Telecommuting W-2 State taxes

[Woky]

I work from home and moved from MA to RI in June. My employer is in MA. My state taxes on the W-2’s total more than my Federal taxes.  The W-2’s show MA pay & state tax through November and RI pay July - December, only taxing December.  So there is duplication of wages. The Turbo Tax state forms are picking up the combination of the two state taxes, grossly overstating my total income.  How do I correct this in Turbo Tax? I called last week, but the person couldn’t help me. 

[ErnieS0]

File part-year Massachusetts and Rhode Island income tax returns. Each state will allow you to adjust the income you are reporting.

Enter the correct amount of income you earned in each state on the state return for that state.

Massachusetts works backwards. On the part-year MA form, subtract non-Massachusetts income, i.e. income earned in Rhode Island. 

You’ll find the MA adjustment on the screen “Non-Massachusetts Portion of Income.

For Rhode Island, adjust your wages on the screen “Rhode Island Wages and Salaries.”

[Woky]

But the problem  is that on one page on the MA form it is totaling the two states entries and this figure cannot be changed.  Why would any form show this total anywhere when it is duplication of pay? 

[Woky]

Also, my employer is in MA, so isn’t all of my income from MA sources? 

[ErnieS0 · Accepted solution]

Your state tax is based on where you live and work, not where your employer is located. A few states tax remote workers, but Massachusetts is not one of them.

“Beginning September 15, 2021, employees working remotely outside of Massachusetts should have wages reported and taxes withheld to the state where they are physically performing services.”

See Supreme Court and State Remote Worker Tax

if you moved to Rhode Island, you are only taxed by Massachusetts for the time you lived in MA. That’s why your employer withheld RI tax. Rhode Island began taxing you when you moved there.

Massachusetts starts with federal income which includes Rhode Island income. That’s why you must subtract your non-Massachusetts income in the Massachusetts section of TurboTax.

[Woky]

Thank you Ernie,

So my W-2 is incorrect, which I told my employer 2 weeks ago.  The W-2 shows income in MA until the end of November.  I moved on June 22nd.  The W-2 needs to

be corrected to show income in MA only until June 21st.  The IRS will look at the W-2, not what information I input.  

Please confirm this is correct, that until the W-2 is corrected, I cannot file my taxes.  

Thank you 

[ErnieS0]

Yes. You W-2 is incorrect, and your employer should fix it. Many employers will not issue a corrected W-2 because it involves taking back withholding from the state.

If your employer is willing to issue a correct W-2, wait until you receive it before filing federal and state taxes.

If you employer is not willing to fix your W-2, you can divide your income. You may receive a notice from either MA or RI. You’d then have to write back and send proof that you did things correctly, such as including copies of your pay stubs.

You can be proactive and file MA and RI by mail and include a copy of the other state return in each filing to show MA and RI that you reported all your income — just to the other state — plus a note explaining what happened.

There’s no guarantee MA or RI would read it, in which case you’d have to do the whole thing again if you received an audit notice, which is why many people choose to e-file since there’s a chance you won’t get any letters.

[Woky]

Thank you Ernie,

My W-2’s match the pay stubs.  I never check pay stubs because I have direct deposit and as long as the deposit is correct, I don’t check. I would think I’d then have to prove my change in residency to the states and IRS.  I’m no longer with that employer, so not sure what will happen here.

I appreciate your help.