NC State Taxes - Other State Credit Summary / NC resident but worked in VA and had some VA tax withheld

[whyme940]

Moved from VA to NC end of 2021, NC resident for all of 2022, worked in VA all of 2022. Employer withheld VA tax 1/2022 - 3/2022 then changed to NC tax withholding. 

1 - I completed the VA (nonresident) tax section first; selected option "Employer mistakenly withheld VA tax from income" and noted NC as state of residence.  Filing result is that VA refunded all tax withheld.

2 - NC tax section; I start out owing NC taxes....  Section "Other State/Foreign Country Tax Credit" - do I need to complete this section since VA is fully refunding the withheld taxes?  I did it but am concerned that I shouldn't.  Questions I had while working this:   

   A - what amount do I use  for "Income Earned in VA and Subject to NC tax?   ALL income was earned in VA, so I guess I should be using 1040 line 15 TAXABLE INCOME as opposed to my line 11 AGI - Correct??

    B - I then enter the tax amt paid to VA.  I  get the message that NC is giving me a tax credit for the amt of tax I paid to VA.  My state box goes from Red/I owe them to Green/They owe me, and there is no mention of the VA refund I am getting. 

************Seems to me I am double dipping!!  HELP!!!************** 

[AnnetteB6]

Since you filled out the non-resident VA return first, there should be some numbers populated in the Other State Tax Credit section automatically.  Take a closer look at those and be sure you do not need to change anything.

As for the income earned in VA subject to NC tax, that would typically be box 1 of your W-2.  If you had other income reported on your tax return such as interest or dividends, that would be considered to be earned in NC, your resident state.

Also, you need to look at the non-resident VA return to see if you are paying any tax at all to VA.  If all of your withholdings are being refunded, that means that your taxes paid to VA should be zero.  The amount that was previously withheld from your earnings is not considered to be taxes paid to the state in this context.  So, when you make that correction, the NC credit for taxes paid to another state should disappear, along with the double-dipping.