My w2 has income tax for 2 states in 2020 but I didn't work or lived in my previous state for the whole year. Do i have to file a separate state?

[ErnieS0]

Yes. If state tax was taken out by mistake from a state that you did not live or work in, the only way to get it back is to file a nonresident income tax return. Change your wage amount to $0 and your refund will be equal to the amount withheld in Box 17 of your W-2.

[car-fl]

ErnieS0, I have a similar situation. W2 reports earnings in NY, but I did not work any days in that state in 2020. The software has choices for allocating wages and I chose percentage, entering 0%. During review the software indicates that having $0 allocated when W2 erroneously shows earnings for the state will cause efile to be rejected. (This shows up on non-residential other allocations.) What is the best remedy for this if I prefer not to mail a physical return?

[DanielV01]

@car-fl

If you believe $0 to be correct to New York, the only remedy is to mail in the return.  Your only other option would be to accept some percentage (even a very small one, like one day in the year) to New York to be able to e-file the New York return.  And New York can (and very well may) request substantiation for that claim.

Also keep in mind that if you did telecommute on behalf of the New York company, New York does consider your income taxable there, even if you never stepped foot in New York state last year.

[car-fl]

@ErnieS0thanks for the reply. I did not do work for a company in NY last year, so will claim $0 and mail in the return. Appreciate your insight!

[PLWarak]

We have the same situation only with the state being Colorado and for 2021. If we declare $0 income for Colorado, do we add the income that was allotted to Colorado to the original state of employment?

[DMarkM1]

No, not normally.   If your W2 has two state lines (boxes 15-17), and you did not live or work in one of those states, you should only need to adjust box 16 of the state you did not live/work in.  In most cases, the box 16 for the other state line should equal the box 1 amount on your W2.  

Having said that, if the difference between box 16 of the working state and box 1, is equal to the amount from box 16 for the non-working state, then, yes, add it to the working state box 16 to get it to the box 1 amount.  If you have to make this adjustment you will likely have underpaid your tax to the working state and may owe taxes there.   

Be advised you would also need to indicate in the "My Info" section that you earned money in another state and select the state that mistakenly taxed you from the dropdown list.  This will generate the non-resident return for that state.

Finally, be sure to have your employer stop withholding for the non-working state.