On VA resident tax return, I claim credit for CA taxes on nonresident wages, from CA return. How to fix "Sch OSC(1): State Code-1 is not a valid state for this credit"?

[parnoldcville]

I did the nonresident CA state return in TurboTax first (for wages earned during a summer internship).  Then I did the (resident) VA return, entering the CA income and CA tax from the CA return as "Credit for Tax Paid to Another State."  Everything went fine until the state review, where I get the above error.

[DanielV01]

@parnoldcville Please see my answer below.

[DanielV01 · Accepted solution]

For California and Virginia, the arrangement is the opposite.  California and Virginia have a unique relationship as "reverse credit" states, a hybrid reciprocal agreement in which Virginia taxes all of your California income first, and then you claim a credit on the California non-resident return for the tax you pay to Virginia.  This website from the Virginia DOR explains this arrangement:  Virginia Reverse Credit

In TurboTax, prepare the Virginia return first, and then the California return.  This way you can know how much Virginia taxes the California income in order to claim the credit on the California return.

[parnoldcville]

That works -- thanks!  I deleted the credit claim from my VA tax return and went back and found out that Turbotax by itself put a credit claim in the CA return.  [ I had looked up beforehand the recommended order to do the returns, but I see from your explanation that this was one of those exceptions that proves the rule. 🙂 ]  Thanks again!

[DanielV01]

You're welcome.  Not a lot of states have this provision, so I'm glad I was able to help.

[rosabear]

Hello! I am in the same situation as I am a Virginia resident who worked an internship in California. When I first went through Turbo Tax, I may have entered my California W-2 first before my Virginia W-2 (I work a part time job in Virginia during the school year). I said that I was a nonresident for California. I received the same error that parnold received upon filing. I then deleted my California W-2 from the federal and state sections and re-entered it. I am still getting the same error, and a Turbo Tax rep sent me to this Q&A session. I understand that California and Virginia have a unique tax relationship but I am not sure how to fix this error in Turbo Tax. I'd greatly appreciate any help. Thank you!!!