There is one W2 form that does not have the state income tax taken out (Box 17 on W2 Employer said that employee opted for exempt, which is not true. What do we do?

[AnnaB · Accepted solution]

You would enter the Form W-2 amounts as reported to you and the IRS.  In order to pass the error check, you should enter a zero in Box 17.

If the form is incorrect, and you had state taxes withheld, you would need to have the employer issue a corrected W-2.  Unfortunately, if they did not withhold state taxes (even if you did not indicate this), you have to report it as such because nothing was paid in.

Unless you are deemed to have underpaid your tax to a certain extent (depending on your state's rules), you will not be penalized for not having tax withheld.  The income would still be taxable in the state, but all of your withholding for that state and any credits you may be eligible for will be taken into consideration.

If you are still employed at the referenced company, you should contact the payroll department to adjust your state tax withholding.

[dkessler79]

On the one W2, state income tax box is blank. After we have filed, will we get something from the state saying that we owe money because the state tax was not with held on the one W2? Thanks for your help.

[AnnaB]

No, by reporting the income, your state tax return calculates your tax liability.  Therefore, the fact you had no withholding does not matter.  If you owe money to the state after your entire return is completed and all your forms are accounted for, you could potentially have an underpayment penalty, but again, this is calculated with your return.

Simply report the W-2 as issued, you may need to enter a zero for state income tax withheld to e-file, and you should be good to go.

[dkessler79]

Thank you so much for your help!

[SweetieJean]

Probably nothing, since you did not notice all year that no state taxes were withheld.

If still employed there, file a new state W-4 with the employer.

[TNcricket]

To avoid a rejected State return, the total state tax  must match the W2 box(es). On the W2 that has nothing in the State area, should I just copy and input the income there on the W2 in box, along with the 0 in box 17? Will this mean that this W2 is now non-standard, because it has been altered? I don't have the Employer's state tax ID, even though it's the same employer (moving expense reimbursment) the EIN is different.