California is my state of residence, employment and such. Despite W2 address, W4 Exemption filings being correct all along, employer withheld my state taxes for both 2021 and 2022 and forwarded both withholding to Missouri. They coded that as MO on the W2, which I didn't notice when filing last year. They've confirmed the money went to MO, it is not just a typo for the Code. When I filed for 2021, TTax correctly calculated my CA taxes, assuming my income was in CA (it was), and zero withholding went to CA (true). I didn't notice the discrepancy at that time, and paid what is in fact the full CA tax burden myself. So money is not owed to CA for 2021, nor to the IRS, though the coding in those filings will be incorrect as presently filed. Will not have corrected W2 to file returns with MO to get that money back until long after this 2023 filing deadlines. This year, the carryover in the Federal Return from the prior year's state tax data will match the forms, but be incorrect - the money for 2021 being held by MO has not been "taxed" at the Federal level.
The question: how should I complete this year's Federal filing? For example, should I adjust my Federal income now to allow for correct taxation of the as-yet un-reimbursed withholdings from MO? Or file the Fed return based on the current (incorrect) W2'a, and file amended Fed returns then? Or will the reimbursement from MO of the 2 year's of false erroneous withholdings count as Federal income in 2023 tax year, and those taxes be calculated and paid in my filing for tax year 2023? Or something else?
