Employer Refuses to Correct 2018 W-2 Improperly Prepared

[Uncle Sam]

I have a client who's on extension with 2018 returns. And return can't be filed by tonight's deadline.
The problem is, during 2018 he was told in mid-year he was going to be terminated by end of year. This is a Fortune 500 corporation, and he's been there for over 20 years.
When he was told of his termination, he advised employer to change his MAILING ADDRESS to his wife's address in another state.
The W-2 as originally prepared had the Federal information okay - but the state information was wrong.
It had his resident state ok with the resident full year wages ok and SWT ok. BUT - it ALSO included a second line for his wife's state and taxed him on the wages earned in his resident state from that point, with -0- withholding tax. He did NOT WORK AT ALL IN WIFE'S STATE for the employer for any time during the year. He is still currently living at his NY resident address.
No matter how many times he's requested it be corrected, employer has come back with a corrected W-2 showing wife's state's income and no withholding, but no resident state information.
Should I paper file the resident return and attach the original copy of the W-2 explaining the reason for paper-filing?
I've already advised him that down the road his wife's state will be communicating with him.

[Lion]

E-file a non-resident return for wife's state with his NY resident address and NO days worked in wife's state, along with his NY resident return and his federal return. Charge him for the extra return, but he'll get his withholding back.

[TaxGuyBill]

My limited experience with this is that the State will ONLY look at the W-2, and won't listen to reason.

Option #1: Keep trying with the employer. Maybe YOU could write a letter or call HR and make them understand EXACTLY what needs to be done.

Option #2: Just go with it. File a non-resident return with the wife's state, and then for his home state he should get 'credit' for the tax paid to the other state. This is definitely not ideal, but that is one way to just deal with whatever is on the W-2 and not need to be continually arguing with the employer and/or States.

[Lion]

You also could try Form 4852 with wife's-state w/h but NO wife's-state-sourced income and an appropriate explanation.

I had two different situations in the same year with one client having a RI W-2 in error and another a MA in error. After lots of correspondence back and forth, I think we ended up with NOT all of the w/h returned, but my memory is foggy tonight.

[Uncle Sam]

I'm not aware of any Form 4852 equivalent for NYS. Client has notified me that the employer has closed out his case.

[Lion]

Just like the W-2 is a federal form, the Form 4852 is a federal form.

I also like Bill's Option #2. File with wife's state; take credit on NY; don't fight it.

[Burke]

According to the OP, there was no withholding shown for the other state on the W-2. Would filing an NR return with this other state with no income earned there produce a tax liability? He doesn't mention what the other state is. In my state, there would be no tax due. So if that is the case, there would be no credit to show on NY return. I agree that he should file a NR return showing this.

[Uncle Sam]

Wife's state is Massachusetts.

[Lion]

BUT - it ALSO included a second line for his wife's state and taxed him on the wages earned in his resident state from that point, with -0- withholding tax.

OP said the W-2 included a second line for his wife's state and taxed him on the wages earned in his resident state from that point, with -0- withholding tax. So, the W-2 shows MA-sourced income with a MA mailing address. He can file a NR MA return allocating all working days to NY and a resident NY return. Expect to get a letter from MA asking for a copy of his NY resident return to make sure he had a resident state and reported all his income to that resident state.

[dtlee]

I have filed literally dozens of state returns that matched the actual situation rather than what was on the W-2 with few required follow-ups (and none that were significant enough for me to recall specifically). States are aware that employers make mistakes. It is good that they did not withhold (since he probably never gave them any authorization to withhold) for Massachusetts. It is bad if they did not honor his withholding to New York, but I did not read that in your description.

Should I paper file the resident return and attach the original copy of the W-2 explaining the reason for paper-filing?
I've already advised him that down the road his wife's state will be communicating with him.

I do not understand this question. This is hardly a valid reason to file a paper return in New York and risk a fine. New York taxes based on Federal Income unless you tell them that his income was less by filing the proper forms. I seem to recall that a person can elect to be taxed as a full-year resident even if not true (even though it is true in this situation).

The issue is more likely Massachusetts, which may be best filed on paper with a signed statement on the front indicating that the taxpayer did not at any time live or work in Massachusetts. The fact that the employer did not withhold any taxes to that state (even though attributing income there) may actually support this. I think Lion is accurate with his recent assessment. I would not file and pay Massachusetts nor claim a credit for those taxes on New York by fraudulently claiming part-year residence in Masachusetts. As you know, New York is notorious at researching claims of non-residency and while they may prove that he was not a resident of Massachusetts and is not entitled to a credit to Massachusetts, it is unlikely once you filed a signed return there claiming you owe them taxes that Massachusetts will easily allow you just change your mind.

Just my 2¢.