Employer had incorrect state on W-2

[jmlewis9689]

Hello,

For 2025, I worked a 100% remote job. Although I was located in and worked from Florida the entire year, my employer mistakenly withheld Illinois state income tax from my first few paychecks (the client was located in Illinois and they put the wrong address for my work site location). They issued me a W-2 and W-2c, but I'm having trouble getting this IL money back using TurboTax.

I already filed my federal return a couple of weeks ago, and just now realized I need to file an IL state return as well. When I try to file my IL state return, it keeps telling me I have $0 for a refund since I earned $0 while working in IL. Any advice on how to do this correctly with TurboTax? This is the first time I've had to deal with a W-2c and an incorrect state like this. It's probably something simple, but I'm not sure where I'm going wrong. Any help is much appreciated.

[Vanessa A]

If your employer actually withheld the taxes and paid them to the state of IL, your W-2 should reflect the amount they withheld and paid to IL.  If they did not actually send the payment to IL, and they reimbursed you for the extra withholding, then the correct amount would be $0.

So, for now, you will need to go back to your employer to either get a refund of what they withheld since they are now showing $0 on your W-2C or have them send you another W2-C showing the correct amount of withholdings in box 17 and $0 for wages in box 15. 

If your employer sends you the money back, then there is nothing left for you to do with IL.

If they send you a corrected W-2 then you will need to file the IL Non Resident form.  When you have a number in box 17 and no wages in box 15, it should no longer tell you that your refund is $0.

[jmlewis9689]

Hello Vanessa,

Thank you for your reply. I appreciate the detailed information and explanations on this.

So, my employer sent me the following response: "The state of IL does not allow Employers to refund prior year taxes withheld. You will need to file your Corrected W2 in order to receive a refund from that state."

Unless I 'm reading this wrong, it sounds like my employer paid this to the state of IL and that my employer is unable to refund me directly. On my original W-2, box 16 and 17 have dollar amounts. On my W-2c, the previously reported box 16 has that same dollar amount, the corrected box 16 shows "0", previously reported box 17 is blank, and the corrected box 17 is blank too.

With that in mind, will I need another corrected W-2? 

Also, I'm not sure how to go about this with the TurboTax software itself. I had already filed my federal side with TurboTax Deluxe on Windows (no state). I tried using TurboTax Online, but I'm running into some issues with it.

[KrisD15 · Accepted solution]

No, you don't need a new W-2c.

Actually you didn't need on in the first place. 

From what you posted, the original W-2 had a dollar amount in Box 17. That is the Illinois tax you had withheld and was paid to the state. 

The W-2c did not correct for that, it only corrected Box 16 for the income earned in Illinois. Box 17 did not NEED to be corrected, so use the same amount in Box 17 for the W-2c as that which was on the original. 

You didn't need a corrected W-2 because you are in charge of allocating the state income. You could have entered the original W-2, finished your Federal return, started an Illinois return, allocated Zero of your income to Illinois and get the Illinois state tax refunded. 

There is no harm with having the corrected W-2c showing zero for Illinois income, but be sure to carry forward Box 17 Illinois State Tax from the original to the corrected W-2c. 

A W-2c is entered as a combined W-2, meaning all the numbers from the boxes on the original W-2 that were not changed and the changed  boxes from the W-2c. 

Don't leave Box 17 blank. 

[jmlewis9689]

Thanks everyone for your help. I was able to get my IL state refund to show the correct amount I'm owed.  It looks like I'll have to get a letter from my employer stating the correct amount and number of work days performed in each state, so I'm about to go climb that hill, then get everything mailed off.