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alisonjhade
Level 1

Multiple states

I filed both my Federal and Colorado taxes manually.  My husband works remotely for a company in Connecticut so I need to file that return as well and I can't find anyone to help me.  Should I re-file my Federal taxes using TurboTax and not submit the return, but use it to file CT taxes?  If so, can I print the CT taxes and mail them in so I don't file my Federal taxes twice?  

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Accepted Solutions
Hal_Al
Level 15

Multiple states

Q.  Do I need to do an amended return for Colorado?

A.  Probably not.  I believe CT tax was mistakenly withheld, since he did not physically work there.  You need to file a non resident CT return for a full refund.  You may need to attach a letter of explanation. 

 

However, if he occasionally worked in CT (trips, including training days, to the home office), you are required to pay CT tax on the income for those days.  So, in that case, you would need to file an amended CO return to claim a credit for the net CT tax paid.   

 

He should talk to his employer about stopping the CT withholding, to avoid filing for a CT refund  every year. 

 

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9 Replies
Hal_Al
Level 15

Multiple states

Yes. If you want to prepare a state return using TurboTax (TT), you must first complete the federal return, in TT.  Be sure that the federal return you prepare matches what you actually filed.   You will not be able to e-file the CT return.  So it will have to be printed and mailed. 

 

But, you need to explain more.   You may need professional tax prep help.  What does "works remotely for a company in Connecticut " mean?  You may not need to file a CT return if he did not physically work in CT.  Was CT tax withheld?  Did you file  MFJ (Married filing jointly) Federal & CO returns?  Normally you should not have prepared your CO (residence state) return without first having prepared a CT (work state) return. 

 

This is the general rule: The income is work state (WS) source income only if it was physically earned there. Resident States (RS) tax all their resident's income, regardless of where earned. You  file a non-resident tax return for the WS and report the WS income. You  file a full year resident return for the RS, reporting all your income. The RS will give you a credit, or partial credit for any tax paid to the WS.

alisonjhade
Level 1

Multiple states

Thank you for your reply.  He works from home in CO and will continue to do so.  The office is in CT.  Yes, CT taxes were withheld.  Yes, we filed MFJ for Federal and CO.  

 

Your third paragraph makes me think I need to do an amended return for Colorado.  We didn't get a credit for tax paid to the WS.  

Hal_Al
Level 15

Multiple states

Q.  Do I need to do an amended return for Colorado?

A.  Probably not.  I believe CT tax was mistakenly withheld, since he did not physically work there.  You need to file a non resident CT return for a full refund.  You may need to attach a letter of explanation. 

 

However, if he occasionally worked in CT (trips, including training days, to the home office), you are required to pay CT tax on the income for those days.  So, in that case, you would need to file an amended CO return to claim a credit for the net CT tax paid.   

 

He should talk to his employer about stopping the CT withholding, to avoid filing for a CT refund  every year. 

 

alisonjhade
Level 1

Multiple states

I suspected we need to ask them to stop all along but they think they have to withhold CT taxes.  I believe the only way to prove they don't is to file and see if I get all of the money returned to us.  Not sure if there is another way to proved they should stop doing this.  

rjs
Level 15
Level 15

Multiple states

@alisonjhade 

Connecticut has a "convenience of the employer" rule. That means that the state treats a telecommuter employed by a Connecticut company the same as an employee who actually works in Connecticut. The only exception would be if the employer has a specific business need for the employee to be located elsewhere. Under this rule, the employer is required to withhold Connecticut tax, and the employee must file a Connecticut tax return and pay Connecticut tax as if all his income was earned in Connecticut.

 

The convenience of the employer rule puts the employee in a difficult position, because Colorado considers the income to be earned in Colorado if that's where the employee is actually working. You should probably seek professional tax advice.

 

Hal_Al
Level 15

Multiple states

@rjs  Do you have a reference? The last list I saw only had New York , Pennsylvania, Nebraska, Delaware and Arkansas as directly taxing telecommuters.

 

This references says "Connecticut applies it (the CT convenience of the employer rule) only if the taxpayer’s resident state applies a similar rule for work performed for a Connecticut employer"...."Connecticut applies the rule  to nonresident employees of a Connecticut employer who work from a remote location and reside in one of the five states listed above".  

https://www.cga.ct.gov/2021/rpt/pdf/2021-R-0008.pdf

 

This 2nd reference says "If a nonresident of Connecticut works in Connecticut and in another state, the employer should withhold Connecticut income tax on that portion of the employee's wages related to services performed in Connecticut".

https://portal.ct.gov/DRS/Individuals/Individual-Tax-Page/Nonresident-Working-in-Connecticut

rjs
Level 15
Level 15

Multiple states

@Hal_Al 

I was relying on this.


web page:
https://taxfoundation.org/remote-work-from-home-teleworking/
or download PDF:
https://files.taxfoundation.org/20200812115626/Teleworking-Employees-Face-Double-Taxation-Due-to-Agg...


"Six states—Arkansas, Connecticut, Delaware, Nebraska, New York, and Pennsylvania—had implemented so-called convenience rules prior to the COVID-19 pandemic, while Massachusetts adopted a temporary income sourcing rule with the same effect in response to pandemic-era telework."


But it does not go into any detail. Your reference is both more recent and more authoritative.

 

TomD8
Level 15

Multiple states

@alisonjhade --

 

Connecticut does NOT require withholding from the wages of a non-resident employee unless the employee works in one of those same five states (NY, NE, DE, PA, or AR).

 

See Nonresident Wages Subject to Connecticut Withholding on page 8 of this reference:

https://portal.ct.gov/-/media/DRS/Publications/pubsip/2021/IP-2021-1.pdf

**Answers are correct to the best of my ability but do not constitute tax or legal advice.
alisonjhade
Level 1

Multiple states

TomD8.  I can't thank you enough!  This is the answer I have been looking for.  Next, I have two years of taxes to clean up.  Hopefully Turbo Tax can help.  Big thanks!  Alison 

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