Sports Player with Multiple State W-2's

[peggysioux]

Have a taxpayer who is a baseball player and has W-2's from four states. What is confusing me is when I add the wages from each of the states, the total exceeds the federal wages in box 1. No benefits in box 12. Is there a reason that I am not aware that could make this scenario correct or is the W-2s wrong??

Peggy Sioux

[ATSMAN]

When multiple states are involved especially NY and CA, they insist that box 16 be equal to box 1. You have to allocate the correct income to each state in your software. If you start adding up box 16 it will generally exceed box 1.

[Roland Slugg]

when I add the wages from each of the states, the total exceeds the federal wages in box 1.

That would puzzle me, too. If the amounts in boxes 1 and 16 are the same on each specific W-2, the totals must be the same as well. I'd check for an input error of some kind.

[TaxGuyBill]

No benefits in box 12.

Were there any benefits that were NOT in box 12?

I think some States 'add back' some benefits to become taxable State income, in which case the State amount would be higher than box 1. However, I do not know what States do that or what benefits they would add back.

[Burke]

Have a taxpayer who is a baseball player and has W-2's from four states. What is confusing me is when I add the wages from each of the states, the total exceeds the federal wages in box 1. No benefits in box 12. Is there a reason that I am not aware that could make this scenario correct or is the W-2s wrong??

Peggy Sioux

Assuming these are all from the same payer, they should agree. Are the federal wages shown on each W-2? State wages should not be more than federal, unless moving expenses may be involved, but even then........ I had one client once who had two states (same company - same situation) and it turned out the W-2's were incorrect. They had to issue a new one for one of the states.

[Snaggletooth]

Differences

I'm not aware of any wages for Federal Purposes that would not reconcile to the total of the four W-2s.

State taxation of salaries and wages is another story. Alabama, for example, adds deferred salary to its W-2 for state purposes for state and local employees. Other states have inconsistent treatment as well. Adding up all four states' state taxable wages may or may not exceed Federal.

[Lion]

Read the rules for the states. Some states want the same amount as Box 1; as has been said, NY is one of those. Some states add back certain retirement or other items; NJ is one of those where the state income from just NJ is higher than Box 1. Some nonresident states want only that-state-sourced income listed on the W-2 Box 16. I don't worry about what all the state income $$ add up to; just how much should be allocated to each nonresident state (resident state gets it all) and that often comes from the YTD info on pay stubs.

[peggysioux]

Sports Player with Multiple State W-2's

W-2 shows wages in box 1, 3 and 5 of $15,083.33. Shows the following wages in box 16:

CA: $10,054.17
AZ: $1,116.67
VA: $2,568.33
OH: $4,973.33

No benefits shown in box 12 or 14 of W-2.

Another tax preparer recommended that I allocate the state wages based on number of days, or hours worked, etc. My concern with that application is that the states received W-2 information with the above info so they will be looking to match.

[peggysioux]

Sports Player with Multiple State W-2's

Read the rules for the states. Some states want the same amount as Box 1; as has been said, NY is one of those. Some states add back certain retirement or other items; NJ is one of those where the state income from just NJ is higher than Box 1. Some nonresident states want only that-state-sourced income listed on the W-2 Box 16. I don't worry about what all the state income $$ add up to; just how much should be allocated to each nonresident state (resident state gets it all) and that often comes from the YTD info on pay stubs.

So do you input into the software the YTD info from the paystub rather than what is on W-2 for the states?

Peggy Sioux

[TAXNJ]

W-2 shows wages in box 1, 3 and 5 of $15,083.33. Shows the following wages in box 16:

CA: $10,054.17
AZ: $1,116.67
VA: $2,568.33
OH: $4,973.33

No benefits shown in box 12 or 14 of W-2.

Another tax preparer recommended that I allocate the state wages based on number of days, or hours worked, etc. My concern with that application is that the states received W-2 information with the above info so they will be looking to match.

Agree with you that “My concern with that application is that the states received W-2 information with the above info so they will be looking to match.”

If you did what the reply poster said “allocate the state wages based on number of days, or hours worked, etc.” Would the reply poster handle any tax liability difference if it is challenged or does that fall on you? That is not your responsibility to change what an issued document states!

Think as other reply posters suggested that you look at the y/e pay stub to see if you can find the reason(s) why Federal & State differ. Yes, as other reply posters mentioned, there are some states where the mentioned W-2 boxes differ.

Also, have you asked your client (or have client ask payroll company or client’s manager) if they know why the difference since it is the client’s money and most of the time the client (and client’s manager) make sure they get paid the correct amount?

There is a source for the explanation that has the answer rather than you having to guess or make changes to what the issued W-2 states. That source is "who" prepared the W-2.

[Burke]

W-2 shows wages in box 1, 3 and 5 of $15,083.33. Shows the following wages in box 16:

CA: $10,054.17
AZ: $1,116.67
VA: $2,568.33
OH: $4,973.33

No benefits shown in box 12 or 14 of W-2.

Another tax preparer recommended that I allocate the state wages based on number of days, or hours worked, etc. My concern with that application is that the states received W-2 information with the above info so they will be looking to match.

Most W-2 formats that I see only have 2 lines on them for state information, so you must have more than one W-2. At first I thought you might be missing one, but its the other way around. State wages are $3,629.17 MORE THAN federal, which is highly unlikely. I can tell you re: VA that the wages must be the same. If there are adjustments they start from AGI, not wages. Agree with TAXNJ in that you cannot file any return until this is resolved. Have client call payroll issuer and determine what the problem is.

[Lion]

Once your client tells you how much is each state's sourced income, you use that on the allocation schedules. Is one of the states his home state? For how to do it in your software, call your technical support.

[peggysioux]

Sports Player With Multiple State W-2's

Received a copy of last 2016 paystub and do not see anything on W-2 that explains the wage difference between federal and states. CA is taxpayer's home state so CA will tax all income. I guess the next step is to contact issuer of W-2 (with permission of taxpayer)........

Peggy Sioux

[TAXNJ]

Received a copy of last 2016 paystub and do not see anything on W-2 that explains the wage difference between federal and states. CA is taxpayer's home state so CA will tax all income. I guess the next step is to contact issuer of W-2 (with permission of taxpayer)........

Peggy Sioux

Not surprised. We had (have) clients with the same issue depending on the payroll service. You can handle contacting the payroll service as you decide. We have the client or client's representative handle calling the payroll service or with a POA we provide that extra service. Key is whoever contacts the payroll service is to get in writing the reason of the difference for documentation.

Sounds like you are on your way to being a specialist in handling Professional Sports Players tax issues. If you want let us know the result.

[Lion]

Ask your client to bring you his pay stubs, highlighted in yellow for the time he worked in AZ, pink OH, green VA. if the highlights add up to the state amounts on his W-2, you are good to go. If not, have him ask payroll for documentation of why. Put him on extension until he provides an explanation for the AZ, OH, and VA amounts on his W-2. We can't help you; we never interviewed your client.