Working from home state 75% of time and 25% in RI - not sure my W-2 is correct

[kcieplik]

Prior to this year all of my work was done within my home state.

In July of 2023  things changed. I work from home 3 out of 4 weeks (MA - 75%). The fourth week I now working in our RI office instead of Boston (RI - 25%).  

I filled out a form with my employer on July 17th so they would start correctly handling the tax-related information correctly. The first half of the year, everything was earned in Massachusetts.  Second half - 25% was in RI. 

My W-2 does have two separate sections so I see state tax info for both MA and RI. That is good.

Let's pretend the amount for my overall earnings for the Federal Tax Return is $1000. This my full earnings for the year in both states combined. I see that in Box 1 on Copy B to use for the Federal tax return.  

For the MA State info, it's showing this same full $1000 amount as the MA State wages in Box 16 and then the MA taxes taken out in Box 17.

For the RI State state wages, it's showing a lesser amount, about 15% of this $1000 total, in the state wages box 16. (for this example $150). This makes sense to me since it was only half of the year that I was working in RI 25% of the time. So it would be prorated down.

It seems to me that  having the full amount I earned in boths states in the MA State wages box is wrong and is overstating my income in MA. This then makes it appear I underpaid MA taxes and now owe the state money. Shouldn't the state wages for MA be the remaining 85% ($850) so that the MA and RI State Wages sum to the full $1000?  

Thanks everyone.

[TomD8]

Your home state of MA can tax ALL your income, including the portion you earned in RI.

Your non-resident state of RI can tax only the income you earned by physically working in RI.

You must file a tax return in both states.

You'll be able to claim a credit on your MA return for the taxes paid to RI, so you won't be double-taxed.

In TurboTax, be sure to complete the non-resident RI return before you do your MA return, so that the program can calculate and apply your credit.

[kcieplik]

Thank you so much Tom. I appreciate it. I did the MA State tax return first and then the RI one, so that may not have helped.

In Turbotax, when I look at the 'Income Taxed by Rhode Island' section, they appear to be partially wrong, maybe because of this timing.

• The '5% income on  which you paid tax' value is correct & matches what I have on my W-2 for RI State Wages (box 16).
• The 'Income Tax paid on this Income' was a bit lower so I fixed it to match what was in box 17 (state income tax ) for RI, which then resulted in hitting the max credit of $1000. Please let me know if you think I did anything wrong here.

Unfortunately after all of this, I owe money to MA for state taxes which is not covered by the refund I get from RI. I claim zero exemptions so they are already withholding the most for taxes (versus claiming exemptions).  

In case you know:

• Any suggestions/thoughts on why I would still owe money if they were taking the appropriate withholdings along the way, with no exemptions, and I am getting a federal refund?
• Is there any way the refund from RI could automatically be applied to the $ owed MA to minimize what I need to pay out of pocket?

Thanks again. I really appreciate it. I knew this would be a learning year, doing this for the first time around.

[TomD8]

 "I did the MA State tax return first and then the RI one, so that may not have helped."

>Doing your state returns in the incorrect order will likely result in both returns being incorrect.

>The "other state credit" amount is based on the calculated tax due to the non-resident state, which may (and usually does) differ from the amount withheld as shown on the W-2.  Also, the "other state credit" may not exceed the tax due to the home state on the taxed amount.  There is no "max credit of $1,000".

>No, a refund from one state may NOT be automatically applied to the tax due to another state.

[kcieplik]

Hi again,

Do you know what options I have if I did the Mass State tax first and then RI? I'm afraid if I delete them and start again, I will be charged again for the 'second' state, which I have already paid for.

It seems very odd that Turbotax did not call this out for me as guidance when I was adding the state level information. I would think that once I had both states in there, everything should be correct. 

Regarding the max credit, I did put in $1000.39 when updating the withholding amount for RI when initially adding RI as a State and recall getting a warning message saying that there was a maximum of $1000. Once RI state was added and saved/completed, I no longer get the option to update that witholding amount field so i can't recreate the error.

Thanks again.

[TomD8]

Don't change the withholding amounts on your W-2.  Those amounts have already been deposited with the state and reported to both your state and the IRS.

These TT instructions do emphasize the importance of completing the non-resident state return first:

How do I file a nonresident state return? (intuit.com)

Sorry, I don't know how to avoid TurboTax fees.  Maybe some other user will be able to help with that.

[kcieplik]

I did just talk on the phone from someone in Turbotax. In case it helps:

• when I answered the questions under the Personal info tab (using desktop Turbo Deluxe for windows),  those questions/ansers made it clear I was a MA resident and that RI was the non-resident state.
• Since Deluxe version only comes with one state, the application did indicate that it seemed I needed to file a RI State tax form but I had to do an additional transaction with Intuit to pay for this separately, as I used MA for my one state included with the Deluxe product.
• Once purchased/added, Turbotax did correctly designate MA as the Resident state and RI as the non-Resident state and has the appropriate questions & info for each state.
• All of the above is what ensures that the taxes are calculated correctly. In speaking with the Turbotax person on the phone, she indicated that it didn't matter the order in which I literally added each state to my return in Turbotax. It was ensuring I provided the correct information so Turbotax clearly knew which state was Resident versus non-Resident.

Thanks again for trying to help me out. I appreciate it and thought I'd share what I learned as well.