My employer was in a lawsuit and I received a settlement payment. I received both a 1099 -MISC form as well as a W-2 form from the lawsuit’s “Settlement Fund”, which is handled by a company located in Massachusetts, a state in which I do not reside in. Do I still need to file a tax return with Massachusetts since the W-2 shows income tax being withheld in that State? Would this be filed as a non-resident?
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Yes, it's possible you must file a Massachusetts (MA) return for the income received from their sources. File the MA return first, then TurboTax will know the credit you should receive on your resident state (assumes your state has income tax). TurboTax can help you with both returns.
Massachusetts (MA) Nonresidents
If you're a nonresident with an annual Massachusetts gross income of more than either $8,000 or the prorated personal exemption, whichever is less, you must file a Massachusetts tax return. Massachusetts gross income includes income from sources within Massachusetts.
State Returns - Assumes both states require income tax returns to be filed:
Credit for taxes paid to another state is allowed by a resident state when the same income is being taxed to another state. Your resident state does not want you to pay tax twice on the same income. The credit that is allowed will be the lesser of:
In most cases file your nonresident state first.
Thank you so much for the prompt reply! The W-2 form is showing an amount of about $5,7XX.XX under wages, tips, and other compensation and a state income tax of $25X.XX. Does this mean I do NOT need to file?
Since state taxes were withheld on the W-2 you received for Massachusetts, then you should file a Massachusetts state return in order to get a refund of the tax you paid. Otherwise, you wouldn't need to file for Massachusetts since your income from that state was below the filing threshold.
If you're a nonresident with an annual Massachusetts gross income of more than either $8,000 or the prorated personal exemption, whichever is less, you must file a Massachusetts tax return. See this Massachusetts webpage for more information.
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