I live in DC but work in suburban Virginia, which is common in the DMV - and I've never had to file in two states. DC taxes are withheld from my paycheck, not VA taxes.

[klynnab]

So I just read reciprocal agreement information; does that mean I should not say I live in one state and work in another? Or how do I handle when it is telling me I have to file two state returns?

[DS30 · Accepted solution]

Yes you are correct. You will only need to file a DC resident state income tax return to report all income (including your VA-source wages). You will not have to file a VA nonresident state income tax return.

DC and VA have what is called a state reciprocal agreement. This allows nonresidents to not have state withholding taxes taken out for wages earned in the state.

Since you will not have an VA state income tax filing, just check that you selected "no" to " Did you make money in any other states?" under the Personal Information section in TurboTax (see screenshots)

You can get rid of a state without clearing your federal return by just deleting the state from your list of states under the "State Taxes" tab.

[amc12341]

Hello, I live in DC but work in VA. My VA pay stubs still says I pay VA state income tax, not DC. My employer is saying they are liable to withhold the state that you work in. Is this correct?

[FangxiaL]

Not quite correct, your employer is liable to withhold tax for DC, not VA.

DC and VA do have a reciprocal agreement. If you live in DC, VA does not withhold state tax for VA. You only pay income tax to DC. 

If your 2021 W-2 has VA state tax withholdings, you need to file a VA nonresident return and claim the refund. 

You need to fill out this exemption form VA-4 and submit it to your employer.

@amc12341

[amc12341]

So I will need to file for DC as a resident, and pay the state taxes that I originally paid to VA?

Then when I file for VA as a nonresident, I should get that money that I have to pay to DC back as a refund?

[ErnieS0]

Yes. Because your employer withheld Virginia income tax by mistake, you will get back your entire withholding (W-2 Box 17).

You will have to make a separate payment to DC. Withholding to VA can't be transferred to DC. Money has to come to you and then be sent to DC.

Your VA refund will probably be less than the DC tax because the DC tax rate is higher.

It's possible you can get your VA refund before the tax deadline (April 18 this year) and use that to pay DC.

[bootdinker]

I had to do that last year, and it was awful. I paid $7K to Virginia and DC wanted $9K, so I had to pay $9K out of pocket and I waited five months for a refund from Virginia. Have your company change your W-4 form to DC for next year or you'll have to do this all over again.

[amc12341]

Thanks for your response, yeah I had my company change my W-4 for next year but unfortunately will still have to deal with it since the first 2 months of this year I was still paying taxes to Virginia.