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sojatt16
New Member

W-2 includes 2 states; one where state income tax was deducted and other state where no state income tax was deducted. Do I need to file state tax returns in both states?

 
8 Replies
LisaBr
New Member

W-2 includes 2 states; one where state income tax was deducted and other state where no state income tax was deducted. Do I need to file state tax returns in both states?

You may have to file in both states.  You will file in your state of residence unless your state does not have income tax.  There are different reasons why companies may have two states on your W-2.  If taxes were withheld in your non-resident state you will want to file for a refund.

If the state that you did not have withholding is your resident state, and it is a state that has an income tax, then you need to indicate that you paid taxes in another state and how much.  Your state will give you credit for paying taxes in another state.

The following information is helpful in filing a non-resident tax return. 

Nonresident income is income from another state you didn't live in during the year, and includes any of the following:

  • Wages or income from a state you're not a resident of, 
  • Rental income, gambling winnings, or sold a home for a profit in a state you're not a resident of,
  • S Corporation business shareholder income from a business in another state,
  • You are a partner in an out-of-state partnership,
  • You are a beneficiary of a trust or estate that has an interest in another state, or
  • Your employer withheld state tax for the wrong state. Under most circumstances, you’ll have to file a nonresident return to recover the incorrectly-withheld taxes.
    Notify your employer right away so it doesn't happen again!
Filing a Nonresident State Tax Return:

Make sure you prepare all nonresident returns before your resident state return, to ensure proper calculations. Also, make sure you select the state long form(s) even if TurboTax selects the short form(s) for you.

Tip: If you are preparing a nonresident state return solely to recover tax that was withheld in error, enter 0 on the screen that asks for the income earned in that state. This will eliminate your tax liability for that state, resulting in a full refund.

If you live and work in a Reciprocal State, you may only need to complete Step 3.

  1. Prepare your federal tax return first, then as you begin each state return;
    • Your federal return data transfers into your state return, and
    • TurboTax learns that you need to file each state return.
  1. Prepare a return for the nonresident state(s). Only report the income and withholdings from that state.
  2. Prepare a return for your resident state. You will report all of your income, including income from any nonresident (or part-year) states.
  3. Take a credit for taxes paid to the nonresident state on your resident state return so that you won't get double-taxed on the same income.

TurboTax calculates the credit for you, but you must select the state's long form to get the option, even if TurboTax chooses the short form for you.

Example: if you live in Kansas but work in neighboring Missouri, you would file a nonresident Missouri return in addition to your usual (resident) Kansas return. You'd then take a credit for any taxes you paid to Missouri on your Kansas return

http://turbotax.intuit.com/support/go/GEN12109'>http://turbotax.intuit.com/support/go/GEN12109

happy_tax_jian
Level 1

W-2 includes 2 states; one where state income tax was deducted and other state where no state income tax was deducted. Do I need to file state tax returns in both states?

I have 2 state incomes in one W2 at box 16, same company: 1st one withhold CA state tax , 2nd one without tax hold for MA.  I am resident of MA and the 2nd one is just portion of 1st income due to some reason.

 

I am filing nonresident of CA, resident of MA, Turbotax only give my options of either report 1st + 2nd income or use only 2nd one for calculating MA resident tax. What shall I do?  thanks

FangxiaL
Expert Alumni

W-2 includes 2 states; one where state income tax was deducted and other state where no state income tax was deducted. Do I need to file state tax returns in both states?

It depends. Are there any reciprocal agreements between the two states? 

Mike9241
Level 15

W-2 includes 2 states; one where state income tax was deducted and other state where no state income tax was deducted. Do I need to file state tax returns in both states?

you must do the nonresident state first.    Then MA taxes all your wages but you get a credit for taxes paid to CA.

there is no reciprocal agreement between the two states.

 

happy_tax_jian
Level 1

W-2 includes 2 states; one where state income tax was deducted and other state where no state income tax was deducted. Do I need to file state tax returns in both states?

The problem is the amount:

Box 1 total income = box16 CA income, and this is my total income amount.

 

After I did federal and non-resident of CA filling, turbox (instead of using W2 box1)  automatically add box16 CA and box 16  MA , which is over my real income, and the box 16 MA amount is in fact counted twice in total income. 

 

is this W2 mistake or a specific situation Turbox not covered?

thanks

RaifH
Expert Alumni

W-2 includes 2 states; one where state income tax was deducted and other state where no state income tax was deducted. Do I need to file state tax returns in both states?

You may change the Massachusetts amount to 0. It will still calculate your MA income based on your income earned everywhere, so it should then calculate correctly. In fact, if no MA tax was withheld, you may delete the MA line entirely from your W-2. 

 

The other question is why is California income tax being withheld from your pay? Even if your employer was based in California, if you are telecommuting from MA, you should not be paying California taxes. See Scenario 2 under Income sourcing for nonresidents temporarily relocated to California, and filing and paying California income taxes during COVID-19 for a similar situation. 

 

You only pay California taxes if the income is sourced in that state, meaning you were physically present in California. If not, you should not allocate any of your wages to California and should get an entire refund of the amount of California taxes withheld. Of course, you would owe Massachusetts taxes on the same wages, but Massachusetts generally taxes at a lower rate than California so you should come out ahead. 

 

If you are telecommuting from MA, you will want to notify your employer to start withholding the proper state's taxes. Once they get it right, you should not have to file a CA state return at all. 

 

@happy_tax_jian

happy_tax_jian
Level 1

W-2 includes 2 states; one where state income tax was deducted and other state where no state income tax was deducted. Do I need to file state tax returns in both states?

Thanks very much for your help.

Here is my situation:

I was physically working in California when I started this job, and in middle of COV I went to MA and worked from there but without changing my CA address etc. since I was expecting to go back to CA when COV ends. 
At last year, I was laid off and HR requested my updated address at MA. And my last 2 paychecks happened after changing address.  This might be the reason I got strange W2.  I called them on the situation, and they are going to review it.

 

Yes, you are right. My current employer is still in CA and is aware of my telecommuting from MA, so only MA income and tax withhold are shown in W2.  

 

Thanks very much!

  

DianeW777
Expert Alumni

W-2 includes 2 states; one where state income tax was deducted and other state where no state income tax was deducted. Do I need to file state tax returns in both states?

If you lived in MA the entire year, all income should be taxed to MA and no CA return is required.  CA does not tax non-resident remote W2 workers.  Your earnings remain fully taxable by MA until you establish CA residency.  So you should withhold for MA prior to your move, and CA after.

 

If this is the case, and I understand what you are saying, then you should show zero wages for CA and all wages for MA with the MA withholding on your W2.

@happy_tax_jian

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