I live in Washington state and work both from home and in the office for a company in Idaho. Does Idaho income tax only apply to the wages I earned while physically working in Idaho?

[lee_tm2020]

I live in Washington state and work full-time for a company located in Idaho. Since 2017, I've been regularly splitting my time between remote and in-office work - 60% of work days in my Washington home office, and 40% in the Idaho office. My W2s every year have reported all of my income as Idaho income, so I've been filing non-resident returns every year and paying Idaho income taxes on my full salary. 

I recently read on Idaho's state tax commission website that nonresidents are only taxed on Idaho source income, which is defined as income from activities performed in Idaho. However, my employer is disputing this and claims that because the business is located in Idaho, all of my income is Idaho income. 

Do I need to pay Idaho income tax on wages earned while working remotely in Washington? And if not, can I get my money back for the years I overpaid Idaho taxes? 

Thank you!

[Hal_Al]

You need to pose that question directly to  the Idaho State Tax Commission.

Under the general rule for states, yes you should get a refund, for the tax on wages while working in your home state. 

[TomD8]

Idaho taxes non-residents only on Idaho-source income.  

This document from the Idaho State Tax Commission gives its definition of Idaho-source income:

https://tax.idaho.gov/aguideidsourceincome.pdf

Clearly the Idaho Tax Commission does not consider work performed in Washington State to be Idaho-source income.

Note that the document states that you or your employer can calculate the Idaho compensation percentage.

With regard to previous years,  you must file an amended Idaho return within three years from the due date of the original tax year return, including valid filing extensions.

[lee_tm2020]

Thank you so much for the reply! To file an amended Idaho return, will I need to get updated W2s from my employer? Or can I just calculate the Idaho compensation percentages myself and use that? 

[TomD8]

It's too late for your employer to issue corrected W-2's.  The taxes withheld have already been deposited with the State of Idaho.  You have to do the calculations yourself.

Remember that amended returns must be printed and mailed.  They can't be e-filed.  You must do a separate amended return for each year you want to amend.  If you amend more than one year, mail each amended return separately.  Be sure to include an explanation as to why you're amending.  Don't amend your 2019 Idaho return until your original return has been fully processed and you've received your refund (if one was due).