W2 question

[ETax847]

Client moved out of Illinois in 2020.  One of her W2's shows Illinois income tax withheld but no illinois income.  Income was fully allocated to another state with tax withhheld in this other state.  I get an E-filing error for IL return saying "state tax must be less than or equal to state wages per IDOR"   

Does anyone know how I can have the state tax withheld included without showing any income from that state?

[Lynn EA USTCP in Louisiana]

I'd ask for the final pay stubs.  Maybe the W2 is wrong.

 

[Lee B]

More likely, the W-2 and the final pay stub are correct. The employer probably screwed up one or more paychecks with respect to State Taxable Income vis a vis State WH.

[Pacun]

Was the withholding my mistake or the person actually worked from Illinois? You can change the number on box 16 to accommodate the proration. If not, I would enter box 16 and 17 with the withholding amount and create the Illinois efile file to see if refund changes. 

[Gail in Virginia]

If the W2 is incorrect, the employer should correct it.  If the W2 is correct, then the employer withheld IL tax in error, but may not be able to correct that internally.  In which case, you would have to paper file the tax return to get the withholding back from IL.  At least that is what it seems to me. 

[Lee B]

It's been said that the practice of Accounting is an art form not a science. The same also applies to Tax Accounting.

However Gail is definitely on the right track ! The only correct answer is the employer needs to prepare a W 2c and amend the relevant payroll reports.

Depending on the circumstances. the employer may also need to refund the the IL WH to the the employee.

Playing games with the numbers on the W 2 is really a bad idea!

[ETax847]

Client contacted the payroll dept and they responded they didn't report IL tax because the client lived and worked in another state.  However, the W2 clearly shows IL income tax withheld with no IL income.  Gotta love tax season 

[Lee B]

1 hour ago, ETax847 said:

Client contacted the payroll dept and they responded they didn't report IL tax because the client lived and worked in another state.  However, the W2 clearly shows IL income tax withheld with no IL income. 

Gee, it must have the ghost gremlins that put the number on the W 2

[Medlin Software, Dennis]

Does the W2 show the correct state, or just the incorrect one?

[Pacun]

3 hours ago, cbslee said:

It's been said that the practice of Accounting is an art form not a science. The same also applies to Tax Accounting.

However Gail is definitely on the right track ! The only correct answer is the employer needs to prepare a W 2c and amend the relevant payroll reports.

Depending on the circumstances. the employer may also need to refund the the IL WH to the the employee.

Playing games with the numbers on the W 2 is really a bad idea!

I have seen numerous W-2 with these entries:

box 1 = 15,380.02
DC  box 16 =15,380.02 withheld $300
MD box 16 =15,380.02 withheld $ 600

If the person lives in DC, I ask MD for $600
if the Person lives in MD, I ask DC for $300

I have never sent back the taxpayer to the employer if I know that the states don't grab box 16 as a starting point.

How about when the client tells you, "well I told my employer to withheld for this state and they didn't do it". Do you send them back to the employer or you just tell them that this year they owe money to that state?

 

[Medlin Software, Dennis]

34 minutes ago, Pacun said:

How about when the client tells you, "well I told my employer to withheld for this state and they didn't do it". Do you send them back to the employer or you just tell them that this year they owe money to that state?

The employer only has to withhold for the nexus state(s).  Employee "asks", unless they are already required by statue, are meaningless, and should not be honored, lest their "kindness" creates nexus.

This sort of issue will be very common going forward as employers will have to deal with creating new nexus issues if allowing remote working in a new jurisdiction.