Unemployment while living in a different state, error with tax witholding

[jkang88]

Hi, I was a student in 2020, and like many others moved back home (CA) but filed for unemployment benefits in Massachusetts, where I was laid off.

I have registered the entirety of my unemployment benefits to my resident state CA. However, when filing taxes, turbotax says:

"Your unemployment withholding of 1190 should not be greater than your MA unemployment income of 0."

1190 is the state tax that was witheld. Should I continue to file my taxes with all my unemployment in CA and just have this error where I have 0 unemployment income in MA yet 1190 withheld? Thank you all!

[ThomasM125]

Your unemployment income is sourced in Massachusetts, so it should be reported as taxable income on that return. You should file a non-resident tax return in Massachusetts and your income will be taxable there. Look for a credit for taxes paid to another state on your California return and any tax you paid to Massachusetts will be deducted from your California tax so you don't get taxed on the same income in both states.

[Edited 4/16/21 at 5:12 PST]

@jkang88

[jkang88]

Hi Thomas! Thanks for responding!

This is basically a question about income allocation. When I fill out the unemployment compensation section, I should allocate all my income to be under MA? That is, non-MA unemployment compensation = 0? 

[jkang88]

Hmmm It seems that when I do this, I get taxed for my unemployment compensation, without the 10200 deduction! How do I claim this deduction? 

[DawnC]

The $10,200 exclusion applies to the federal return only - You will see it on Schedule 1 (Lines 7 and 😎 of Form 1040.   Each state handles unemployment income differently.   You enter the UE on the federal return and TurboTax transfers it to your state return(s).   If all of your UE compensation came from the state of MA, then it should all be allocated to the state of MA.   TurboTax is up to date for the state of MA.  MA does not have an unemployment exclusion, so it is all taxable on your that state return.   If you were only in MA as a student, you were a non-resident there.  In this case, you would list CA as your resident state and leaving the ''Other States Lived In'' section blank.     

Once you've determined that you need to file a nonresident state return, the first thing you want to do is make sure you've filled out the Personal Info section correctly.  You need to mark the Other State Income box - which is not the same as the Other State Lived In box.   

Nonresidents are subject to Massachusetts income tax on unemployment compensation that is related to previous employment in Massachusetts.

Individuals are required to file if Massachusetts-source income exceeds the individual’s apportioned personal exemption.  Nonresidents must multiply the personal exemption amount ($4,400 Single or MFS, $6,800 HOH, or $8,800 MFJ) by a ratio of Massachusetts income to total income.   TurboTax does all of the math, all you need to do is enter the UE income on the federal return and tell TurboTax that it is MA income.