As a Virginia resident, does income made from my Job in Washington D.C. get doubled taxed?

[dchan0316]

In 2019 my main job was in Washington, DC. I also had a part time job in Virginia where I didn't make much at all.

I am a Virginia resident and only commute to DC for work.

I went through the Virginia state return process and Turbotax says....

About the money you made in other states

Before we get too far into your return, there's something we wanted to point out.

Based on what we know from your federal return, in addition to making money in Virginia, you also made money in the District of Columbia.

This money gets taxes twice, by both Virginia and the other state.

But don't worry if you see double taxed income as you go through your Virginia return. Later on we'll help you get a credit that offets paying double taxes. 

I've read some answers on here that because D.C. has reciprocity with all other states, that I don't need to file a D.C. "State" tax return. Is that true?

I did pay taxes on my D.C. W-2 form, but it was computed out to an overall 4% tax rate, which was more in-line with a Virginia state tax than a Washington, DC one.

It says I can submit a "DC Nonresident Request for Refund" form D-40B and request the taxes paid returned, but I realize I do need to pay some state taxes on my income, regardless of where I made it.

Does Turbotax automatically compute what I owe/should get back based on the D.C. reciprocity, which is essentially a pass-through and calculates the income as if it were a Virginia W-2. Or do I need to file the "DC Nonresident Request for Refund" form D-40B and request ALL my taxes paid back?

I know that I am not required to pay taxes in both places, but I'm wondering if Turbotax calculates it so that any D.C. taxes paid you must file a D.C. return in order to get the correct tax return number.

Am I being subject to double taxation based on Turbotax's calculations, and require a full reimbursement of state taxes paid on my Washington, DC W-2 form?

When I try to do it as if I were getting double taxed, on my Virginia state return under form "Schedule OSC" it says DC is not a valid state for the credit.

So I can probably remove that from the Virginia return, but I'm still eligible for the refund on the D.C. side? This is so confusing.

[SteamTrain]

You need to file the DC form to get all your DC withholding back.

VA won't allow a tax credit for taxes paid to DC because they expect you to get all the DC withholding back.

You also need to file a form with the DC employer (ASAP ) to stop all DC withholding,

https://otr.cfo.dc.gov/sites/default/files/dc/sites/otr/publication/attachments/2018%20D-4A.pdf

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And then see if they can only have VA withholding done during the year with the proper VA withholding form

[dchan0316]

Thanks, I appreciate the quick, detailed response. It also means that I need to file a DC State return for 2018, which I did NOT do last year.

Is the correct way to go about that to go into my 2018 tax return and "Amend" it, by adding a DC state return? Or will it count as an "Amended" which may not be correct, because it's actually new, I never had an original.

[TomD8]

First, look at Box 15 of your W-2 to see if your employer withheld DC or VA taxes.

If they withheld DC taxes, and you never lived in DC, you should file DC Form D-40B to obtain a refund of those incorrectly withheld DC taxes.

Here's a link to that form: https://otr.cfo.dc.gov/node/1450551

You only need to file a tax return for VA.  Because of reciprocity, all your earnings from DC are taxable by your resident state of VA.  In TT, enter VA as your State of Residence and answer No to having had "other state income."  

There is no "other state credit" for reciprocal states.

If your employer is withholding DC taxes, file DC Form D-4A with them as soon as possible.  Here's a link to that form:  https://otr.cfo.dc.gov/sites/default/files/dc/sites/otr/publication/attachments/2018%20D-4A.pdf

[dchan0316]

Hmmmmm two completely opposite answers. Box 15 on my W2 does say Virginia. So your answer makes sense too.

I pulled this up on tax.virginia.gov:

"If you’re a Virginia resident, all of your income is subject to Virginia individual income tax, no matter where it was earned or what its source. If you received income from another state and were required to pay income taxes as a nonresident in that state, you may be eligible for a credit for the income taxes you paid to that state provided the income is also taxed by Virginia. If you earn income in a state that doesn’t have an income tax, you are not eligible for this credit on that income.

If you have income from the District of Columbia and you meet the criteria for exemption from DC income tax under reciprocity provisions, you can’t claim this credit {This is in regards to Schedule OSC, which I am not claiming}. If your employer withheld DC income tax from your wages, file the D-40B Nonresident Request for Refund to request a refund of the amount withheld."

-Reference (https://www.tax.virginia.gov/credit-for-taxes-paid-to-another-state)

That seemed to make sense too.

Turbotax did state in the progam that I was double taxed. You would think that since my W-2 had Virginia on it, and not DC, that Turbotax would be smart enough to know omit the statement about double taxation if it wasn't true.

[SteamTrain]

@dchan0316 

IT may be more of a matter of you confusing us/me

1) You said you are a VA resident, working in DC

2) in your Very First post you said "I did pay taxes on my D.C. W-2 form"

3) NOW you say you have VA in box 15......which does indicate that only VA taxes were withheld, not DC.

_________________________

IF in #2 you did not really mean that "DC" was in box 15 of your 2019 W-2 (which is what I thought you were saying) ,

.....but just meant that that taxes were computed on the actual DC tax return (because you erroneously started a DC tax return), 

...........Then you don't file anything for DC taxes at all for 2019.....AND no D40-B needed at all for 2019, since no DC taxes were withheld on your W-2 for the DC job.

_______________________

( the form I was referring to to get DC withholding back was the D40-B form you indicated in your original post...not filing a whole new nonresident DC tax return...so I was not clear either...But with VA in box 15 of the W-2..you don't need to submit either one to DC.)

Details details..

[dchan0316]

Thanks. When I said "I did pay taxes on my D.C. W-2 form," I meant that taxes were taken out on my W2 form from my job that is based in D.C. I didn't realize that the state they were paid to was Virginia.

So in my case, because VA is listed as the taxing state on that W2 form, then I was assessed the correct amount of state tax. D.C. owes me nothing, because they collected nothing.

Had the box on my W2 form said "DC" in box 15, then it would have been double taxation, and I would have needed to file a D.C. tax return along with a request to have all my D.C. taxes refunded.

So to sum it all up. I just need to submit a Virginia state tax return. The D.C. one is not needed.

Thanks for everyone's help. I hope this question helps others in the future, because it sure helped me.

[laurelhammond]

When filing form D-40B, "DC Nonresident Request for Refund" does anyone know if you can receive the refund electronically through filing withTurbotax? Turbotax shows the amount of my DC refund I am to receive, however it also said something about non being eligible to e-file the DC return since I am a nonresident.   Unsure whether to complete the e-file with Turbotax

[JotikaT2]

You will need to mail Form D-40B in to the address listed on the form instructions.

Form 40B

[Worldtrlver81]

Once DC sends the refund, what happens next?  How should this money be reported to Virginia on  the 760 form? Or is this money tax free?

Thanks,

David