Moved to New State; Boxes 16 vs. Box 1 on W2

[BFWP33]

Hello - Assuming the following scenario,

• I was a permanent Resident in State A from January through June (6 Months)
  • My Employer was also located in State A
• I moved to State B, and was a permanent resident in State B from July through December (6 Months).
  • I continued to work remotely (in State B) for the same employer.
• I had Box 1 wages of $100K
• Assume State A should recognize 50K in gross income, and State B should recognize 50K in gross income.
• However, in Box 16, my W2s show 60K to State A, and 40K to State B, due to the timing of when addresses and such were updated in my employer's payroll systems.
• So, State A's Box 16 is over-stated by 10K, and State B's Box 16 is under-stated by 10K.

Is this a case where,

A.) I should try to get a corrected W2, that shows my Boxes 16 having 50K & 50K?

B.) Or, is this a very common scenario that is simply reconciled when I file my return? I.e. when filing in the two states, I adjust my federal AGI to properly show the 50K that was earned in each state.

C.) If the answer to B is "Yes", should I attached a supplementary explanation or something to explain the discrepancy?

Thank you for any guidance!

[TomD8]

You file a part-year resident return in each of the two states, and allocate your income between the two states according to your dates of residency.  Here are TT's instructions for your situation:

How do I file a part-year state return? (intuit.com)

Your state tax obligations aren't determined by your withholdings; they're determined by the actual facts of your residency status.  CAUTION: if you continued to physically work in State A after your move, your earnings after the move would be taxable by both State A and State B.  That's because states can tax non-residents on income from work actually performed within their borders.  In this circumstance you'd be able to claim a credit on State B's return for the taxes paid to State A on the double-taxed portion of your income.

Filing by mail and attaching a written explanation is optional; some taxpayers do, and some don't.

[BFWP33]

Thanks, Tom. Re: this statement of yours,

>>Your state tax obligations aren't determined by your withholdings; they're determined by the actual facts of your residency status.

This makes sense to me. But I am actually asking about Box 16 (which is the wages my employer reported to each state), and not Box 17 (i.e. the withholdings to each state). However, I'm assuming your assessment is still the same, i.e, that the actual facts of my residency status trump the state-level wages reported by my employer?

Thanks again.

[TomD8 · Accepted solution]

Yes, the actual facts determine your wage allocation.  Wage allocations by employers are frequently incorrect when employees move from one state to another, judging by the number of similar questions posted on this forum.  Usually due to lag time in employers updating their payroll system.

[BFWP33]

Thanks, Tom -- you da man!

[TomD8]

You're welcome.  Another note: if you're physically working in State A and are a resident of State B, you should have your employer withhold taxes for State A.  That's because the "other state credit" is granted by the resident state (with a few exceptions all involving California).  

[BFWP33]

Yep, that makes sense (re: the "other state" credit). Fortunately, I am both living/working in State B, so I don't have to handle that wrinkle.