W2 listing 2 states

[ruthc]

I have a client working in CT but lives in Mass. Her W2 has the same wages on her W2 for CT and Mass. Mass taxes wages from other states too so basically her Mass return would come out showing both wages which is incorrect. I can efile the Mass return by not entering any Mass wages on her W2 which is acceptable to Mass. As a matter of fact, Mass says in order to e-file, this would be the only option which is no problem and it works fine. However, the the client shows $28 was withheld for Mass taxes. She doesn't know why CT did that. So if I do not enter the MA wages on the W2 I can't enter the withholding either in order to efile. I can do that and efile thinking that MA will catch that she had the $27 withholding and refund that amount along with her other refund amount. I can enter -o- for the wages with the $27 withheld, but when efiling an error states, of course, you can't have more withholding than wages.
I know we can mail the return instead, but would rather not if I can efile.
Has anyone run into this, andif so, how did you handle it? Thanks for any help!!!

[Golden Rocket]

Reciprocity

The CT withholding may have been the result of reciprocity between the two states.

Not familiar enough with either state to know of the quirks in their e-filing requirements, but I did not read whether the CT wages plus MA wages totalled up to the grand total. From the post it seems like the total W-2 has been duplicated, with each state having total nexus. This cannot be.

On the surface of the matter, the entirety of CT wages may be taxable to MA if the employee is a MA resident. That might explain why the W-2 reads like it does. There is always the technique of filing CT as a non-resident, paying the CT taxes on the return (against which the $27 would apply), and then subtracting the total CT taxes (if lower) from the resident MA return under the line item "Credit for taxes paid to other states."

But if there is reciprocity, then that feature would seem to work against the treatment described above. I'm just now realizing I've rambled on and on when I don't really know enough to respond. I need to leave this for someone familiar with these Northeast states to respond to you.

[Larmil]

The CT withholding may have been the result of reciprocity between the two states.

Not familiar enough with either state to know of the quirks in their e-filing requirements, but I did not read whether the CT wages plus MA wages totalled up to the grand total. From the post it seems like the total W-2 has been duplicated, with each state having total nexus. This cannot be.

I don't know MA or CT, but in the KS MO area when TP lives in one state and works exclusively in the other, many employers correctly show the total wages as taxable to both states. IE, KS taxes wages earned there and MO taxes all income of residents. MO would give a credit to taxes paid to KS.

[Bay ArEA]

I have a client that works for the NBA and so every year he gets about twenty different w-2's each showing wages made in the different states while touring with the team. I enter in each w-2 but have to subtract all the state amounts from the federal total amount so if you add them up it is the same amount of gross income on the federal. We then take a credit for taxes paid to other states on his state return, and don't even bother filing the other states unless they require it as the withholding is usually just ~15 per state. For the states that do require him to file I do a Non resident return and report only the source income for that state. This is pretty different from your case so t may not be too helpful, but the point is I file state returns showing source wages then get a credit elsewhere, so you may have to do that.

[okie1tax]

MA income

The problem is that the software adds the w-2 income for all states together instead of just using the federal total and the MA amount. So if you input the W-2 as it is you will double the income on the MA return.

[Gary2]

This seems like a software issue. You should be able to override the values. Basically the software has no way of knowing whether or not the two state numbers should be added together for state tax purposes, so it picks an answer (in this case, add them), leaving it up to you to fix it if it guesses wrong. As far as I know, you should be able to a) file the W-2s as reported; b) override the total MA wages (not the individual W-2s); and c) still e-file, at least at the MA end, but your software may or may not support that.

You'll need to correctly prepare the credit for taxes paid to CT on the MA schedule Z. The software will probably calculate it correctly. You can't simply subtract the tax paid to CT from the MA tax liability (though there are cases where the results work out that way).

[taxea]

Doesn't the W-2 allow you to only enter state income and withholding? If you do that it shouldn't double the total income.

[David1980]

This seems like a software issue. You should be able to override the values. Basically the software has no way of knowing whether or not the two state numbers should be added together for state tax purposes, so it picks an answer (in this case, add them), leaving it up to you to fix it if it guesses wrong. As far as I know, you should be able to a) file the W-2s as reported; b) override the total MA wages (not the individual W-2s); and c) still e-file, at least at the MA end, but your software may or may not support that.

You'll need to correctly prepare the credit for taxes paid to CT on the MA schedule Z. The software will probably calculate it correctly. You can't simply subtract the tax paid to CT from the MA tax liability (though there are cases where the results work out that way).

It's more than just a software issue. You have states like California that will reject a tax return if the sum of the state wages do not add to the federal wages, yet want you to enter all wages on their line on the W-2 for residents of California. Contradicts itself there for people who work temporarily out of state but aren't changing residency.

So what does the software do? Some state instructions specifically state to use the amount on the W-2. Sometimes that creates an incorrect return, depending upon how the employer does the W-2. Some states want the total of the wages. Some want the federal.

The whole thing is a mess, and the only guidance the IRS gives is that the lines are for state use, pretty much letting states say they want whatever the heck they want on there even if what one state wants won't work for another state.

Really, all you can do is enter the W-2 anyway you need to in order to get the state returns correct. Or override the state forms. Whatever you gotta do. The IRS doesn't care if the state information on a W-2 matches what's on the physical W-2. (They do care that the SSN matches, that the address matches, but don't care about state info.)

[ruthc]

Correct!

The W2 has to be entered into the software as is on the W2. The MA return allows for an adjustment to get the wages right, however, it has to be mailed and not allowed to be efiled. I think I made things more complicated than I wanted to. I just wanted to know if anyone got around the adjustment portion, but apparently it won't work for MA if I want to efile. Everything else works fine, including giving the MA client credit for the taxes paid in CT. Thanks

[Gary2]

It's more than just a software issue. You have states like California that will reject a tax return if the sum of the state wages do not add to the federal wages, yet want you to enter all wages on their line on the W-2 for residents of California. Contradicts itself there for people who work temporarily out of state but aren't changing residency.

This just adds to my belief that the IRS change the box 16, etc. reporting and issue precise standards. New York, for example, requires that the box 16 amount be identical to the box 1 amount. Essentially, they prohibit employees from relying on their employer's reporting to determine how much is taxable to NY, forcing them to do their own calculations. As a result, a NY state resident with out of state wages will generally have a sum of state wages that is greater than the federal wages.

Come to think of it, many state employees who don't participate in Social Security, and whose state doesn't permit a full deduction for contributions to state retirement funds will want up with state wages greater than federal wages.

[David1980]

This just adds to my belief that the IRS change the box 16, etc. reporting and issue precise standards. New York, for example, requires that the box 16 amount be identical to the box 1 amount. Essentially, they prohibit employees from relying on their employer's reporting to determine how much is taxable to NY, forcing them to do their own calculations. As a result, a NY state resident with out of state wages will generally have a sum of state wages that is greater than the federal wages.

Come to think of it, many state employees who don't participate in Social Security, and whose state doesn't permit a full deduction for contributions to state retirement funds will want up with state wages greater than federal wages.

If you're suggesting the IRS issue standards for box 16 I'm with you on that. You're right, any of those states where the state doesn't allow some deferrals the fed allows will reject on states where the state requires the state wages add to fed wages.