Moved from VA to NC halfway through the year.

[Jaysheridoc]

As title states, I worked for the same employer the entire tax year. From Jan-Jun I worked and lived in VA, as a VA resident.  We moved and became residents of NC and I worked that time in NC.  My W-2 shows the correct VA wages, earned as a VA resident, in Box 16.  However, the NC Box 16 shows ALL my wages for the year.  My employer says that NC requires Box 1 to match Box 16.

I can file a NC Tax Credit to make the tax amounts correct, but technically, I wasn't a NC resident for all the wages being reported.  Should I ask my employer to amend my W-2?

[AnnetteB6]

No, you should be able to allocate your income properly to VA and NC without needing a corrected W-2.

Since you moved during the year, you will be filing part-year resident returns for both states.  When part-year resident returns are involved, your income will be allocated to each state based on when you lived in that state and what you earned during the time you lived there.  

You will not be filing a tax credit on either state return for 'taxes paid to another state'.  That only applies in cases where you lived in one state and worked in another and both states were taxing the same income.

Just be careful to review the income being reported to each state as you go through them.  The NC return will determine your total NC income tax by taking a ratio of income earned only while a resident of NC divided by all income earned for the year.  

[Jaysheridoc]

Thank you for your prompt reply.  The issue I have is with my W-2, as it is reporting all income earned as a NC resident.  Let's say Box 1 is $100,000.  Box 16 has two states listed - VA and NC.  Virginia reflects $50,000, and NC should read $50,000, but it doesn't, it reads $100,000.  Payroll's reasoning is NC requires Box 1 to be the same as Box 16 for NC.  It will be the "same" if they report 50/50 as it was earned.  Does this clarify more?

[AnnetteB6]

The entries you make in the NC tax return will resolve the numbers shown on the W-2 for part-year resident returns.  

You will see some information on the screen based on the W-2 entries, but you will have the opportunity to enter the amount earned while you were a resident of NC.  In turn, the amount you enter will go to the NC D-400 Sch PN to be used in that ratio calculation mentioned above.

@Jaysheridoc 

[Jaysheridoc]

When I make the corrections, TT takes the correction, but then reverts back to the amounts in my W-2.

[JamesG1]

I created a situation similar to the one that you outlined.

I prepared one W-2 with $41,418 reporting to NC (07-01-2022 through 12-31-2022) and $20,000 allocated to Virginia (01-01-2022 through 06-30-2022).  However, as a PY resident of each state, I wanted to report $21,418 to North Carolina and $20,000 to Virginia.

I reported as a part-year resident for each state.  

At this screen in the North Carolina tax return, I was allowed to adjust the first line from $41,418 to $21,418 to reflect the North Carolina portion of your income.

@Jaysheridoc 

[Jaysheridoc]

I was able to make that change as well and it does change the NC tax at the top of the program.  When you tab to a different block or review again, it will revert back to the original number.  Curious as to why ALL wages need to be included in the NC Box 16, when I wasn't a resident of that state during that time.  I'm waiting to hear back from my payroll department on getting a corrected W-2.  Push comes to shove, I'll make the revision and just not review again and see if it will post.

Thank you all for your help and suggestions.  I really appreciate  you taking the time to reply to my question.

[MaryK4]

Employers have requirements from the states on what to report on the W-2-- this is because it is used to reconcile the state withholding sent to the state during the year so it is unlikely that they will correct the W-2 so making the adjustment and not going back may be your best option.  

@Jaysheridoc 

[Jaysheridoc]

Thank you for the reply Mary.  I'm not a tax or payroll expert.  If my W-2 reports ALL my 2022 income, to North Carolina, even though I was only a NC resident from June till the end of the year, is that not an incorrect W-2? 

[ErnieS0]

It is not an incorrect W-2 if your employer is following state regulations. You said in your original post that your employer told you that North Carolina requires W-2 Box 1 to match Box 16.

If your employer only reported partial wages, that would be an incorrect W-2.

[Jaysheridoc]

Thanks for the reply @ErnieS0 .  We use Vista (work software) and what my payroll department was referring to is a note, from the software that says "box 16 match the wages in box 1 for all North Carolina residents".   This language is not in the NC statute.  NC-30 states that all North Carolina residents must show wages earned in NC and other states.  However, I was not a NC resident while working in Virginia for the first six months of the year - I was a Virginia resident...

With regards to the TurboTax program, it will allow me to change the box, to reflect NC wages earned (PY Resident), but if I do anything else like review my return, it will revert back to the original amount and show that I owe NC more tax than I should.  When I look for more help on it, it comes back as we need to file for a NC tax credit (since taxes were taken out by VA) and when I complete that portion, the taxes owed to NC is correct.  Again, I don't believe this is correct, because when VA took taxes from me, I was not a North Carolina resident...

[HopeS]

You should be filing 2 part-year returns which will allow you to allocate the wages correctly to both states.

See the steps below:

If you need to add this information after you've begun your return:

1. Sign in to Turbo Tax and select Personal Info.
2. A Personal info summary screen will pop up.
3. Question number 2 asks you the state(s) you lived in during 2022. Select your state of residence from a dropdown menu.
4. You'll also be asked if you lived in another state in 2022. Answer Yes and a new section will appear asking for your previous state of residence. Select the other state you lived in.
5. Fill out the date of when you moved to your current state.
6. If the rest of your information is accurate, select the blue Continue button in the lower-right corner of the screen.

After you finish your federal return, you'll automatically move to the State section, where you'll see your part-year states listed. We suggest you prepare the return for your former state first, followed by the return for the state you currently live in.

@Jaysheridoc 

[Jaysheridoc]

Thank you @AnnetteB6 , @JamesG1 , @MaryK4 , @ErnieS0 , @HopeS for taking time to reply to this thread and providing your insight.  This issue is now resolved and my employer will be providing a corrected W-2 that reflects the correct amount of earnings as a NC resident.