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wwinn2736
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Unable to efile our state taxes because withholding on one state is greater than money earned in that state.

We live in Iowa but my wife works in Nebraska. We have to file state taxes in both states and receive a credit for taxes paid in Nebraska toward Iowa taxes. He employer withholds Iowa taxes from her income but none of her income comes from an Iowa source, so the W-2 shows her Iowa income as zero. When we try to e-file in either state, it is denied because of this zero income in our home state on the W-2. I've had this issue for several years now and have always ended up having to file paper returns for both states.

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Unable to efile our state taxes because withholding on one state is greater than money earned in that state.

.....what might be the easiest option..?

 

See if she can get the NE employer to stop withholding IA taxes.

Then increase your own IA withholding a bit (At what I presume is an IA employer)

 

Why are they doing the IA withholding at all?...perhaps because the IA marginal tax rate is higher than NE's for a couple's combined income above ~49,000, and some extra IA withholding would help out with that.

 

..or...is she telecommuting part-time from home in IA?

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____________*Answers are correct to the best of my knowledge when posted, but should not be considered to be legal or official tax advice.*
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