Question

Work/live in separate states (OH/AL) but W2 shows withheld state income taxes for my non-residential state

Forum|Forum|4 years ago
February 8, 2022
1 reply
0 views

I live in Alabama and worked remotely for a company in Ohio. My W2 shows Ohio and lists paid state income taxes. When attempting to complete my TurboTax state taxes for Alabama, my Alabama-earned income/taxes paid show as 0. Reading prior questions here, I believe I should have paid state taxes to Alabama instead of Ohio. Therefore, I want to report 100% of my income as Alabama-earned. However, TurboTax tells me that I cannot file Alabama taxes digitally if I edit any W2 information and must instead submit a paper filing.

I'm confused by the situation, but this is my current interpretation: file paper taxes to Alabama, file for a non-resident refund in Ohio. I'm unsure if I can file for a refund in Ohio on TurboTax (I didn't plan on filing for OH at all) and am generally unsure of how to proceed for both states.

R

RaifH

It depends if you are a full-time resident of Alabama or only telecommuting temporarily due to the pandemic. If you are a full-time resident of Alabama, then you would be responsible for paying taxes to Alabama. However, you cannot do this by altering information on your W-2. That tax has already been collected for Ohio. You will have to file a nonresident return in order to have those taxes refunded. Ohio has been collecting locality taxes on its remote workers and you may not get those back, but Ohio state taxes will be fully refundable to you if you file an Ohio state return. You will still be able to file your entire return electronically. You will also have quite a large balance due to Alabama since no tax has been withheld during the year. The refund you get from Ohio should offset this.

To do this in TurboTax, enter Alabama as your resident state, and when it asks if you earned income in any other state, enter Ohio. On your state returns, begin with the Ohio nonresident state return and make sure that none of your income is allocated to Ohio. You should get all taxes collected refunded to you. If this is the case, you will also want to make sure your company is withholding Alabama state taxes to avoid this headache in the future.

If, on the other hand, you have only temporarily relocated to Alabama, then you would not need to file an Alabama return as they have ruled they are not taxing temporary residents who have moved there for pandemic-related reasons.