Question on Need to File State Return in DC (or Virginia)

[Timoshenko]

Hello,

I am doing my daughter's taxes.  I live in Washington state.  She is a full time student, so she is technically a Washington State resident.  We have no state taxes here.  However, she worked this past summer in Virginia.  She made less than $5k.  However, she did pay about $300 in federal tax and about $250 in state tax which she should get back. 

The bizarre thing that I don't understand is that her W-2 has employer address in Virginia where she worked.  Her personal address as stated on this W-2 is her physical address in the District of Columbia.  Line 15 of this W-2 asking for "State" shows "DC".  I am interpreting this to mean that her employer paid taxes to "DC" which seems strange to me.  So, several questions:

1)  Does she need to file a state income tax return for the District of Columbia (DC) or for Virginia?  I would have thought that entering "DC" in box 15 of W-2 would help make this determination in TurboTax but it appears to be dictated by choice of state income in personal info section.

2)  I know she is under income threshold limit for even having to file a state or federal return, but I am assuming that in order to get a refund of the taxes she paid, that she will need to file.  Please verify.

3)  There is a $45 additional fee for the ability to file a state return in TurboTax.  Is there any way around this given circumstances described above?  That's pure piracy when seeking refund of $250.

Thanks much.

Timoshenko

[MaryK4]

She will NOT have to file a Virginia tax return because she is Single and her VAGI is less than $11,950 (filing threshold) and the employer did not withhold for for Virginia. 

Because she is not a resident of DC and did not work in DC, you can use Form D-40B, Non-Resident Request for Refund D-40B (Fill-in) instead of filing a DC nonresident return to get the DC withholding back.  She can also file a federal return to get the federal withholding.

I provided the DC form so you do not have to pay the TurboTax filing fees.

[Timoshenko]

This is fantastic.  Much appreciated.

However, can you confirm my understanding that because my daughter is a full-time student, that it is entirely appropriate to claim WA state as her state of residency? 

The issue that gives me pause is that it appears from the D40B form that she would be declaring a "Domicilary state exemption" yet there is verbiage that says "I did not maintain a place of abode for a total of more than 183 days".   While at school, she lived in DC, well over 183 days.

Thanks much.

Timoshenko

[Cynthiad66]

Attending college in a state does not come anywhere close to making you a resident of that state *FOR TAX PURPOSES*. While colleges will have their own residency requirements to determine if you pay resident tuition rates or non-resident tuition rates, it has absolutely no bearing on your home state for your taxes.

@Timoshenko

[Timoshenko]

Hi Cynthiad66,

That is the same verbiage that I found when googling this subject.  However, I would ideally still like to find some further guidance related to justifying non-residence in light of D-40B verbiage that states "who did not maintain a place of abode with the District of Columbia for an aggregate of 183 days or more during the taxable year."  This verbiage suggests she is a resident and I don't see any verbiage that would provide an "out" given that she is a student ... other than this general language from google.  I do see further instructions in 2000 D-40B instructions indicating that "any individual who wants a ruling as to his/her liability for District of Columbia income taxes [must file form D-40B]".  

Noting again that this whole thing is a bit of a silly exercise because her income is below threshold limits and I could file a DC state return but TurboTax wants to charge me $45 to do so.    I don't want to pay this but also compare this with the potential cost (in terms of my time) from potential future hassles.  Noting that the D-40B form requires attachment of W-2 form but not federal return, so income threshold issue may go unrecognized.

Thanks.

Timoshenko

[Cynthiad66]

Honestly,  a student has flexibility to choose their home state.  In her case, Washington state is the ideal choice with no income taxes.  She can file to get her withholdings back.  These few years are probably the only time she will have that flexibility.

You might want to see if she qualifies for FREE File.  Use this link to see if she qualifies.

Or, as Maryk1101 said above, since she is not a resident of DC and did not work in DC, you can use Form D-40B, Non-Resident Request for Refund D-40B (Fill-in) instead of filing a DC nonresident return to get the DC withholding back.

Two ways have been provided for her to file without paying if she qualifies.

@Timoshenko

[Timoshenko]

Thanks so much for the help.  Makes sense.

Unfortunately, no free file.  2 summers ago, in a summer job, she somehow got enrolled in a retirement plan.  Ridiculous.  Whopping $120 saved but 1/2 gone with fees.  She took distribution to "get this thing off the books" last year.  So, she has a 1099-R (with $5 tax penalty) for tax year 2022.  This prohibits free file.   So, I will go the D-40B route.

Can I ask you one more related question?  I promise last one.   🙂

My daughter will be graduating in May.  And, she has decided to take a job in DC that starts in August.  Looking ahead to her taxes next year, (2023 taxes), I'm wondering about DC residency status then.  Jan thru May she is student (so Washington State resident).  May thru July uncertain ... maybe some travelling ... maybe come back home to Washington State for a while.  August thru December working in DC ... which is 5 months of employment (less than the 183 day criterion on D-40B form).  What do you see as defining her resident status with these circumstances?  I'm guessing part time resident of Washington State and part time resident of DC.  Should she literally be tracking days in the May to August interim period?  Noting she may also be holding on to her shared apartment situation in DC until August (even thought she will be there periodically).

Thanks again.  You have been very helpful.

Timoshenko

[Timoshenko]

Actually, I think I just answered my own question because I reread the D40-B instructions and see requirement to have permanent home outside DC the entire calendar year within D40-B instructions ... to qualify as non-resident.  This will not be the case.  So, I guess NOT a non-resident in 2023.