Taxes on bonus paid for out of state residency for prior year. I have included details in the description below if anyone can help. Please and thank you!

[jsco91]

In 2016 I worked in Connecticut from Jan 1st to Jan 31st as a Non-Resident (lived in NY at the time) before moving to Pennsylvania and becoming a resident working in state with the same company. In August of that year I took a new role in the same company without changing locations. This new job offered a bonus that is paid in April of the following year. In April of 2017 I was paid this bonus as a percentage of the time I had worked in the bonus eligible role (August-Dec 31st 2016). That entire time I was working and living in PA. To my surprise, there was income reported to the state of CT on that check with no taxes withheld (federal and PA state taxes were withheld fine). As my job wasn't eligible for this bonus for the job I had worked for 1 month as a non-resident of CT, I do not believe that any of that bonus income should be reported to the state of CT. Employer isn't willing to correct the W2. I performed no work in CT in 2017 and didn't live there for that one month in 2016 so it makes no sense to file a return there for the 2017 year. Anyone have insight into this? Thank you SO much.

[DS30 · Accepted solution]

If no part of the bonus relates to any of the one month of work that you did in CT in 2016 and since not CT withholding were taken out, then just don't file any CT nonresident return for 2017.

If the CT department of Revenue contacts you (which is unlikely), then provide them with your explanation and your employer's unwillingness to correct their error on your W-2.

Alternatively, you may feel more comfortable with actually filing a CT non-resident state return for 2017 and report ($0) for the income. You must mail in this nonresident state income tax return (cannot efile a $0 state return) and include your state W-2 information. You will want to include an explanatory statement (a .pdf attachment) with your return stating your situation (that your employer incorrectly allocated a portion of your bonus income to CT and was not willing to correct the error).

This way you have proof that you actually did submit a CT nonresident state income tax return (mail certified) so as to avoid the CT DoR saying you had CT income but did not file.

[jsco91]

Thank you so much for your reply @TurboTaxDeeS ! Last question I had on this here was that the W2 issued still had income reported to the state of CT, just with no tax withholdings. Is that still the same course of action you'd recommend?

Thanks!

[DS30]

Yes - However, you may feel more comfortable with actually filing a CT non-resident state return for 2017 and report ($0) for the income. You must mail in this nonresident state income tax return (cannot efile a $0 state return) and include your state W-2 information. You will want to include an explanatory statement (a .pdf attachment) with your return stating your situation (that your employer incorrectly allocated a portion of your bonus income to CT and was not willing to correct the error).

This way you have proof that you actually did submit a CT nonresident state income tax return (mail certified) so as to avoid the CT DoR saying you had CT income but did not file.

[jsco91]

Awesome. Thanks so much @TurboTaxDeeS! Sounds perfectly logical to me 😄

[DS30]

You are very welcome 🙂