State Tax Question

[Logan]

Hoping this is something that others have gone through in the past and can help me with...

So I started a new job in September and in doing my taxes, I'm confident I was able to take care of everything correctly as far as managing the multiple W2s. There were a couple things I was keeping an eye on that look like they were handled correctly once the wages were added together.

My new employer messed up when I got hired and listed me as working in Illinois (my direct boss is out of Chicago) while I worked and lived in New York (true, at least through 2014). I had them correct it but it took some time to work through the system, and I was paying both IL WH and NYS/NYC WH for a few pay periods. I had a W2 showing my state wages and taxes withheld for both states: IL was about half of the wages for the year, NY was the full amount for the year and matched Box 1 on the W2.

Looking around it seemed like an easy fix: I would file a nonresident return for Illinois, claim $0 in income earned in the state, and I'd get a refund for the full amount that was withheld. And I did all that, my IL refund was the correct amount, and my $ owed to New York looks right.

My question is this (I use TaxAct if that helps): where should I be making that adjustment to $0 in state wages for Illinois?

a) In the Federal section where I'm entering my W2 information box by box (so instead of entering what is reported on there, I'd enter $0 in Box 16 despite it being roughly half of my reported wages for this job)

b) Within my IL state return, where I can override what has been auto-populated based on my W2 entries, and make my state wages $0.

Not even sure if it matters, as it might get scrutinized more closely in either case, but I could see the former setting off a larger red flag as it seems like such an easy catch. And while it won't be the worst case if I get questioned on it, as I can defend it, I'd rather not deal with any headaches obviously.

Thanks!

[CU Tiger]

The fed doesnt care at all about state wages.
The states care a lot.
I wouldnt wory about what the Fed shows as far as state wages. What is going to suck is next year you will have to pay taxes on the return from IL that never should have been.

[Logan]

Originally Posted by CU Tiger

The fed doesnt care at all about state wages.
The states care a lot.
I wouldnt wory about what the Fed shows as far as state wages. What is going to suck is next year you will have to pay taxes on the return from IL that never should have been.

Help me understand what you mean by that last sentence. What would I be doing next year?

I've always gotten a refund from the feds and have owed my states so this would be new for me, even ignoring the whole non-resident, "I never even earned money in your state" issue. So any additional info you can offer would be helpful.

[stevew]

Say you paid 1000 to IL, you wouldn't be taxed on that amount federally,

Next year you will report that you made 1000 from IL in a refund, and that amount will be taxed.

I believe that is what he means.

[Logan]

I see. But would that be the case even if the extra $1000 that I end up collecting from IL was ultimately paid in NY tax?

I'm not sure if this makes it more or less clear. But my reported wages to IL are included in the wages that were reported to NY. Lets say my W2 shows $20K in federal wages. The same W2 shows $10K in IL state wages (at a 10% state tax rate, there's your $1000), and $20K in NY wages. I don't think NY expects me to pay anything less to them just because a portion of my wages were allocated to IL, as my NY wages = my federal wages.

Incorrect?

Fuckin HR.

[stevew]

Originally Posted by Logan

I see. But would that be the case even if the extra $1000 that I end up collecting from IL was ultimately paid in NY tax?

I'm not sure if this makes it more or less clear. But my reported wages to IL are included in the wages that were reported to NY. Lets say my W2 shows $20K in federal wages. The same W2 shows $10K in IL state wages (at a 10% state tax rate, there's your $1000), and $20K in NY wages. I don't think NY expects me to pay anything less to them just because a portion of my wages were allocated to IL, as my NY wages = my federal wages.

Incorrect?

Fuckin HR.

I was just speaking federally. Unless you're at super mega baller status I doubt it would totally be that much money overall. I think that's what CU was saying.

So for example, if your federal adjusted gross after all the deductions was supposed to be 50k, but once you subtract the 1000 in taxes paid to IL that means you're paying taxes on 49K instead this year. Then next year if it's also 50k again, you'd have to add back the 1000 you got from IL in a return and pay taxes on 51K, meaning I think that basically it shouldn't be that much money(say you save $350 on fed this year and pay an extra $350 next year).

Don't go on a coke and hookers binge or anything and get divorced, that could make it a much worse situation.

[Logan]

That make sense (except for the advice at the end). Thanks.

[CU Tiger]

Sorry if I confused it any I sent a much longer post from my tablet but it looks like less than 1/3rd of it showed up for whatever reason.

This is what happened to me and why I said what I said at the end of my earlier post.

About 2 years ago I re-joined the work force and went to work as a consultant/sales engineer for a national company. My division is headquartered in TN the nearest brick and mortar to me is in NC however I am a resident of SC. We are largely satellite employee based and I was assured I would be coded as a SC employee. I was not originally I was coded as an NC employee. It took 6 months to straighten it out.

So at the end of the year I had essentially a net $0 to fed.
Lets say I earned 100k for easy numbers.
NC showed I had earned $50k and paid taxes on $50k but owed no taxes so that money paid was refunded. (I think it was at 7.75%) SO I got a refund check of roughly $4,000.

Now SC I had to file that I had actually made $100k that year and only paid taxes on $50k. The SC income tax was 6%. So since deduction had only been taken for 6 months I had only paid in $3,000 yet I owed $6,000 so I had to pay SC $3,000. No big deal the NC refund offsets that.

UNTIL the next year. I had to claim the NC $4,000 REFUND as stated income for the state of SC the following year so they were able to again tax that money at 6% and got another $250 out of me.

Not enough to break you either way but enough to piss me off.

[Logan]

Thanks CU. Annoying, agreed.