Multiple state tax filing with errors with tax withhelding

[wk66]

My office is located in VA, but I lived and worked from home in MA the whole year in 2021. My employer somehow withheld taxes in both MA and VA on my 2021 W2. In addition, my wages are not correctly allocated between the two states on the W2.  The sum of the state wages in box 16 is greater than my actual wages in box 1.  I have contacted my employer to correct my state wages info but my request was rejected.

Since I lived and performed services in MA the whole year in 2021, my understanding is that the total amount in box 1 of the w2 is subject to MA state tax as a resident but 0 is subject to VA state tax. Am I understanding it right?

My question is:

1. Could I file state taxes using my current w2 form (with the sum of two states' wages in box 16 exceeding box 1) without employer correction?

2.  For MA, should I use the total amount of wages in box 1, instead of MA state wages in box 16 (a fraction of box 1) to calculate the state tax?

3. For VA, could I file Form 763-S as a nonresident to claim "tax withheld in error by employer" and attach my MA state tax return with it?

Any advice would be very much appreciated. 

[MaryK4]

1, You want to enter your W2 information as it is reported:

The amounts for state taxes on your W2 are not necessarily based on your state wages- they are reported as required by the state for TAX WITHHOLING purposes.  (When you fill out your W4 or state form, the employed is required to withhold based on formulas so the amount of state wages on the W2 is supposed to coincide with the amount of tax withheld and is matched with the employment withholding tax forms that the employer files with the state.).   Also, the state employer withholding rules vary on corrections so it is more difficult than not for the employer to correct the withholding and refund employees after the quarter ends and especially after the end of the tax year. 

This definitely does not make it easy for the individual taxpayers when a situation like your happens.

2. Yes, for Massachusetts, you will want to adjust the income to include the total you earned since you did work remotely in the state.

3, Yes, for Virginia, you will file the 763-S as you described to get your withholding refunded and attach the Mass tax return.

[wk66]

Thank you for replying, Mary @MaryK4 . This is very helpful. 

Just to make sure I understand it right, I could adjust the state wages to other amounts that are different from box 16 of w2, while entering w2 info as it is, correct? 

Is Form 763-S available on Turbotax Virginia, or could I only paper file it? When I checked the VA state tax web, it doesn't show an online filing option.

Thank you.

[DianeW777]

Yes, Form 763-S is available in TurboTax.  You will need to file a Form 763-S Virginia Special Nonresident Claim For Individual Income Tax Withheld.  When you indicate that you are a resident of Massachusetts (MA) and did not work in Virginia (VA), and your Form W-2 has Virginia Taxes Withheld, TurboTax will walk you through the form.

You will need to print and mail Form 763-S with your Form W-2 attached showing the Virginia withholding.  You will receive the entire amount of your VA withholding back since you were a resident of MA.