Working from home state 75% of time and 25% in RI - not sure my W-2 is correct

Forum|Forum|2 years ago
February 3, 2024
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Prior to this year all of my work was done within my home state.

In July of 2023 things changed. I work from home 3 out of 4 weeks (MA - 75%). The fourth week I now working in our RI office instead of Boston (RI - 25%).

I filled out a form with my employer on July 17th so they would start correctly handling the tax-related information correctly. The first half of the year, everything was earned in Massachusetts. Second half - 25% was in RI.

My W-2 does have two separate sections so I see state tax info for both MA and RI. That is good.

Let's pretend the amount for my overall earnings for the Federal Tax Return is $1000. This my full earnings for the year in both states combined. I see that in Box 1 on Copy B to use for the Federal tax return.

For the MA State info, it's showing this same full $1000 amount as the MA State wages in Box 16 and then the MA taxes taken out in Box 17.

For the RI State state wages, it's showing a lesser amount, about 15% of this $1000 total, in the state wages box 16. (for this example $150). This makes sense to me since it was only half of the year that I was working in RI 25% of the time. So it would be prorated down.

It seems to me that having the full amount I earned in boths states in the MA State wages box is wrong and is overstating my income in MA. This then makes it appear I underpaid MA taxes and now owe the state money. Shouldn't the state wages for MA be the remaining 85% ($850) so that the MA and RI State Wages sum to the full $1000?

Thanks everyone.

TomD8

Employee

Your home state of MA can tax ALL your income, including the portion you earned in RI.

Your non-resident state of RI can tax only the income you earned by physically working in RI.

You must file a tax return in both states.

You'll be able to claim a credit on your MA return for the taxes paid to RI, so you won't be double-taxed.

In TurboTax, be sure to complete the non-resident RI return before you do your MA return, so that the program can calculate and apply your credit.

**Answers are correct to the best of my ability but do not constitute tax or legal advice.

kcieplikAuthor

Thank you so much Tom. I appreciate it. I did the MA State tax return first and then the RI one, so that may not have helped.

In Turbotax, when I look at the 'Income Taxed by Rhode Island' section, they appear to be partially wrong, maybe because of this timing.

The '5% income on which you paid tax' value is correct & matches what I have on my W-2 for RI State Wages (box 16).
The 'Income Tax paid on this Income' was a bit lower so I fixed it to match what was in box 17 (state income tax ) for RI, which then resulted in hitting the max credit of $1000. Please let me know if you think I did anything wrong here.

Unfortunately after all of this, I owe money to MA for state taxes which is not covered by the refund I get from RI. I claim zero exemptions so they are already withholding the most for taxes (versus claiming exemptions).

In case you know:

Any suggestions/thoughts on why I would still owe money if they were taking the appropriate withholdings along the way, with no exemptions, and I am getting a federal refund?
Is there any way the refund from RI could automatically be applied to the $ owed MA to minimize what I need to pay out of pocket?

Thanks again. I really appreciate it. I knew this would be a learning year, doing this for the first time around.

TomD8

Employee

"I did the MA State tax return first and then the RI one, so that may not have helped."

>Doing your state returns in the incorrect order will likely result in both returns being incorrect.

>The "other state credit" amount is based on the calculated tax due to the non-resident state, which may (and usually does) differ from the amount withheld as shown on the W-2. Also, the "other state credit" may not exceed the tax due to the home state on the taxed amount. There is no "max credit of $1,000".

>No, a refund from one state may NOT be automatically applied to the tax due to another state.

**Answers are correct to the best of my ability but do not constitute tax or legal advice.