My daughter lives in DC and works in Northern VA. But her employer withheld VA taxes!

[eli104]

Short version as noted:

My daughter lives in DC but works in VA, and her employer withheld taxes in Virginia (she also had a two-week job in DC last summer, so there is some income taxed in DC.

• Using the "free online" version of TurboTax, I see that she will get all of the Virginia Tax refunded (over $2,600).
• BUT, I seem to have done something wrong because it says she only owes $13 to DC, and I know that cannot be right!
  • I'm ready to start over from scratch, and I want to be sure I check the right boxes here! 

[JotikaT2]

Your daughter will need to submit a VA-4 form to her VA employer as DC and Virginia do have a state reciprocity agreement.  This form is used to notify employers not withhold state taxes within Virginia.  State reciprocity is an agreement between states where the nonresident state agrees not to tax the income earned in their state which allows taxpayers to just pay tax in their resident state.

When preparing your daughter's returns, you will need to indicate that she earned $0 in Virginia to get a refund of any state taxes withheld in error.  She will most likely owe taxes in DC for this income but make sure she submits the withholding form to her VA employer to ensure the erroneous tax withholding does not continue.  Her employer can then just withhold taxes in DC instead of VA.

Please see how do I file a nonresident state tax return for guidance on preparing the nonresident Virginia state tax return.

[eli104]

So I did figure out on TurboTax how to get all the money back from Virginia... and the end result shows she will get over $2600 back from VA.

But now I am looking at DC, and it appears she only owes around $13 (correct). So obviously, I am missing something there! Any idea what I have missed in that process?

[eli104]

Just a bump here... something is NOT right (unless I missed it completely).

Please see the previous message... how can she get a $2,600 refund from VA and only owe $13 to DC? Any ideas??

[SteamTrain]

@eli104 

The only thing I can think of for the moment, is that in the DC tax return, you/she is taking a credit for taxes paid to another state (VA).........  but that is not allowed in this case, so that needs to be set to zero.

(I don't have DC forms, so I don't know where/what page it might show up during the DC interview)

[eli104]

I think I figured this out... I had to fill the DC taxed first (only) and then was taken to VA taxes. That cleared things up and now she gets her $2600 back from VA and owes ~$2400 to DC. 

The TurboTax process says to do your  Non-Resident form first, but in this case something was backwards... but now it's OK! 

Thanks!