Full-time out of state Telecommuter W2 problems.

mattx · #1 (**permalink**) 02-15-2011, 04:44 PM

I live and work in MA and for a CA based startup. They withhold Federal and MA state income taxes for me and tell me I have no liability to CA because I have never set foot in the state.

I received my w2 recently though and it has a pretty big error. I need to know what to do about it and what is going to happen.

The w2 correctly reports my full federal wages. It also reports my full wages as MA wages. The problem is that it also RE-REPORTS 1/3 of my wages as CA wages but my employer zeroed out the Tax ID on the CA line because he says there is no CA liability.

So I'm worried about several things.

1) CA will be looking for income tax from me on this 1/3 which I have already paid tax on to MA.

2) Since the CA is duplicating a portion of my MA earnings my two state lines add up to 1/3 MORE than my FEDERAL. I'm afraid this will cause the IRS to come after me for tax on that non-existent 1/3 income.

I have asked my employer to correct this by dropping the CA line from the W2 but they have not done so. I don't know what the correct thing to do is.

Any guidance would be greatly appreciated.

Also DO I HAVE TO FILE NON-RESIDENT CA STATE INCOME TAXES?

Wnhough · #2 (**permalink**) 02-16-2011, 12:20 AM

“I live and work in MA and for a CA based startup. They withhold Federal and MA state income taxes for me and tell me I have no liability to CA because I have never set foot in the state.”---> Correct.
“1) CA will be looking for income tax from me on this 1/3 which I have already paid tax on to MA.”---.No; I assume that you are a full time resident of MA. Then you are not liable for CA state income taxes to CA, but are only liable for MA state taxes as you said; you have never set foot in the state
“2) Since the CA is duplicating a portion of my MA earnings my two state lines add up to 1/3 MORE than my FEDERAL. I'm afraid this will cause the IRS to come after me for tax on that non-existent 1/3 income.”--->Then, you are subject to CA state tax refund on the tax paid to CA.
“Also DO I HAVE TO FILE NON-RESIDENT CA STATE INCOME TAXES?”----->No; you are not liable for CA income taxes.