Incorrect Amounts of Wages Withheld Between CO and CA After Moving

[beebo01]

Hello all!

In 2021 I was working remotely in Colorado and moved permanently to California in March 2021 with the same job. When I moved I updated my address in my employer's payroll system but I didn't know that this didn't also update my state withholding, so I continued to pay CO state taxes for 5 months until I noticed the error on a paycheck and in August and got my state withholding updated to CA with my employer. I know I need to file a part-year resident return in each state.

It appears they never retroactively made any changes because my W2 shows my CO income as almost equal to my CA income, when in reality my CA income should be a much larger share of my total wages. I've also checked my paycheck records and they show that I paid CO tax withholding until August when I should have stopped in March. I've reached out to my employer and they have refused to send me an updated W2 because their policy is to only go off what forms they receive. I'm left now with what I believe could be an inaccurate W2 and I'm afraid to file it for fear of submitting incorrect information to the IRS, or other further complications down the line.

Does anyone have advice for how I should proceed?

• Do I wait to file my taxes and continue to pressure my employer for an updated W2?
• Do I file with what I have and do my best to calculate accurate wages for each state? I think this would create problems as my calculations would differ from what my employer submitted.
• Do I file my taxes completely as-is with each state and expect an adjustment?

I've calculated my taxes in Turbotax based on my current (inaccurate) W2 and I'd get a refund federally and from both states, for what that's worth. So I think I'm unlikely to owe even with the adjustment and am worrying about nothing. Thanks in advance for all your help.

[ErnieS0 · Accepted solution]

No. Do not wait to file your return. Employers almost never correct state payroll tax errors.

You can report amounts that are different from what’s reported on your W-2. Doing this will give you a larger Colorado refund and a smaller California refund (or balance due).

You may receive a notice from CA, CO or both if your wage amounts differ from what is on the W-2. In that case you would just have to show how you calculated the amounts and provided some documentation, such as a pay stub of year-to-date earnings at the time you moved.

If you report everything as shown, it will match your W-2s, so it will not create any red flags.

California pulls state wage info from the W-2 Box 16 amount you report in TurboTax, so if you do want to make an adjustment, you would make it there.

The IRS will not care if the state wage amount is different as it doesn’t impact federal tax.