I moved from CA to MS in late January 2020, staying with the same company (they have locations in each State). My January 15th and 31st paychecks were noted as CA (CA taxes withheld), while all other paychecks were withheld in MS only.
Upon receiving my W2's, my entire taxable income is included in Box 16 for MS and my entire Q1 income is included in Box 16 for CA (so it totals 1.25x my total state taxable income). Payroll claims this is appropriate and that it notes the entire pay for any quarter you worked in the state.
I am seeing conflicting info out there about whether my return will handle this by allowing me to input how much time was spent in each state, or whether I need to send in additional documentation showing actual paystubs as well as fill out a Form 3525 for CA to substitute my W2.
Can someone clarify if this is typical and recommend how to properly document this in Turbotax?
I had HSA contributions (not deducted in CA) as well as some capital gains if there are any specifics on how to best handle that state-by-state.
You will be able to allocate the state wages if you are filing Part Year resident tax returns. (If, however, you maintained California domicile and only resided in Mississippi for work, you would allocate the Mississippi income on the Nonresident return.) The state filing requirements for the W2 often require reporting the income differently.
For your HSA contributions, California does not allow the deduction from income so you will be able to allocate it as non-California, but it will still be on the Schedule CA. For the cap gains, if you can divide by the state you were in when it was received, you would include on that Part-Year return.
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Thank you for the info. I was a resident of CA for 3 weeks of 2020 then MS, so part year tax returns in each case. You say I can allocate the state wages but what I am trying to get clarity on is the fact that the sum of both state's listed (Box 16) wages is greater than my total wages paid out, there is an overlap. So I don't want to know if I can allocate that total accordingly, but rather if my wages will be an allocation of Box 1 with Box 16 totally ignored or not.
California and Mississippi will match the income reported in Box 16 against their records (they get a W-2 from your employer). You may have problems if you use the Box 1 amount since CA and MS wages are clearly stated on your W-2.
Ideally your company should issue a corrected W-2. Sounds like they won’t do that.
The alternative is to report the CA and MS wages as shown on your W-2 and take a tax credit on your MS return for tax paid to California. This is easy to figure because the credit would be based on your entire CA income and tax liability.
Your third option would be to use Box 1 and respond to tax notices if you get audited.