages to states differently when filing state tax returns than what is shown on my w-2? Moved states keeping same employer, but updated address 6m later.

[kristen-landino]

Because I was late in updating my address with my employer, the allocation of my wages between states is shown incorrectly on my w-2.  do i need to contact my employer to issue a corrected w-2 or can I just allocate my wages differently when I file my state tax returns?

[JotikaT2]

It is better to contact your employer and request that they issue you a corrected W-2 Form. 

This ensures that the amounts reported by your employer with the taxing agencies matches the amounts reported on your federal and state income tax returns.

[kristen-landino]

I contacted HR and they do not want to correct the W-2.  They are claiming that it's not their fault we notified them late. It wouldn't matter so much, but one of the states significantly increased taxes mid-year to apply for all of 2020 and the $$ amount related to the change is substantial. Is it possible to correct the wage allocation through the tax filing itself?

[DianeW777]

Yes, you should correct the wages in the W-2 section as long as you can substantiate it with the pay stubs.  Add another state wage line in the federal interview. The important actions are to report the correct amount of income and tax withholding to the correct state of residency because you moved during the year. 

Do NOT change the withholding amounts.  The state withholding shown on the W-2 is where the tax was paid.

States vary on filing requirements and is always based on residency and domicile.

Proceed to complete your part year resident state tax returns for both states. Be prepared to show residency change and wages earned in each state should you need that later.  The state where the wages are listed on the W-2 may want to see a copy of the other state return later, however sometimes that isn't an issue when both are filed electronically.

[kristen-landino]

Thanks.  How can I substantiate with pay stubs?  I can certainly show that I moved from NJ to CT on March 15th and substantiate with a signed lease, etc, but my pay stubs were not updated to reflect my new address until September.  This was obviously a crazy year, so I lived in NJ and physically worked in NYC until March 14th, then I moved to CT on March 15th and worked from home in CT for the rest of the year.  Initially when I moved on March 15th to CT, I did not know that move would be permanent (who could predict the course of events at that time?) so I did not update my address.  Given this information, I will pay taxes to NY state on 100% of my income and receive a credit for those taxes paid, 20% of which will go to NJ and 80% of which should go to CT. Unfortunately, NJ decided to raise taxes by in my bracket, affecting the majority of my income. So while I will receive a credit from NY state, I will have to pay the difference for the higher NJ rate on any income earned while living in NJ. How do I add another state wage line in the federal interview as you suggest?  what is the federal interview?  

[DianeW777]

The pay stubs are used to determine the amount of wages earned before and after the move for each part year resident state as well as the New York nonresident return.

Part Year resident returns:

• New Jersey and Connecticut (Credit for taxes paid to another state on the NJ return only for taxes paid to NY Jan-Mar 15th)

Nonresident return and includes only the income earned when you physically went there to work (Not full year).

• New York only - Prepare this return first.

[TomD8]

Be aware of this New York rule:

If you are a nonresident whose primary office is in New York State, your days telecommuting during the pandemic are considered days worked in the state unless your employer has established a bona fide employer office at your telecommuting location.

There are a number of factors that determine whether your employer has established a bona fide employer office at your telecommuting location. In general, unless your employer specifically acted to establish a bona fide employer office at your telecommuting location, you will continue to owe New York State income tax on income earned while telecommuting.

https://www.tax.ny.gov/pit/file/nonresident-faqs.htm

[kristen-landino]

Right.  But obviously these paper pay stubs will reflect the old NJ address from March to September, because did not update my snail mail address with my employer until September.  

[kristen-landino]

Yes, I understand the NY rule, which is why I stated above that I will pay NY state taxes on 100% of my income and then receive a credit for those taxes paid, which is then allocated between the 2 states (NJ & CT) which I lived in.  That credit generally means that I owe little to no taxes in NJ or CT because I paid in NY state taxes on 100% of my income and the tax rate in NY is similar or slightly higher than NJ or CT. Unfortunately, because NJ substantially raised taxes in Sept 2020, the taxes in that state are now much higher than in NY state and my credit will not cover the difference (with a credit, you basically pay the higher of the tax rate) .   As a result, it is essential that my wages are allocated correctly between NY and CT. 

[TomD8]

@kristen-landino :

This may help:

How do I allocate (split) income for a part-year s... (intuit.com)

[kristen-landino]

I understand myself how to allocate my earned income; however, there will be a discrepancy between the allocation shown on my w-2 and my tax filings.  Will this be a problem?

[alexaiono]

I would like to understand if this would be an issue as well. I'm in a similar situation where there is a discrepancy due to an error on my end in informing my employer.

[TomD8]

@alexaiono @kristen-landino 

Some taxpayers in your situation print their tax return and mail it in, along with a note explaining the discrepancy between their return and their W-2. 

[alexaiono]

Following up, in my particular situation, the state I’ll be allocating this income to does charge income tax, while the state it is currently allocated to doesn’t show up on my W2 because it is a no income tax state. 


Would it still be an issue as I’m allocating more income to a state that will charge income tax, therefore increasing my tax liability in one state, but not decreasing it in the other? 

[AmyC]

@alexaiono No, a taxing state will gladly take more income than you are showing on W2. E-file without worry.