W2 Total State per Remote Work - How to Appropriately File Tax Return

[Jpark8816]

Hi, received my W2 and since I work remotely in a different state from where my employer is located, my W2 shows TOTAL STATE for box 15 of the 1st page. Other pages for box 15 have taxes withheld for 2 the different states (NC = Employer State and MD = My remote location where I am a resident). 

Questions that I have:

- I understand that I have to file a tax return for my employers state, NC per the W2 received, however could you please let me know if for the Intuit Wages Allocation page for NC state taxes, should the status be chosen as "Not NC Source Income"? I work remotely 100% in MD. 

- Also Intuit Wages Allocation page for NC state taxes shows the same W-2 wages twice as 2 line items, where you can choose "Not NC Source Income". Is this the correct way it should be showing? I assumed it should have only been 1 line item. 

- If I am suppose to choose "Not NC Source Income", I show I get a refund for the amount withheld for NC. Is that the method to get the credit/refund back? Or if there something I need to do to connect this with MD (my resident state where all my income is made) so that I also avoid the underpayment penalty. Because of the amount withheld by NC, I show that I get an MD underpayment penalty. 

Thank very much for your help.

James 

[MaryK4]

Yes, your allocation of the W2 wages is Not NC source income because you worked remotely 100% in Maryland.  The second line of income you see is the Maryland withholding from the Box 15-16-17 so it too is Not NC source income.  If, as in your case, withholding was done by mistake in North Carolina you are required to file a nonresident tax return showing zero NC income to get the withholding refunded.  If you have not already done so, contact your employer and make sure they stop the NC withholding,  

After you do the NC return, you should be able to prepare/file the Maryland return with no additional reporting required from the NC return.

[Jpark8816]

Hi Mary,

Thank so much for your help and clearing that up for me. 

I assume for the MD underpayment penalty (per my employer withholding a sizeable amount for NC) there is nothing that can be done about that, other than making the corrections w/ payroll for the 2022 tax year. Would that be correct? 

Thanks again,

James 

[ZoltanB45]

Once every 4 years, you can request an abatement of penalties in the state of Maryland. You have to be in good standing and have had reasonable cause. This is as reasonable as it gets. I would begin by calling the Comptroller of Maryland. The number for non-compliance is 410-767-1322