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Subject Author Date
Another Multi-State Dilemma acne_is_incurable 10-27-2006
Posted by acne_is_incurable on October 27, 2006, 10:55 pm
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 My employer deducted taxes for two states last year.
Assuming my salary was $1,000,000 (hypothetically, from a
single employer), the W2 shows NY income to be $1,000,000
and Hawaii income to be $700,000. Obviously the sum of the
parts exceeds the whole. Being a law abiding citizen, I had
witholding done for two states. Probably a big mistake doing
it so early, but better to overpay than underpay.

The distribution of pay works out more closely to $666,000
(NY) and $334,000 (HI). NY accepts my claim of $666,000 in
taxable income, while Hawaii insists on $700,000. I became a
resident of HI last year. Here are my questions:

1. Do I ask my employer to issue a W-2C at this late date?

2. Do I sign an affidavit stating that the W-2 wrongly
allocates income, and hopefully get Hawaii to accept it?

3. Get a tax attorney to fight this?

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Posted by Katie on November 1, 2006, 4:52 pm
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 acne_is_incurable@hotmail.com wrote:

> My employer deducted taxes for two states last year.
> Assuming my salary was $1,000,000 (hypothetically, from a
> single employer), the W2 shows NY income to be $1,000,000
> and Hawaii income to be $700,000. Obviously the sum of the
> parts exceeds the whole. Being a law abiding citizen, I had
> witholding done for two states. Probably a big mistake doing
> it so early, but better to overpay than underpay.
>
> The distribution of pay works out more closely to $666,000
> (NY) and $334,000 (HI). NY accepts my claim of $666,000 in
> taxable income, while Hawaii insists on $700,000. I became a
> resident of HI last year. Here are my questions:
>
> 1. Do I ask my employer to issue a W-2C at this late date?
>
> 2. Do I sign an affidavit stating that the W-2 wrongly
> allocates income, and hopefully get Hawaii to accept it?
>
> 3. Get a tax attorney to fight this?

From the facts given it is impossible to tell whether the
W-2 is correct or not. For example, if you did some work
for your employer in Hawaii while you were still a NY
resident, the Hawaii W-2 could be right.

Katie in San Diego

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<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
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<< to this newsgroup as well as our anti-spamming policy >>
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<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

Posted by mathcircle on November 1, 2006, 4:52 pm
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The key is your state of residency.

Let's say you were a resident of NY the entire year, but you
traveled to HI and did $700K worth of your work for your
employer on site in a Hawaii location.

Because you are a legal resident of NY, you owe tax to NY on
the whole million dollars.

Because you did $700K of the work in HI you owe tax to HI on
$700K.

BUT, the saving grace is that you can take a CREDIT against
your NY tax for what you paid to HI.

So, in essence, it doesn't much matter how your income is
split across the two states. NY will tax all of it and give
you a credit for whatever you had to pay to Hawaii.

(This is something of an oversimplification and if Hawaii's
tax rates are significantly higher than NY's, which I would
tend to doubt, you might not get a full dollar for dollar
credit, but hopefully it should work out pretty well in
terms of avoiding double taxation.)

Now, on the other hand, if you CHANGED your state of legal
residence midway through the year, all bets are off on
figuring this all out.

Multistate returns are tricky to do right--for the amount of
money you're talking about here, you really should have a
professional do it!

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

Posted by San Diego CPA on November 2, 2006, 12:58 am
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Note to original poster: both of the previous responses are
accurate (i.e., the one shown below and the one from "Katie").
Multi-state returns are often tricky in their simplest form,
for example, when their is not change in residency during the
year, and much more difficult when you relocate.


> The key is your state of residency.
>
> Let's say you were a resident of NY the entire year, but you
> traveled to HI and did $700K worth of your work for your
> employer on site in a Hawaii location.
>
> Because you are a legal resident of NY, you owe tax to NY on
> the whole million dollars.
>
> Because you did $700K of the work in HI you owe tax to HI on
> $700K.
>
> BUT, the saving grace is that you can take a CREDIT against
> your NY tax for what you paid to HI.
>
> So, in essence, it doesn't much matter how your income is
> split across the two states. NY will tax all of it and give
> you a credit for whatever you had to pay to Hawaii.
>
> (This is something of an oversimplification and if Hawaii's
> tax rates are significantly higher than NY's, which I would
> tend to doubt, you might not get a full dollar for dollar
> credit, but hopefully it should work out pretty well in
> terms of avoiding double taxation.)
>
> Now, on the other hand, if you CHANGED your state of legal
> residence midway through the year, all bets are off on
> figuring this all out.
>
> Multistate returns are tricky to do right--for the amount of
> money you're talking about here, you really should have a
> professional do it!

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

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