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March 15, 2023
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My employer list wages from working in two states on my W2 that does not match Box 1 wages

  • March 15, 2023
  • 2 replies
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I moved in August from VA to NC, but remained with my same employer.   On my W2, the sum of wages listed in box 16 for each state exceed the total wages earned in box 1.   It also exceeds the wages listed for SSA / Medicare wages in Boxes 3/5, which is higher due to my 401K contributions.

 

This is a mismatch on earnings reported.  How do I adjust or fix?   I suspect my withholdings from each state are correct, but since wages are inflated it will result in higher taxes due.

 

Is this a mistake by my employer?   Why would my state wages be greater than the Box 1 wages disregarding any 401K contributions I made?

    Best answer by KrisD15

    Please verify that the W-2's are all correct and that one is not a CORRECTED W-2C.

    If you have a W-2C, don't use the W-2 it is correcting.

     

    Assuming none are W-2C's and assuming the state tax withheld is correct:

     

    To enter into TurboTax, you'll need to enter them as if it is one single W-2 (as long as none of them is a W-2C)

     

    I'm assuming the TOTAL of the state income for Both States is more than the federal AND that not either income for either state is more than the federal. 

    For example, Federal is 50,000 and state 1 has 30,000 reported as income and State 2 has 32,000 report, NOT Federal is 50,000 and state 1 is 60,000 and state 2 is 57,000.

    IF EITHER STATE SHOWS MORE INCOME THAN THE FEDREAL INCOME I would ask payroll for a corrected W-2 and ask why they reported it that way.

     

    So, as long as the amount of STATE TAX WITHHELD is correct, you can enter the forms.

    (I tested and did not get an error when entering two states with income that totaled more than the Federal income) 

     

    YOU can allocate your income to each state, regardless of how payroll did. 

     

    I'm also ASSUMING you worked in VA and still work in VA.

    VA taxes the income earned in the state, so doesn't matter where you live. Employees pay tax on whatever wages are earned in VA.

    NC taxes the income someone earns while living in North Carolina, so it doesn't matter where you earned it. 

     

    In this situation, you pay tax on ALL the income earned in VA on a Part-Year Resident VA return. 

    Next you claim the income you earned AFTER you moved to North Carolina on your Part-Year Resident NC return. 

     

    You will receive a credit on your North Carolina return for the tax you paid to Virginia, so you are not double-taxed on the same income.  

    This does not always result in a wash, because North Carolina and Virginia may have different tax rates, credits and so on, but it should be close. 

     

    So what payroll attributed to VA and/or NC doesn't really matter, as long as the amount of state tax that was withheld is correct. 

     

    In reality, from how you describe your situation, they should withhold VA tax on all your income if that is where you work. 

     

    Next year you'll file a NON-Resident VA to claim the income earned while working there and a Resident NC return, 

     

    UNLESS YOU WORK REMOTELY in which case you'll need to continue your question and provide more details.

     

     

     

     

     

     

    2 replies

    KrisD15
    March 15, 2023

    To clarify, 

    are the wages for each state more than the Federal (Box 1) 

    OR is only the TOTAL of BOTH state incomes more than the Federal? 

    **Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"
    TaxguyAuthor
    March 15, 2023

    The two state wages listed in Box 16 of the two W2s  > wages. income listed for Federal (Box 1).

     

    I was given two W2s to account for the two state income wages.   Only one of the W2 listed the federal wages in Box 1.    I was expecting the total state wage incomes to equal the Federal wages (adjusted for 401K contribution).

    KrisD15
    KrisD15Answer
    March 15, 2023

    Please verify that the W-2's are all correct and that one is not a CORRECTED W-2C.

    If you have a W-2C, don't use the W-2 it is correcting.

     

    Assuming none are W-2C's and assuming the state tax withheld is correct:

     

    To enter into TurboTax, you'll need to enter them as if it is one single W-2 (as long as none of them is a W-2C)

     

    I'm assuming the TOTAL of the state income for Both States is more than the federal AND that not either income for either state is more than the federal. 

    For example, Federal is 50,000 and state 1 has 30,000 reported as income and State 2 has 32,000 report, NOT Federal is 50,000 and state 1 is 60,000 and state 2 is 57,000.

    IF EITHER STATE SHOWS MORE INCOME THAN THE FEDREAL INCOME I would ask payroll for a corrected W-2 and ask why they reported it that way.

     

    So, as long as the amount of STATE TAX WITHHELD is correct, you can enter the forms.

    (I tested and did not get an error when entering two states with income that totaled more than the Federal income) 

     

    YOU can allocate your income to each state, regardless of how payroll did. 

     

    I'm also ASSUMING you worked in VA and still work in VA.

    VA taxes the income earned in the state, so doesn't matter where you live. Employees pay tax on whatever wages are earned in VA.

    NC taxes the income someone earns while living in North Carolina, so it doesn't matter where you earned it. 

     

    In this situation, you pay tax on ALL the income earned in VA on a Part-Year Resident VA return. 

    Next you claim the income you earned AFTER you moved to North Carolina on your Part-Year Resident NC return. 

     

    You will receive a credit on your North Carolina return for the tax you paid to Virginia, so you are not double-taxed on the same income.  

    This does not always result in a wash, because North Carolina and Virginia may have different tax rates, credits and so on, but it should be close. 

     

    So what payroll attributed to VA and/or NC doesn't really matter, as long as the amount of state tax that was withheld is correct. 

     

    In reality, from how you describe your situation, they should withhold VA tax on all your income if that is where you work. 

     

    Next year you'll file a NON-Resident VA to claim the income earned while working there and a Resident NC return, 

     

    UNLESS YOU WORK REMOTELY in which case you'll need to continue your question and provide more details.

     

     

     

     

     

     

    **Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"
    March 15, 2023

    that can be correct. state laws for what's included in wages and what's not differ from state to state and may not match box 1 wages