Help! Multiple states - Same state wages, but total is double my federal wage

[kgn02]

Hello,

I am working completely remotely in MA for my employer based in CT, and I have an issue with wages being double-counted when doing my resident MA taxes.

Suppose my federal wage is $10000. My CT state wages is also reported as $10000 in box 16, and MA state wages is also reported as $10000 in box 16. However, when doing my MA taxes, TurboTax transferred total state wages of $20000, which is double of my actual wage of $10000. This makes TurboTax thinks I'm making double of what I actually make, and that I owe 2x the amount of the state tax to MA.

Applying tax credits also doesn't work because the tax was computed on the 2X amount, so even after the deductions I ended up owing more than expected.

When TurboTax asked me to transfer only the MA portion of the state wages (declaring the total amount as incorrect), it says that I could no longer e-file because I only reported MA source when other state sources are present.

Before we go further let me say that I have read the FAQ as well as similar threads:

Topic 1: "Troubleshooting common federal to state transfer issues"

https://ttlc.intuit.com/turbotax-support/en-us/help-article/import-export-data-files/troubleshooting...

• This article is for NY and NJ (not MA and CT), even though it mentioned that it can generalize to different state situations. However, I could not even see the "Income and Deductions Summary screen" and any indication that the correct amount is used when doing my resident MA tax return.

Topic 2: "Same income reported by two states"

https://ttlc.intuit.com/community/taxes/discussion/same-income-reported-by-two-states/00/659394/page...

• Many people were having the same issue but none were sufficiently addressed. The "workaround" that worked is manually editing the info in W-2, by zeroing some box 16. Is that even legal and correct? I thought we should enter W-2 as it is.

Topic 3: "MA state tax double counting income"

https://ttlc.intuit.com/community/state-taxes/discussion/ma-state-tax-double-counting-income/00/1377...

• This thread deals with MA and RI, but the person resolved it by editing W-2. Again, is this proper?

Topic 4: "How do I remove income doubling due to multi-state amounts in box 16 of my W-2?"

https://ttlc.intuit.com/turbotax-support/en-us/help-article/income/remove-income-doubling-due-m[prod...

• This has solutions for NY v NJ, NY v Pennsylvania. But for MA and CT none of these steps seems to apply...

I believe the "interview screens" within Turbotax are dependent on the states as the software is programmed specifically for those states, for example, there is a solution for NY vs. NJ (per the FAQ), or even other state combinations. But there's really none for specifically MA and CT. Also, there is no way to "allocate" anything when doing the resident MA taxes.

So, my questions are:

1. Is there a way to e-file the returns without modifying and editing the W-2?
2. More importantly, is editing the W-2 in order to e-file the proper way to do it? Will it result in an audit? Will the state returns get rejected because the information doesn't match what's in their system? (e.g., the total state wages exceeds the reported amount)
3. Tax professionals, how would you resolve this?
4. Readers who have done it by modifying W2's in the past, how did it go for you?

Thank you very much.

[ErnieS0]

A Massachusetts resident working remotely for a company in Connecticut does not have any Connecticut income. If you have no CT withholding, you can delete the CT line in your W-2.

If you have no CT withholding, removing those boxes will not have any impact on your federal or Massachusetts tax.

Connecticut says:

Connecticut sourced income of a nonresident is income derived from or connected with sources within Connecticut when the income is (among others):

Attributable to compensation for services performed in Connecticut or income from a business, trade, profession, or occupation carried on in Connecticut. This includes income derived directly or indirectly by athletes, entertainers, or performing artists from closed-circuit and cable television transmissions of irregularly scheduled events if such transmissions are received or exhibited within Connecticut;

See Connecticut Sourced Income of a Nonresident – Nexus.

[maglib]

@kgn02   You must first prepare your nonresident return.  If you did this, then when you started your resident return, there should have been a question about which income to remove.

[kgn02]

@ErnieS0 I have withholding in CT, because my employer set had withheld tax in CT. I also know I should also actually pay tax for CT because I went to the company physically and worked for a few days there. In that case I shouldn't be removing the lines, right?

[kgn02]

@maglib No, I do not have the screen with the heading "Let's Confirm Your Taxable State Wages". I do not see any subsequent screen that allows me to do what you said. The only screen resembling that is "About Your State Wages" which says:

"We have transferred a total of $XX,XXX in state wages from your W-2. Is this transferred state wages correct?"

$XX,XXX is twice the amount of my actual federal wage, because it's doubled. If I choose that option that says it's not correct, it allows me to import only MA portion of the wages, but it does not allow me to e-file.

[maglib]

@kgn02  I don't normally respond to CT.  Seems CT does NOT tax income from working out of state unless that other state does. There is a convenience of employer ruling.. 

@ErnieS0  is normally correct Wages of a nonresident are not subject to Connecticut income tax withholding if the wages are paid for services performed entirely outside of Connecticut.

But, due to covid there was a convenience of the employer ruling.  Which also did not apply to MA. 

Five states (Arkansas, Delaware, Nebraska, New York, and Pennsylvania) apply the convenience
rule. Connecticut applies the rule only if a nonresident taxpayer’s resident state applies a similar
rule. In other words, Connecticut applies the rule to nonresident employees of a Connecticut
employer who work from a remote location and reside in one of the five states listed above.
Consequently, wages earned by these nonresidents are allocated to Connecticut unless they are
working remotely (i.e., in an out-of-state location) due to the necessity of the employer rather than
the employee’s convenience (Connecticut Resident Income Tax Return Instructions, 2019 Form CT1040, p. 5).

During the CT interview you had to do an allocation of your income as you did work physically there it seems. 

Make sure you only entered 1 W-2 with 2 states.  Many enter it as 2 w-2's and that could be your issue.

Did you do the nonresident state first?  You had to.

Then delete the MA return.  

Start MA over from scratch. 

[JLLAM2009]

I am having the same issue....except I live in MA and my employer is in NYC.  When I go to do my MA state taxes, TT is calculating the MA income tax owed on 2x my wages! 

[kgn02]

Hi, I understand your frustration!!!

Just as an update, none of the advice here worked for me (I'm grateful for the replies here especially volunteers to help with these questions). I did not want to alter any W2 information and risk any audits, so I chose the option that cannot be e-filed, i.e. mailing physically. That way my wage calculation is still not doubled but I had to mail the returns to the state department of revenue. I mailed it on a Friday via priority mail and they processed my refunds on the following Monday. You may still have time as long as you mail it out before the due date! Good luck!

[JLLAM2009]

How did you get the info to not double your MA taxes even when filing manually?  Were you able to manually change the MA wages and have TT calculate the (right) amount of income tax credit to subsequently apply?

[kgn02]

Hi! To be clear, I still used Turbotax to complete the package. After paying the price, it allows me to print out a deck of papers, but I had to mail this package. So every deductions/tax credits were computed by TT, just without the option to e-file.

Edit: In the corresponding screen where they doubled your transferred wages, they will ask you if the number is correct. Say it's not correct, and then it will prompt you if you want to transfer only the MA part. But then it will say you'll be ineligible for e-filing. Everything else proceeds as usual, and once you complete the package, pay the TT price and then print out the documents to be mailed. I could never figure out how to do it myself without tax softwares or help from accountants.

[JLLAM2009]

@kgn02 Sorry I feel so helpless here so that you sooo soo much for your guidance...I am going a little stir crazy from this searching for that screen!  Where is the corresponding screen that you mention where it prompts you to only transfer the MA part?  Is it after you paid for the turbo tax?  Or is it still in the "Your State Returns section"? 

[kgn02]

No worries, I felt helpless too when I did it, and was looking for information for 12+ hours myself! But I may need to log off soon. I couldn't revisit my screens since I already finalized it, so I am just going from memory... That happens wayyyy before paying.

The screen in question should have the following text:

"About Your State Wages":

"We have transferred a total of $XX,XXX in state wages from your W-2. Is this transferred state wages correct?"

Answer "No". It will lead you to the next screen that asks if you want to transfer only the MA portion. It will affirm you that if you do so, you will no longer be eligible for e-filing. You just need to internally acknowledge that and you can continue as usual. If you check your top left of the screen and look at your refund/owed amount, it should now be the smaller number since you're taxed at the actual wage you earned, not the doubled version.

[JLLAM2009]

what a debacle.... I get deleted my state taxes and started them all over again, and that screen won't pop up for me.  But I think you've made a great point.  I am going to just file my Federal and NY tax refund first, and then file the MA separately (in hopes of it not capturing the wage info from NY and double counting!)

thanks so much for your help! 

[kgn02]

You should make sure you do the Nonresident state first (NY) so it remembers your situation that you have more than one state. Maybe it's because you deleted your MA and started over, and something broke... So you didn't get the screen anymore... Just guessing!

For MA to not pick up your NY wages would mean manually editing the W2 even if you were to file separately. I am uncomfortable with editing the W2 whatsoever. However that seems to be the solution for some other discussion threads.. I am very hesitant to do that.

However, best of luck doing your taxes!!