VA resident with erroneously withheld DC wages

[YR]

I am a VA resident and work in DC on a part-time basis. My employer erroneously withheld my wages for DC income taxes for 2018. I have left the company in December. 

Is there a way to claim a refund for the DC withheld wages? Does Turbo Tax have a function to do that? Thanks. 

[Rachel_W · Accepted solution]

Yes, you can file a DC Nonresident return to get the DC state taxes withheld as a refund.  You will be able to prepare both your Virginia Resident and DC Nonresident returns in TurboTax.

Because VA and DC have a  reciprocity agreement, you pay income tax only to the State you *live* in, which in your case is Virginia.

In TurboTax, follow these instructions to indicate that you are a resident of VA that worked in DC:

• Log into your Turbo Tax Online account.
• Select "Take me to my return"
• Click "My Info" located on the left side of your screen
• Scroll down and click "Edit" next to "Other State"
• Answer "Yes" to "Did you Make Money in any Other States?"
• Choose "DC" from the dropdown menu that pops up

When you have completed your Federal return, click "State" from the left side of your screen and TurboTax will walk you through the preparation of both State Returns.  Be sure to do you DC return first, and then your VA.

[tkeirnan]

My employer had me withholding DC taxes even though I am a resident of VA. As TurboTax had it, I ended up doing VA only and I have now added DC. Why is it important to do DC first and then VA?

[TomD8]

@tkeirnan --

File DC Form D-40B to obtain a refund of the incorrectly withheld DC taxes.  If you did not reside in DC in 2021, it is not necessary for you to file a DC tax return.  You can download Form D-40B here:

https://otr.cfo.dc.gov/node/1576061

If you haven't done so already, advise your employer that you are a resident of VA and ask them to begin withholding taxes for VA and cease withholding for DC.

[Worldtrlver81]

The same thing happened to me as a VA resident who works in DC and the employer withheld taxes for DC.  I have followed all the steps and requested a refund.  How do I report this refund to VA to pay taxes on the income mistakenly withheld in DC.  Would I need to complete a Virginia Estimated Income Tax Payment Voucher in this case?

Thank you,

David Williams

[IsabellaG]

Yes, you will have to pay VA yourself for the tax that should have been withheld by your employer. You wouldn't pay with an Estimated Tax Voucher, because that's for the upcoming year (2015). Instead, you'll pay with Form 760- Tax Due Payment Coupon, which can be printed out with your VA return, or you can choose Direct Debit in TurboTax when you file.