Two States - How 2 Not Pay Tax on Full Income Twice

[sgorm]

I lived in one state but had a summer job in another state. I am a student, so I had very little income except during the 2 months I worked the summer job out of state.  I paid state income taxes and have a small refund coming.

Problem:  My home state shows I owe a huge tax bill plus penalty because I did not pay tax in my home state for the work in the other state.  How do I fix that?

[DianeW777]

You will use a credit for taxes paid to another state. Credit for taxes paid to another state is allowed by a resident state when the same income is being taxed to another state.  Your resident state does not want you to pay tax twice on the same income. The credit that is allowed will be the lesser of:

1. the tax liability actually charged by the nonresident state, OR
2. the tax liability that would have been charged by your resident state

When you are going through your resident state return look for this credit.  If you had done the nonresident state first then TurboTax would know the amounts.  Be sure to write down tax (not the withholding) charged in the nonresident state, then be prepared to enter that figure on your resident state return.

[sgorm]

It's clearly not working right.  It says I can get a $17 credit in my state for $2311 of tax paid in the other state.  It's saying I owe $2381 more taxes to my state.