Hello Forum members,
I am faced with the following situation with respect to state taxes in MA:
I received two W-2's in 2017 for amounts $X and $Y. The $Y is my wife's W-2 that was paid to her in 2017 while we were living in Massachussets. However, she was not working at that time. The W-2 was from a company that went bankrupt in 2009. My wife worked for that company until 2009 and we were full-year residents of Texas at that time. Her company's bankruptcy proceedings were settled in 2017 and thus her backpay was mailed in 2017 to us. We moved to Massachussets in 2011.
I reported both W-2's on the Federal and State tax returns. However, I did not include $Y in my taxable earnings for MA but only reported $400 because Box 2 or 4 on the W-2 stated that I should only report about $400 of it as taxable MA earnings.
The State of MA has now sent me a Intent of Assessment Letter stating that I under-reported my wife's W-2 (although I included the W-2), and assessed me taxes and fines on the $Y. When I spoke to them briefly, they stated that I owe them the taxes without giving any good reason.
I contend that I do not owe any taxes on my wife's W-2 because
a) The W-2 asked me to report only $400 to MA,
b) The payment is just a highly delayed payment when I and my wife were residents of Texas, living in Texas, and had no connection to MA. We only moved to MA much later.
Please let me know what your opinion is? Should I fight this with the state or suck it up and pay up?
Thank You,
-vganti1965
I agree. This is not too dissimilar from if you were living in MA and traveled to TX for 6 months for a temporary assignment. Money earned in TX is still MA taxable income if you are living (domiciled) in MA when it is paid.
You might explain the situation and ask for a waiver (abatement) of the penalty. But I think you owe the tax.
did you buy audit support from TT for your 2017 return?
The Audit Defense service is provided by TaxResources, Inc., also called TaxAudit.com, in partnership with TurboTax. If you paid for Audit Defense and you received an IRS notice, call TaxResources, Inc. at 877-829-9695, or report your IRS notice on their web site at http://intuit.taxaudit.com/. Do not contact the IRS until you have spoken to TaxResources. They may contact the IRS on your behalf..
if not see this webpage.
https://support.turbotax.intuit.com/irs-notice/audit-support/
it's probably the state's position that regardless of the year and state where earned you received it while you were residents of MA. State's generally taxed its residents on all income received unless exempt by law.
perhaps you can contact the W-2 issuer to find out their reason for saying only $400 is MA income and provide you with the law cite that justifies this position. , I'm sort of surprised by the $400. I would have guessed $0 because it was all earned in TX or the full amount because it was paid will living in MA.
Chapter 62, Section 2, of Massachusetts law states "Massachusetts gross income shall mean the federal gross income, modified as required by Section 6F, with the following further modifications..."
This is a link to the actual statute, if you'd like to read the details:
https://malegislature.gov/laws/generallaws/parti/titleix/chapter62/section2
Bottom line: if you were a resident of MA when you received the income, and the income was included on your federal tax return for that year, MA regards it as fully taxable by them. (I might note that this is no different than any other state with an income tax.)
Had the income also been subject to taxation by another state, MA would have allowed you to take a credit on its return for the tax you paid to the other state. In your case, this is irrelevant because TX has no income tax.
Bottom line: Of course you have the right to protest, but I think you're going to have to pay the MA tax.
I agree. This is not too dissimilar from if you were living in MA and traveled to TX for 6 months for a temporary assignment. Money earned in TX is still MA taxable income if you are living (domiciled) in MA when it is paid.
You might explain the situation and ask for a waiver (abatement) of the penalty. But I think you owe the tax.
TomD8,
Thank you for your reply. I think I will file for at least an abatement of the interest rate, as I followed the instructions in the W-2. Deeply appreciate your help.
Opus 17,
The consensus is that I should pay. Your suggestion for filing for the abatement is helpful. So far I have not been assessed a penalty but there is a $100 interest charge. I hope I can get that eliminated. Thank you for your reply. Highly appreciate the service of this community.