Income tax withheld in wrong state

[JotikaT2]

If your employer will not correct the issue on their end, you would need to file a Nonresident and Part Year Resident AR1000NR, Arkansas Individual Income Tax Return to get a refund of your income taxes withheld. 

Arkansas nonresident form

When using TurboTax to prepare you nonresident wages, you would need to indicate that none of the wages were applicable to Arkansas in the state interview section. This will result in your state tax return showing no taxable income and allow you to get a refund for all of your state income taxes withheld erroneously by your employer.

[Dan]

I would start by asking your employer for a corrected W2 that moves that withholding to Texas.  Otherwise I believe you will need to file an Arkansas tax return to get that money back. 

[DawnC]

Texas does not have a state income tax so there are no withholdings for that state.   A nonresident return for Arkansas would need to be filed to collect the erroneous withholdings.   

[krhusbands]

Hi,

How can I do the same but for income taxes withheld in NY?

I live in TX and was taxed in NY in Feb 2021. My employer says they can't correct anything on their end because they claim its my fault the address wasn't updated.

Thanks for any help.

[TomD8]

@krhusbands --

If you're sure the withholding was incorrect (you neither lived in nor worked in NY at that time), then in order to obtain a refund you would have to file a NY non-resident return, showing the withholding and allocating zero income to NY.

[Hal_Al]

@krhusbands 

 NY is different. It depends on the details of your working arrangement.  It sounds like you moved from NY to TX, but continued to work for the NY employer.  So it depends, on why you moved to TX.  Was it for your convenience or the convenience of the employer.  In other words, could you have continued to do the work in NY or could it only be done in TX.

Here's a link to New York's memorandum on its "convenience of the employer" tax doctrine regarding non-resident telecommuters: https://www.tax.ny.gov/pdf/memos/income/m06_5i.pdf

[Alibas2006]

I have a similar issue for 2022 (live in Oklahoma and employer paid Arkansas - they refuse to amend my W2), where/how in Non-resident firm do you indicate none of my income is taxable by Arkansas?

[ThomasM125]

You would need to prepare the Arkansas return by entering AR in box 15 on your W-2 entry (assuming that is how it was entered on your W-2) and leave box 16 blank (for Arkansas wages) and enter the Arkansas withholding in box 17. You need to then mail the return in with a copy of the W-2 and an explanation of what happened. It is possible, however, that the Arkansas Department of Revenue will deny your claim unless you provide a corrected W-2 form.  @Alibas2006

[Alibas2006]

Thank you @ThomasM125! I have requested a letter from the payroll/HR department stating it was in error - I do have it in writing in an email thread if they refuse to admit the error in a formal letter….hopefully Arkansas will accept the filing - paying state tax in 2 states seems extreme? Any other options for me?

[HopeS]

Since you are a resident of Oklahoma, ALL your income is taxable by Oklahoma, regardless of where you earned it.  So you must file an Oklahoma tax return.

Your income from Arkansas is also taxable by Arkansas. So therefore you have to file a tax return in both states. You won't be double-taxed, because OK will give you a credit for the taxes you pay to AR.

In the personal info section of TurboTax, enter OK as your State of Residence, and indicate that you had Other State Income from Arkansas.  

In order to get the proper credit you should complete the non-resident AR return before you do your home state OK return, so that the credit flows properly.

See additional guidance in the link below:

How do I file a nonresident state return?

@ThomasM125

[Alibas2006]

Thank you @HopeS , I didn’t actually work in Arkansas, with the exception of some business meetings which was a total of about 12 days, so that was my question as far as filing. I work a majority of my time remotely in Oklahoma.

[ErnieS0 · Accepted solution]

If you attended 12 days of business meetings in Arkansas, then you have 12 days of Arkansas income because “income derived from Arkansas sources” is taxable to Arkansas. It’s the same as a traveling entertainer who gave 12 concerts in Arkansas.

You should file a non-resident income tax form and report 12 days of income. Oklahoma will give you credit for tax paid to AR.

[PeggyD]

In late 2021 I accidentally changed my state to Massachusetts (instead of Maryland, where I actually live) when I was changing my county of residence. I didn't catch it for a few paychecks, so $800 ended up going to MA for their state taxes. When using the non-resident form in Turbo Tax, if I allocate all the tax to Maryland (which is correct; I work in Virginia, have nothing to do with Massachusetts), TT tells me I OWE $45. If I change the allocation to include a portion going to MA, then it says I will get a refund of $35. Both these things seem very wrong, as I should get all $800 back (and pay it to MD, which wants it). 

Solution??

[ErnieS0]

Yes. If Massachusetts state tax was withheld in error, then you can file to get everything back.

1. Go to the Massachusetts section.
2. On the screen “Apportion Your Wages?” select YES
3. On “Nonresident Apportionment” tap EDIT next to your W-2
4. On “Apportionment Method” chose Working Days
5. Enter Total Working Days Outside Massachusetts and “0” for Total Working Days Inside Massachusetts
6. On the screen “Wages you earned outside of Massachusetts” the number should equal W-2 Box 16 Massachusetts income.

It’s likely you will owe some Maryland tax because you had no MD withholding for those paychecks where your state taxes went to MA.

[PeggyD]

Thanks, that worked perfectly. I'm not sure I would have found the right edit fields on my own! (Yes, I know MD will be owed more because of those paychecks when the tax went to MA. The MA refund will help with that.)