NQSO Withholding

[KGunnIT]

I just filed, but fear I may have made a mistake.

In 2012, I received a grant for some NQSOs. Those were vested (or became available) 1-2 years later. This was while I worked and lived in Colorado.

In 2018, I moved to Indiana where I now reside. Last year I exercised and sold some NQSOs. When I did, taxes were deducted for Colorado withholding and Indiana Withholding. On my W2, it reported income earned for both Colorado and Indiana, so when I filed, I entered the amount as shown on the W2 for Colorado as a non-resident.

My question though is: should I have reported $0 for Colorado to receive a refund for that income? I had just transcribed what was on the W-2 thinking that I needed to since I was given the grant while in Colorado. However, now that I think about it, since I haven't actually lived there for a few years and since, though I received the grant while in Colorado, I didn't actually exercise that grant until after leaving the state. Both states share withholdings, so I'm receiving a refund from Indiana, but lower since the state tax is lower than what it is in Colorado.

If I did it incorrectly, should I amend for both states after receiving my refund? It means a larger return for me, but really just want to make sure it's done correctly and not be audited.

[RobertB4444 · Accepted solution]

The most important question is whether the employer who gave you the NQSOs is a Colorado employer?  Because Colorado taxes Colorado source income so if they are then you did everything just right and you don't need to change a thing.

If they are not a Colorado employer and your NQSOs did not come from a Colorado source then you should re-file and claim zero tax due on zero Colorado income.  (With holding done in error).