OK, what am I missing here...credit for taxes pad in another state

[AZ-Tax]

Client had withheld $10K of NJ income tax but never resided in NJ in 2010 therefore I did not prepare a NJ tax return, yet. I included all NJ W-2 box 1 income for "credit for taxes paid to another state of country" within AZ tax return. AZ credited the TP $3K and the TP went from owing AZ to a tiny refund. So I thought there would be a carryforward credit, NOT. Where is the remaining $7K

[Burke]

Probably cannot go below tax liability in AZ? After all, they did not get the taxes. NJ did. You may be able to file a NJ return and see what happens.

[jimmcg]

Client had withheld $10K of NJ income tax but never resided in NJ in 2010 therefore I did not prepare a NJ tax return, yet. I included all NJ W-2 box 1 income for "credit for taxes paid to another state of country" within AZ tax return. AZ credited the TP $3K and the TP went from owing AZ to a tiny refund. So I thought there would be a carryforward credit, NOT. Where is the remaining $7K

Where was the income earned? If in NJ then there may be nexus unles NJ and AZ have a reciprocal agreement (which I doubt) on individual taxation of income earned by non residents.

[okie1tax]

Other state tax

Most states want a copy of the other states tax return before they will give credit. The reason is because they want to know what the actual TAX PAID was, not the amount of withholding on the w-2. If your client wants the other $7K, he should be getting it from NJ.

[BOB W]

Client had withheld $10K of NJ income tax but never resided in NJ in 2010 therefore I did not prepare a NJ tax return, yet. I included all NJ W-2 box 1 income for "credit for taxes paid to another state of country" within AZ tax return. AZ credited the TP $3K and the TP went from owing AZ to a tiny refund. So I thought there would be a carryforward credit, NOT. Where is the remaining $7K

You would file a NJ non-resident and report NJ income on that return. Any excess of the $10,000 would be refunded. AZ will give credit for NJ taxes up to what your client would have paid if it was AZ income.

Curious> why would you say he never lived their? He did work their didn't he? Or was the NJ withholding in error?

[Davc]

The other state tax credit also should never be below the other state's liability.

[AZ-Tax]

The conclusion.....maybe

I had tech support on line and here are the results. I will be filing a NJ non resident and out of the $10628 NJ withheld, TP will get refunded $6119 from NJ.. AZ (resident return) will apply $3226 of NJ withholding which leaves $1283 which I assume NJ receives because their poor though this still does not make sense (then again most tax laws dont make sense). TP's AZ tax liability is $4299 with $815 withheld (on W-2) leaves $3484 minus $3226 = $258 owed AZ. As far as incorrect state error on W-2, TP did NOT want to mess with it.

[BOB W]

I had tech support on line and here are the results. I will be filing a NJ non resident and out of the $10628 NJ withheld, TP will get refunded $6119 from NJ.. AZ (resident return) will apply $3226 of NJ withholding which leaves $1283 which I assume NJ receives because their poor though this still does not make sense (then again most tax laws dont make sense). TP's AZ tax liability is $4299 with $815 withheld (on W-2) leaves $3484 minus $3226 = $258 owed AZ. As far as incorrect state error on W-2, TP did NOT want to mess with it.

Now I'm confused,, W-2 was an error?????? If you paper file NJ and attach a note explaining bookkeeping error, you should get all of the $10,000 back.

[Burke]

I am thinking the same thing. If this is really not NJ source income, and the tax was withheld in error for NJ, and actually should have been AZ, then the TP should receive a full refund from NJ. I don't see a special return for this situation like we have in my state, but if you fill out a NJ NR form and show "0" for NJ source income, it should work out. You might have to send a letter with it. (And then there will be no credit for out-of-state tax on the AZ return.)

[S T]

Non resident

I am thinking maybe t/p was a resident of AZ and non-resident and worked in NJ, but then the OP and subsequent posts are not really clear.

If that is the case NJ should be NR and taxed and refunds back, AZ would have Other State Tax Credit to the limit of NJ tax as the income is reported to both states, but AZ will allow credit for NJ State taxes paid. So basically or rarley double taxation in two states.

You might need more info from T/P

so very possible there are refunds.

Seems like employer collected and paid over NJ State Tax according to OP on the info on W-2

Agree with Burke and Bob W

Sandy

[Gary2]

I had tech support on line and here are the results. I will be filing a NJ non resident and out of the $10628 NJ withheld, TP will get refunded $6119 from NJ.. AZ (resident return) will apply $3226 of NJ withholding which leaves $1283 which I assume NJ receives because their poor though this still does not make sense (then again most tax laws dont make sense). TP's AZ tax liability is $4299 with $815 withheld (on W-2) leaves $3484 minus $3226 = $258 owed AZ. As far as incorrect state error on W-2, TP did NOT want to mess with it.

Here's a simplified example to understand why the numbers don't always add up the way you might expect:

Taxpayer lives in a state with a 5% tax rate, and earns $1000 in a state with an 8% tax rate. He pays $80 to the other state, but his home state isn't going to let him claim that full amount, because then they'd be subsidizing that other state. What they're going to do is to treat it almost as if he didn't have that $1000 in income, and thus his home state tax will only go down $50.

Now reverse it, home state taxes at 8%, other state at 5%. The home state isn't going to treat it as if the $1000 wasn't there at all. They'll give him a credit for the $50 paid to the other state, but still tax him on it, with a net of $30.