I am a part-year resident in NJ and NC. I have earned income (W-2) that must be allocated between states. TurboTax correctly allocates for NJ. But (!) NC does not. Help!

[mauel]

I lived 5 months in NJ, and 7 months in NC. So I can allocate 5/12 for my NJ PY return. But TurboTax does not allow a 7/12 allocation for NC. (This is an error.)

[Karis_F]

You will need to go through the North Carolina organizer in TurboTax in the State Taxes area and look at the section that allocates income between NC source (earned while in NC) and non-NC source. 

There is a screen that asks about the correct allocation of wages from your W2.

Also, make sure that you are filing a part-year return and that the dates that you lived in NC in 2025 are shown correctly.

Even though the New Jersey allocation seems correct, you may want to go through the NJ organizer to check the allocations and confirm the part-year residency period.

Here is a TurboTax article with instructions on how to file a part-year tax return.

[mauel]

Dear Karis_F,

I agree: what you recommend "should work", but it doesn't.

When I enter the screen asking me to allocate my W-2 wages, I have boxes to enter the correct allocation of (a fraction) of the year-long income into the NC PY time period. I do enter this amount, and TurboTax notes the correct tax due in the state pop-up. But, when I do a final review (or a state review) TurboTax change the PY amount that I entered into the box and substitutes the full amount. (Obviously, this increases my tax due amount.)

When I look at NC Form D-401 (NC Instructions) page 21, NC instructs how Form D-400 PN Line 1 should be entered. In Column A, enter the full amount. In Column B, enter the NC allocation. Well, no matter what I have tried (and I've redone the state taxes many times), Column B on Form D-400 PN Line 1 always is equal to the full year amount in Column A.

This is a TurboTax error. I suppose that I have no choice but to complete my NC State Return Manually.

Any advice would be very much appreciated!

Sincerely,

Mike

[SteamTrain]

@mauel 

I "thought" I was able to get it to work for a part-year NC allocation...though I did note some strange behavior right when I designated the NC-PY amount....I had it working.

But right at the Audit Risk step after the reviews & error checks...it reverted to the whole amount for me too.

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BUT that might depend on what your W-2 is showing  (Only one W-2? Same company?)

What's in your boxes 15,16, 17 of your actual W-2 form ?

Just NJ?......Just NC?

or, both NJ and NC?

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All designated as NJ wages?...or split between NJ and NC on your actual W-2?

AND.....are you using the Desktop software...or the "Online" browser-based software.

(I'm using Desktop)

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I'll check back tomorrow and test again based on your responses.

[mauel]

Dear Steam Team,

Yep. I moved from NJ to NC, but I my employer's W-2 lists full year NJ income, but not NC. (Sigh...)

I suppose I can request a revised W-2c, but I was hoping that I could allocate the NJ/NC amounts in TurboTax. Instead, TurboTax always puts the full-year amount in the NC allocation. There is no provision to allocate W-2 income in the NC forms. 

(In comparison, I can allocate the NJ income and TurboTax recognizes my allocation (5/12 in NJ and 7/12 in NC).

Why doesn't TurboTax fix their NC form to allow users to designate their PY allocation?

-Mike

[SteamTrain]

@mauel 

Same employer? Yes?

I'll give it a try again and see what happens.

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make sure that employer/HR/Payroll knows you are living and working in NC now...and that only NC taxes are being withheld on that income.

Not sure they will reissue as a W-2C with correct amounts for two states...depends on the flexibility of the payroll people.....but I guess it's worth a try.

[SteamTrain · Accepted solution]

@Karis_F   @mauel 

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Yeah..it IS a strange NC software bug..

NC part-year W-2 Allocation of $$

I think I have a workaround...maybe not perfect but it "seems" to work. I noticed the same problem this user experienced.

My system: Windows 11, Desktop Premier with NC, all updates to date installed. (Don't know if the Online shas the same problem)
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I created a file for a part-year NC resident, who moved from TX to NC on 1 June 2025. Same employer Before & After the move. $100,000 of total W-2 income. $40,000 in TX and $60,000 after moving to NC but no NC line on the W-2 itself.

(Texas....because I didn't want TTX pestering met to download another state beyond the NC I already have.
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During the W-2 allocation of $$ in the NC part-year tax return, if you set the NC-PY allocation to $60,000 in the first line of the allocation table...it stays ONLY until you go thru the error checks and review...until just at the point you step to the Audit Risk page. Where the PY $$ reset to $100,000 in the NC tax return and screw up the PY allocations.

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Also...if I copy the issuer into the second line for the remaining $40,000 and designate it as Not-NC income......it also doesn't keep the top-line at $60,000 thru the Audit Risk step, and messes up the NC-PY calculations.

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IF, instead I, indicate the second line as the $60,000 NC-PY income, and set the first line to $40,000 as Not-NC...then it "kind-of" works. At the Audit Risk step, the first line for Not-NC income changes to $100,000 again, but it doesn't seem to adversely affect the NC-PY. calculations...(but I can't know if it changes during the actual filing....and I don't want to try that and get charged $25)

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Here's a Diagnostic file for the NC-PY set up Correctly in the first allocation line as $60k and PY-NC, but the file is not yet continued thru the error checks, reviews, and not at the Audit Risk step where the calc suddenly changes.

[mauel]

Dear Karis_F,

Brilliant!

Yes, I also did a nearly similar "work-around" without the need to request a revised W-2c. 

I simply indicated that the W-2 that was auto-imported from the Federal Return was "Not NC Source Income" (in the status pop-up.) Then, I manually entered another line (which was "Blank") and indicated its status as "NC Resident Income". This sticks during state, federal, and final review. 

Finally, I printed out all returns and confirmed the PY incomes are correct. For example, for the NC D-400 Schedule PN, Line 1 Column A correctly shows total income from all sources. Then, Line 1 Column B now correctly shows the PY NC State allocation. The final state tax calculation is correct.

For *everyone* who replied to my request for help: Thank you! I sincerely appreciate the help and (at last!) a resolution.

Thank you, thank you

-Mike

[SteamTrain]

@mauel   

Looks like it was a problem last year too...NOBODY bothered to fix it??

Solved: Part Year Resident for NC and NY- Taxes witheld for NC on W2, NC Refund not calculating corr...

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@Karis_F   PLEASE report this for getting fixed.  People shouldn't have to be guessing that the first line has to be Not-NC income.  It should work no matter what order the amounts are entered in the W-2 allocation screen.

[SteamTrain]

@GabiU 

Apparently this is still not working for Part-Yr NC residents:

TurboTax reverts part year NC source income to the full W-2 income amount for the year

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I posted the problem to @Karis_F  above, with a diagnostic file number toio...BUT..no indication that it has been reported.    Over the past couple months, I've seen similar posts reporting a sudden jump-up in State taxes owed during the review...and just at the step where you see the Audit Risk...but haven't been able to find them.   Check into this??   It is still occurring.  (Just checked)