Moved last year from DC to VA (less than 183 days in DC). TurboTax is calculating VA properly, but is not prorating DC taxes but using full-year income. How do fix this?

[gautam_rana]

TurboTax in calculating DC taxes is using my yearly income.  I've changed my dates of residence in both the personal info and state info sections, but no matter what I do, TT continues to use my full-year income to calculate the DC taxes.  My other state taxes for Virginia is being calculated properly, with correct prorating.  

[JohnB5677]

Please confirm that you have both states as part year nonresident states.  This election is in the state section of your return, not the My Info.

[gautam_rana]

Yes, confirmed.  In the My Info section AND the state section of the DC return, I have listed my period of residence for DC from January 1, 2022 - May 31, 2022 (less than 183 days).

Thanks.

[JohnB5677]

If I understand correctly, you worked in DC for the entire year. 

• If that is correct you will owe taxes in DC for the entire year regardless of where you live.  
• You would then owe taxes to VA for the time that you lived there.
• However, you should get a credit for taxes paid to another state on the Virginia tax return.

Your resident state (Now VA) taxes all income but gives a credit for income taxed by another state. Please carefully follow these directions.

You will need to prepare both DC and VA in a special order. You may need to delete both states and begin again.

1. First, prepare your non-resident DC return. This creates your tax liability for the non-resident state.
2. THEN prepare your resident state VA return and it will generate a credit for your income already being taxed in the non-resident state.
3. The credit will be the lower of the state tax liabilities on the same income. You may owe your resident state.

It isn't possible for the program to create a credit before it knows the liability. Your returns may be wrong if you do not prepare the states in this order.

If you followed these steps and the credit is not showing, you may want to contact a specialist that can work through that section of the return with you. 

[TomD8]

@JohnB5677  wrote:  "If that is correct you will owe taxes in DC for the entire year regardless of where you live."  

That is incorrect.  DC does not tax non-residents of DC, and it taxes part-year residents only on the portion of their income earned as a DC resident.   DC does not even have a non-resident tax form.

On DC Form D-40, Line 8 in the "Subtractions section", the instruction is to enter the income received during the time of non-residence - which is then subtracted from the federal AGI to arrive at the DC taxable income.

https://otr.cfo.dc.gov/sites/default/files/dc/sites/otr/publication/attachments/2022_D-40.pdf

The income the taxpayer earned after becoming a VA resident, even though earned in DC, is taxable only by VA.

@gautam_rana -- In the Personal Info section, enter VA as your State of Residence.  Indicate that you lived in another state (DC) during the year.  Answer No to having "Other State Income".  Then complete the DC return before you do the VA return.

[gautam_rana]

Colleagues --

Many thanks for the responses and the assistance.  

I believe the latter answer about DC and part-year residents is correct, but my personal situation is even more complicated.  I work for the federal government and have been overseas on official assignment and I actually was not physically present in DC at all last year.  (The whole backstory is complicated, and last year I completed a domicile move as I own no personal property in DC.)

I did resolve the problem along the lines of TomD8's suggestion.  The problem was I assumed that TurboTax would prorate my earnings by the dates I lived in each state.  In fact, there is a question as you go through the first state about "other state income" but TT provides no information on this page, including no hyperlinks.  I didn't quite understand the importance of this and did answer "no" which resulted in TT computing my DC taxes looking at my total yearly earnings, while prorating the VA taxes.  I deleted both my state taxes in TT per the earlier suggestion, and as I re-input my data, I actually answered "yes" to the "other state income" which prompted TT to ask "how much"?  I then figured out the number of days I was in DC for the calendar year (x/365), multiplied that percentage by my total income and inputted that number for DC.  That resolved the issue with a more logical state tax result.  

This actually tracks with tax law (you are taxed based on where and when you get income, not necessarily the days you are in a state) but TT really should provide a hyperlink on this page and make clear the importance of providing this information.  Instead of automatically prorating my earnings, it expected me to do the math   -- which may be logical as only I would know when I earned income, but TT should provide more information guiding the user who is unlikely (like I was the last 2 days) with this nuance of tax law.

Thanks again everyone for your help.