My employer mistakenly withheld NY taxes, filing as a nonresident in Turbotax is not giving me the full refund

[alejandro_d]

I live and work in FL, but for a month or two, my employer withheld NY taxes mistakenly. They told me that I needed to file NY state taxes as a nonresident and declare $0 earnings in NY and I would be refunded the withheld amount.

I tried doing this in Turbotax and of the $2000+ that I was withheld, I'm only being refunded ~$1300. Is this because that refund is "taxed" or something?

I also would like to know what's the correct process through Turbotax to rectify those erroneous withholdings since I might not be doing it right.

Thanks!

[ThomasM125 · Accepted solution]

You may have New York wages listed on your W-2 form, as evidenced by the abbreviation "NY" in box 15 and an amount on that row in box 16. If so, you will need to get the W-2 corrected as New York will assume the wages were earned there as that is how they are reported. You need to enter the W-2 as it is stated in TurboTax.

New York taxes all of your income earned in and out of their state. Then, they multiply the tax by a factor of your in-state income divided by your total income. If your in-state income was $0, then the factor would also be $0, and you should'nt have ended up owing taxes. If your W-2 form is correct, you have to go back through the New York return and make sure you answered the income allocation questions properly. 

[alejandro_d]

I do have NY wages in box 16 in my W2, so I guess the W2 is indeed wrong then. I'll reach back to HR.

Thank you!

[DaveF1006]

You can also report this in your New York State return and not request a W2. To report:

1. Go to federal>state taxes.
2. Add New York State
3. Navigate through the initial screens verifying the fact that you are reporting this return as a New York state non-resident.
4. You will eventually reach a screen asking if you lived in NYS.  Here you will say no.
5. Then the program will ask the question if you have NY sourced income.  You will say yes to this question since it was reported on the W2.
6. Then there will be a screen that mentions New York income Allocation.  You will say no that your wages were not earned in NYS.
7. Then you will reach a W2 summary page. Here select edit next to the W2.
8. Next it will ask you how to allocate these wages. indicate you wish to allocate by percentage.
9. Next put 0 as the percentage amount.  This will allow you to claim all your taxes owed to the state of NY. To illustrate this I have included a before and after screenshot illustrating my example.  Notice the change in refund amounts.

@alejandro_d 

[alejandro_d]

@DaveF1006 That's what I did at first, but the NY refund amount is much less than what it was withheld. In your example, is $250 also the amount that was withheld?

In my case it was withheld ~$2000, but after doing all the steps you mentioned, I end up with $1300 as the refund. Actually, box 17 of my W2, which should contain the total withheld amount, is incorrect. That's why I was not seeing the full refund of $2000.

[RobertB4444]

I'm afraid that the amount in box 16 is what's throwing you off.  New York is notorious for taxing everything that it can and having that amount in box 16 is going to cause problems.  I agree with @ThomasM125 - you need to have the W2 corrected to show the amount in box 16 as zero and then the withholding amount.  That will fix the problem.

If you can't get the corrected W2 then you should change the amount in box 16 to zero and print the return (Do not efile it).  Attach a copy of the W2 as well as a copy of your federal return as well as a letter stating that you lived in Florida all year and did not earn any NY income from any NY sources and that the W2 was issued in error.  Then mail the return to the address TurboTax provides.  This means the refund will take a while but at least you will get all of it back.

@alejandro_d