How to Correctly Account for Employer Charging State Taxes Partially to the Wrong State?

[ninsights]

My W2 shows that I paid state taxes to both IL and NC. My employer incorrectly deducted IL taxes for half of the year.

As a result, my W2 shows some of my wages in box 16 for NC and some of my wages in box 16 to IL.

The tax they deducted to IL and NC are correctly shown in Box 17.

I have read that I should file a non-resident return to the state of IL in order to get those taxes back, but how does that work if the wages listed in Box 16 for IL are not zero? Doesn't Turbotax think that I owe taxes to IL if there's a dollar value in Box 16 for IL?

My employer says they cannot change my W2.

[MaryK4 · Accepted solution]

When you file a nonresident return, you can allocate the wages earned in TurboTax so you will be able to file the zero return to get the withholdings refunded.  TurboTax uses the information on the W2, but as in this case, there are times when adjustments apply.  (Example, North Carolina was your resident state, so you are not be able to adjust.) 

The amount on your W2 is what your employer used for the IL withholding (they state has requirements for the employer).  In general, the state does not question zero returns unless there is evidence to the contrary- you were an Illinois resident for years then all of a sudden filed the nonresident returns several years in a row.  

Your employer cannot make changes to the IL state withholding after the end of the calendar year of the wages.