My employer paid income tax to a state I did not live in. How do I report full refund from no-resident state to resident state?

[mataczyn]

I received a W2 from a New Mexico Company PNM and reside in Wisconsin for all of last year. Moved from NM to WI in June 2020. When I fill out the NM state income tax forms, I am required to pay an additional $1300. However, my State of Wisconsin goes from owing $700 to receiving a $2,400 in refund from the state.

Would I be correct in filing the NM state taxes

[DMarkM1]

You would be correct to file a NM non-resident return.  NM taxes non-residents on income derived from employment within NM.  

As you have apparently already discovered you would then claim a credit on your WI return for taxes paid to another state. 

 If you are not already doing so you should have your employer withhold taxes for NM and not WI.  That way you will not have a big NM end-of-year tax liability since you would have paid it during the year.   If NM is already withholding you might consider increasing that.

Here is the NM reference.

[TomD8]

@mataczyn --

If you were a non-resident of NM for all of 2021, and if your work for the NM employer was done entirely remotely from a location outside NM, then the income from that work is not taxed by NM.

NM does not tax non-resident remote income.

If that's your situation, file a non-resident NM return on which you allocate zero income to NM.

[Irahs]

Part 1: I lived in MI from Jan 1, 2021 through Nov. 9, 2021. I moved to South Carolina on Nov. 10, 2021. My employer paid state income tax to MI for the whole year. My understanding is that I needed taxes to be taken out for So. Carolina starting Nov. 10. Because I haven't done that, it seems like I will get a penalty.

Question: Is there a way that my employer can make the correction or will I have to get a refund from MI for the taxes paid and pay SC directly? 

Question: How do I determine the amount that SC should have gotten given that I was living in SC for a partial month? Is there a formula to use for this?

Part 2. MI has also paid state income tax to MI for Jan. and Feb. of 2022. Now that I know the problem, I submitted a W4 so this issue should be handled going forward.

Question: Since I already know that taxes will be underpaid for SC for 2022, what can I do to address this and pay the proper amount of taxes for Jan and Feb when I was living in SC so I can avoid a penalty in 2022?

Thanks!

[JohnB5677]

Did you still physically work in MI when you moved to SC?  I will answer these questions based on you did.

My employer paid state income tax to MI for the whole year. My understanding is that I needed taxes to be taken out for So. Carolina starting Nov. 10. Because I haven't done that, it seems like I will get a penalty.

No, you should not get a penalty.  If you continued to work in MI you will get a credit for the taxes in MI on your SC tax return.

Question: Is there a way that my employer can make the correction or will I have to get a refund from MI for the taxes paid and pay SC directly? 

As stated above.   If you continued to work in MI you will get a credit for the taxes in MI on your SC tax return.

Question: How do I determine the amount that SC should have gotten given that I was living in SC for a partial month? Is there a formula to use for this?   

If you moved in on November 10th that is 52 days. 52/365 = 0.142 of the year.  Take 0.142 X your W-2 Wages.

Part 2. MI has also paid state income tax to MI for Jan. and Feb. of 2022. Now that I know the problem, I submitted a W4 so this issue should be handled going forward.

If you're still working in MI you should continue to pay MI state tax.  The Federal W-4 tells your employer about your withholding needs. States either use their own state W-4 form or the federal Form W-4.

Question: Since I already know that taxes will be underpaid for SC for 2022, what can I do to address this and pay the proper amount of taxes for Jan and Feb when I was living in SC so I can avoid a penalty in 2022?

My first question is the big one.  Where are you physically working?  If you're working from home you can pay an estimated tax for those two months.  The  Department of Revenue will provide guidance on estimated payments and forms List of Department of Revenue by state  List of state DORs

[Irahs]

Once I moved to SC, I was working remotely for my MI employer from my home in SC. Does that change anything? Thanks

[TomD8]

@Irahs --

If your work is carried on entirely remotely from a location in SC, it is taxable only by SC.  It is not taxable by MI.

[Irahs]

1. My employer withheld taxes for the state of MI from November 10 - December 31. How do I recover them, as I will need to pay SC back?

2. Also, in planning for next year, how do I recover the Jan & Feb withholdings for MI? I've handled the problem and taxes are being withheld for SC starting in March. 

Thanks

[TomD8]

@Irahs --

Since you moved in 2021, you'll be filing two part-year resident tax returns.  Allocate your earnings as a MI resident to MI; allocate the remainder to SC.  MI will then refund any excess taxes withheld.  You will have to pay any taxes due to SC.

For 2022, you'll have to file a non-resident return for MI, allocating zero income to MI, in order to have the 2022 withholdings refunded.

[Acusimano]

I have a question where I currently live in Florida and moved here in June 2021.  My wife worked remotely and she was taxed in NJ but received in income in florida.  How do i record the tax properly if i moved.  I thnk I am due a refund because she was overtaxed while working in florida

[TomD8]

@Acusimano --

Prior to October 1, 2021, due to Covid NJ was "sourcing" income based on the employer's jurisdiction.   Starting on October 1, NJ resumed sourcing according to where the service or employment was performed - which was NJ's pre-Covid rule.  See "End of Temporary Suspension of Employer Withholding Rules for Teleworking Employees" in this reference:

https://www.state.nj.us/treasury/taxation/covid19-payroll.shtml

So the portion of your wife's remote income that she earned on or after October 1, 2021, would not be taxable by NJ.

To claim a refund of the excess withholding, she would have to file a non-resident NJ return, allocating to NJ only the income earned prior to October 1.

[Evaj6139]

I live in and work in  minnesota so there are taxes being held but there are taxes being withheld from NC in never live of been there 

[Critter-3]

@Evaj6139 

You need to discuss this with your employer and get this corrected.  

[Yykoonce]

I live in Texas and NC taxes have been deducted from my check and it's on my W-2, will I be able to get a refund for this? I've beed deducted St taxes for NC and Fed for Texas. Thank You

[DianeW777]

It depends. 

If the income was derived from North Carolina (NC) sources, even if you were a remote worker you will be required to pay taxes to NC on that portion of your income. An example could be a remote worker which prompted this action in several states during the pandemic.

• Filing Requirements for NC Nonresidents

Unfortunately, TX does not have an income tax so in your case there is no credit to assist you.

If this was in error and the income was not derived from a business or activity situated in NC  then it's possible you may be entitled to a refund of the tax paid to NC.  

@Yykoonce