Non-resident income tax issues (how exciting)

February 8, 2019 11:18 AM

I'm a little confused about my tax situation for last year due to a mistake made by my employer—they withheld income tax for the state in which they are located; I work remotely from another state. What do?

For the last couple of years, I have lived full-time in state A and worked remotely for an employer whose presence is entirely in state B. Upon receiving my W2, I noticed that they withheld state tax for state B, not state A. Thus, I have paid income tax to state B, in which I do not live and performed no work at all in 2018, but not to state A, where I do live and performed all my work.

So what do I do? This seems like a double-taxing situation for which I should be able to claim a credit on my state A taxes, but intuitively it makes more sense that I would just get a refund from state B? TurboTax is predictably not very helpful on this point.

posted by sinfony to Work & Money (4 answers total)

Best answer: It depends on the agreements between the states:
https://www.thebalance.com/do-i-need-to-file-a-nonresident-state-tax-return-3193323

It seems like you should file in both states, probably getting a full refund from State B and probably paying State A -- but see above.
posted by chesty_a_arthur at 11:25 AM on February 8, 2019 [1 favorite]

Best answer: Chesty has it right but do be careful, as the answers vary by each state involved. Usually you file for a total refund on work-state's taxes and then pay your resident-state taxes, but some states have different arrangements.
posted by praemunire at 11:52 AM on February 8, 2019

As those above have explained, you can get the money back and pay it where it should have been paid. But you might want to talk to someone in your employer's accounting department to make sure it doesn't happen next year.
posted by ubiquity at 12:50 PM on February 8, 2019

Yes, you'll need to file a "non-resident" return for State B and a "resident" return for State A. If this has been your situation for a "couple of years", you might want to make sure that your returns from 2017 and earlier were filed correctly as well.
posted by Johnny Assay at 2:16 PM on February 8, 2019