Can the same income be W2'd to two states?

[equinecpa]

I have a client who lived in MO (part-year) and then in OR (part-year). She worked in Kansas until she moved to OR.

Her W2 has the following

Fed Box 1 Wages: 110000
KS state wages: 110,000
OR state wages: 11000

So in essence the $11,063 she earned while in OR (which I think is severance pay of some kind) has been allocated to KS and OR. Can this be correct? It seems odd to me that is allocated to both states.

Thanks

Carolyn

[thomtax]

I can't speak to individual state laws, but the usual thing is to see

Fed 110,000
KS 99,000
OR 11,000

There may be some quirk in Kansas law but my feeling is that someone made a mistake in keying in state figures.

I had several from one company this year that, even though employees only worked in one state, showed amounts higher for state earnings than for Federal. It was a payroll company and they were adamant that they were right, I was stupid, and that there would be no corrected returns. They then would not talk to me any more. About a month later, the employees received a corrected W2. I guess that they are still not talking to me.

LT

[equinecpa]

That's kind of what I thought it "should" look like. I'm sure if I call the payroll department at this point in time they'll give me a song and a dance. I guess I can try...any other thoughts?

Just called payroll person...absolutely no help at all.

[DaveO]

This is pretty common

A Hospital that has a branch in IA and in NE does this to one of my clients from time to time. Usually they correct it. Highway contractors are another group that gets it wrong pretty often. I wonder how they get it straight with unemployment.

[erchess]

Interesting Thread

I would have guessed that most if not all states would tax severance pay from jobs in their states even if the TP moved out before receiving it and that most if not all states would tax pay of any kind actually or constructively received while a resident of that state. Thus it would not have occurred to me to question the W2 Carolyn's client received.

As we all know getting a company itself or its payroll company to change a W2 is usually quite difficult. What do you do if you are convinced a W2 contains a material error and you can't get the provider to change it? When I worked for a storefront firm I was taught to always go with the documentation and if there was any reason to think that the documentation was wrong then getting me corrected documentation was entirely the client's responsibility.

[Lion]

See It

I see it much too often, even doubling income on the states. (CT is small, so lots of NY income and RI and MA and NJ and PA and...) Luckily, almost all the states I end up dealing with start with Federal AGI and work from there. For part-year issues, I usually request the paystub closest to the move to see how much was earned while a resident of the first state. Usually, the company does an OK job of allocating the correct amount to the primary work location state; it's the resident state and secondary work locations that can look way too large. It's not too hard if your client has his pay stubs and knows moving dates and remembered to fill out new withholding forms when his company transfered him to a new state. Or, if it's only two states and you think the company has one of them correct. Otherwise, good luck sorting it out.

[BOB W]

As I recall, most states have an allocation schedule where you show days work in-state and out-of-state causing the same income to not be taxed in each state. Review the states involved for such a schedule.

[JohnH]

I've hand-prepared allocation schedules for NC, SC, VA, GA, etc when I thought the W-2 was incorrect and have never seen a question come back on any of them. Usually these are reconstructions from check stubs or client estimates. I just attach my worksheet to the state return, even if the state has their own allocation schedule (which I also fill out using the numbers from my worksheet).

Most of the states I'm involved with will piggy-back on the Federal AGI and I don't think they pay much attention to the state income figure on the W-2. It may be a different story if the state requires the starting number to be the State income shown on the W-2.

[veritas]

The W2

could be correct.

Oregon for instance taxes nonqualified retirement pay earned while in Oregon even if you receive it as a nonresident.

So Oregon taxes the income and the other state taxes the same income. You would get a credit on the resident state return for the Oregon tax.

[joanmcq]

NY taxes all income earned in NY, even if you telecommute to NY and never set foot there.

[veritas]

California

You are considered a resident if you visit Disneyland three or more consecutive days.

[erchess]

You are considered a resident if you visit Disneyland three or more consecutive days.

I'm channeling BHoffman here and asking you to please learn to use smilies so the rest of us can be sure when you are joking.

[David1980]

This is actually a pretty crappy situation. It's not uncommon to see a W-2 with something like 100,000 in box 1, 80,000 as NJ wages and 100,000 as NY wages. What the real story behind that W-2 is, is that it's a full year NY resident (thus 100,000 is taxable to NY) who drove over the border into NJ and earned 80,000 of his wages in NJ (and thus 80,000 is taxable to NJ.)

I don't bother trying to get corrected W-2's because I don't know what a correct W-2 would be. The federal directions for a W-2 are very unclear in boxes 15-20, seems almost as if the state can put whatever it wants to put in there (for example you might see a W-2 with $60,000 in box 1 and $65,000 in box 15 for NJ due to state tax differences.)

At the same time other states such as California require that the total of all state wages on a W-2 sum up to the amount in box 1 in order to efile. (And yet other CA documentations requires you to report wages on the W-2 for nonresidents of CA which means the wages would also be reported in the resident state as wages which means CA would not accept a W-2 prepared according to their directions electronically...)

So basically all the states are starting to have separate expectations (with CA different expectations for the same state!) as to what the state lines should include. You either change the data when inserting it into the computer, perhaps you preparer a substitute W-2 (it is to be used for a non-received or incorrect W-2 after all) or mail the return (but not in a state that has a mandate...)

So like I said, it sucks.

[DonPriebe]

The NY W2 is correct

It's not uncommon to see a W-2 with something like 100,000 in box 1, 80,000 as NJ wages and 100,000 as NY wages. What the real story behind that W-2 is, is that it's a full year NY resident (thus 100,000 is taxable to NY) who drove over the border into NJ and earned 80,000 of his wages in NJ (and thus 80,000 is taxable to NJ.)

I don't bother trying to get corrected W-2's because I don't know what a correct W-2 would be.

The W2 is correct per NY Pub 50 (Employer’s Guide to Unemployment Insurance, Wage Reporting, and Withholding Tax)

• Full-year New York State resident employees — The amount of wages that must be reported in the State wages, tips, etc. box on federal Form W-2 is the same as the amount of federal wages required to be reported in box 1, Wages, tips, other compensation.

Since the amount in the state wages box is not explicitly used anywhere on the state form, no harm is done.

[joanmcq]

That is a situation where the wages are taxed to both states, but you get a credit for the double taxed income. Unless there is a reciprocity agreement between the states, you will see that situation where income is earned in a different state than where the taxpayer has residency. The general rule is you are taxed where you earn it and taxed where you are a resident. Usually, the resident state will give a credit for taxes paid to another state if the income is double taxed. If you do multi state returns, invest in the tax book states edition or another multi state guide. You don't adjust the W-2s unless you want your client to get nastygrams from the states down the road.