Why do I have an error on my Virginia OSC form? State Code-1 is not a valid state for this credit doesn't make sense

[DanielV01]

What is the state?  There are some states with which VA has a reciprocal agreement that are not eligible for the credit, which means you need to use another procedure.

[gromitz]

Arizona

[DanielV01]

Virginia and Arizona have a hybrid reciprocal agreement called a reverse credit arrangement.  Virginia will not allow you to take a credit for Arizona taxes on your Virginia return.  Rather, you must claim the tax that Virginia assesses on the Arizona return.  Prepare the Virginia return, removing this credit, and then go back to the Arizona return and claim the credit on the Arizona tax return.  (Same basic screen: credit for taxes paid to another state.)

[zburstein]

I just had the same error on the Virginia form, but when trying to submit credit for a CA tax payment. 

Do I need to do the same thing?  If so, and more guidance on exactly how?

[JotikaT2]

Yes.

The credit will need to be claimed on the nonresident California return instead of on the resident Virginia return in this situation.

Go back into your Virginia state interview section.

1. Select Edit under the Credits section
2. The next page should be Credit for Tax Paid to Other States Summary.  Go ahead and select Delete to the right of the CA copy.
3. Then go back into the California state summary.  
4. Select Edit under the Credits section in California.
5. Select Edit or Add to report the amount of income and taxes paid in Virginia for the California sale of property taxed in Virginia.

@zburstein