Multi-state tax and W2

[zz26]

I am trying to complete State Filings for New York and Virginia. I moved from VA to NYC in 2022 and have the some employer. The methods I am seeing all involve using paystub to find the amount I earned in VA, or multiplying box 1 by % based on weeks, months, or days. Why is it wrong to use box 16 Figures in the State W2 for VA? When I did try and see if I could get my W2 for VA using paystub to match, it does not. So I am confused at

1. Why my VA state W2 Box 16 does not seem to match up to paystubs when in VA?

2. Why I can't just use the VA W2 box 16 to determine the amount of W2 Box 1 I earned in VA? 

3. Why I can't Subtract W2 Box 16 NY from W2 Box 16 VA to determine earned income in VA?

4. Why NYC Locality Box 18 + Virginia W2 Box 16 does not equal W2 Box 1? Shouldn't this summed equal total wages earned?

5. Why doesn't NY W2 Box 16 - NYC W2 Box 18 does not equal VA W2 Box 16? Shouldn't the difference tell me how much I earned in VA?

6. Which method should I be using to allocate if I can't trust my state W2s? Paystub, % day, week, or month? 

7. Why can't I trust my State W2s, and what is my employer doing if It's not even accurate?

[DawnC]

Your payroll department can help. They should have access to time sheets and other records that can give you an accurate picture of your earnings before and after your move date.   If your W-2 has the information broken down by state and it accurately represents your wages in each state, you can use those figures in Box 16.   Your payroll department can answer most of your questions and you should be able to trust that your employer is giving you accurate tax forms.   They may need to correct your W-2 if there are discrepancies, so check with them before you file.  You don't want to do an amendment later for a corrected W-2.    

How to Allocate Income for Part-Year State Returns -  There is an example of your situation in that HELP article.   Any of the methods discussed can be used (for earned income) and they are listed at the bottom of this reply.   

You should correct the wages in the W-2 section as long as you can substantiate it with the pay stubs.  The important actions are to report the correct amount of income and tax withholding to the correct state of residency because you moved during the year.   Do not change the withholding amounts.   The state withholding shown on the W-2 is where the tax was paid.   

Differences in Box 1 vs.  Box 16/18 -  Part-year residents follow each state's rules. Some states separate the income and tax only their state's income. Or a state may calculate the tax on all of the income as if you were a resident, and then allocate the tax based on in-state sources as a percentage of all sources.   The differences relate to what wage amounts are taxable in each case.  Pre-tax benefits will also cause the numbers to be different.  Wages that are not taxable on the federal return may be taxable on your state return or vice versa.

Living and Working in Multiple States   

Understanding Your W-2 Wages - a quick look at the differences between the amounts in Box 1 and Box 16 (Fed and State tax base).

METHODS FOR ALLOCATING EARNED INCOME  (from the HELP article linked above)

Some companies will send you a W-2 with the state totals listed, others will send you two separate W-2s for each state. If not or they didn't change the withholding to the second state, then you’ll have to estimate how much income you earned as a resident of one state versus the other. Here are a few ways to do that:

Method 1: This is the simplest method of all and the most accurate if your income fluctuates from paycheck to paycheck.

Find a pay stub with the pay period ending around the time of your move. The YTD (year-to-date) amount on the pay stub is how much you earned while residing in your former state.

Method 2: This method is pretty accurate as long as your income is more or less the same from paycheck to paycheck.

Estimate the number of weeks/months you worked at that job while a resident of one state and divide it by the total number of weeks/months you worked at that job to come up with a factor.  Apply the factor to your total income from that job to come up with the allocation for that state.   For example, if you worked at that same job the entire year and moved in early May, you earned roughly 4 months' worth of income (1/3 or 33% of your total income) in your old state.  Multiply the total income from that job by .33 to obtain the allocation for your former state. The remainder gets allocated to your new state.

Method 3: This method is the most accurate, but it also assumes your income is more or less the same from paycheck to paycheck.  First, find the Julian date of your move (also called an ordinal date).  Search for Julian date in your favorite search engine.

• For example, if you moved on August 8, 2022, the Julian date is 220, which simply means August 8 is the 220th day of 2022.

Then divide your Julian date by 365 to come up with a factor, which should be less than 1. Apply your factor to the year's total income from that job to get the income allocation for your former state. The remainder is allocated to your new state.

[zz26]

Thank you, I will try and contact my payroll department to get a bit more clarity into these numbers. At a high level, are companies just trying their best to withhold the correct state taxes amount and report those figures when multiple states are involved? When I used to just work in 1 state/didn't move, my box 1 would equal box 16. But now that there are 2 states involved, I am trying to understand if the employer attempts to withhold the right state taxes accordingly, and then when I file my taxes, I do 1 of the three methods to split the true accurate number, Box 1.

[LindaS5247]

Some of your W-2 discrepancy questions can better be answered by your payroll department.  However, in general it is best to enter your Form W-2's shown into TurboTax, unless you suspect it is truly wrong.

To enter multiple W-2's:

1. Start your return or continue your return by clicking on Taxes
2. Tax Timeline 
3. Continue your return
4. Go to the Federal Taxes tab  
5. Wages and Income 
6. Jump to Full List 
7. Wages and Salaries  
8. W-2 > Start
9. You will be prompted to enter the first W-2.
10. At the end of the interview you will be asked if you have another W-2
11. Select Yes and proceed adding the next W-2. 

Keep in mind, when you are entering your state taxes in TurboTax, you should enter you non-residential state first (VA).  Then you complete your New York state return.

Don’t worry about knowing the tax implications of moving to a new state — TurboTax will ask you simple questions about you and give you the tax deductions and credits you’re eligible for based on your entries. 

Each state taxes the income that was earned in that particular state, but most states don’t tax the income earned in the other state. If that’s the case for you, your income will be split between the two state tax returns.

On the tax return for your new state, you can claim a tax credit for tax paid to your old state on the same income. That tax credit will offset the extra tax on the income you had to report to both states.

Don’t worry. TurboTax will guide you and help you easily file multiple state tax returns based on your entries. If you have questions, you can also connect live via one-way video to a TurboTax Live tax expert from the comfort of your home. 

Click here for additional information on filing when multiple states are involved. This article discusses the apportionment percentage.