State tax mishap

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Topic Author
Statch
Posts: 115
Joined: Mon Apr 08, 2013 2:23 pm

State tax mishap

Post by Statch »

I'm retiring on January 3d from a federal agency. I live in Maryland now, and will be moving to Georgia the week after I retire. Last week I submitted a state withholding change form to payroll with a note asking them not to apply it until the first paycheck that will be paid after I move. Unfortunately (which I should have foreseen), they did it immediately, so the paycheck I just got has mistakenly had Georgia tax withheld, not Maryland. I called the payroll hot line and was told that they would not be able to change it retroactively because the data for the 2013 W2s has already been submitted. I asked if I should submit another change to have this next paycheck have Maryland tax withheld, then switch it to Georgia for the next paycheck (and the subsequent payout of my annual leave), and she recommended just leaving it the way it is. I'm still trying to decide whether to do that or make them change it back, then change it back to GA once again.

My husband and I are trying to figure out how to handle this on our 2013 taxes. We intend to do whatever's right; it's just hard to know at this point what that is. I wonder if anyone here has had any experience with something similar? Should I just go after payroll to make them issue a retroactive change to the W2 once we get it before we have to file, to make sure that the correct amount of income is reported to Maryland? (Of course I won't be working there at that point so dealing with payroll may be a little tricky, though I'm sure it can be done.) My husband was thinking maybe we could report it under 'other income,' so that we pay the tax but don't have to worry about the W2? I still need to research the Georgia angle, but I'm assuming that we'll be either under an income limit for taxes so will get it back or be able to report it to them as a mistaken withholding and get it back that way, since we'll have taken care of it (one way or another) on the Maryland end. Could be wrong, though. The total tax withheld will end up being about $500-600 between the two paychecks (and would have been about $750 if MD tax had been withheld).

Anyone have any thoughts about the easiest way to handle this to do the right thing but minimize the paperwork? (Between retiring, moving, and trying to get a SS paperwork mess straightened out, I'm kind of paperworked out right now :happy.)
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frugaltype
Posts: 1952
Joined: Wed Apr 24, 2013 9:07 am

Re: State tax mishap

Post by frugaltype »

Do I understand that the last one or two paychecks you'll likely ever receive are involved?

The problem is you have state tax withheld for a year in which you aren't working in that state?

If so, I would just write a letter to the state tax people explaining the problem and ask for the money to be returned to you. I'm not sure if they will do that before the end of the tax year. You might phone them up and see what they say. I live in a small state, with intelligent state tax people; your mileage may differ.
Topic Author
Statch
Posts: 115
Joined: Mon Apr 08, 2013 2:23 pm

Re: State tax mishap

Post by Statch »

It's the last two before I move to Georgia. One final paycheck will get paid out after I move, then I'll get the payout of my annual leave while I'm in Georgia as well. So the plan was to have Maryland tax withheld for these two paychecks, then switch to GA withholding for the final paycheck and the A/L payout. It should have occurred to me that this is way too complicated and that they might just grab and apply the form, and not read the email!

So it's a problem on both ends. I've earned income in Maryland that won't be reported to MD, and I've had money withheld by GA that I don't owe to them. I am assuming that the GA part of it will be relatively easy to fix as long as I end up paying the money to Maryland, but it's how to best fix the Maryland part that's concerning me. I'm also trying to figure out if there's anything I can or should do now before I retire, or just wait and work it out after I retire when I have time during the day to deal with it.
Calm Man
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Joined: Wed Sep 19, 2012 9:35 am

Re: State tax mishap

Post by Calm Man »

I would pay GA for the one paycheck period declaring a 2 week residence and MD for the rest.
sscritic
Posts: 21853
Joined: Thu Sep 06, 2007 8:36 am

Re: State tax mishap

Post by sscritic »

There are two separate issues: income and withholding; they are on different parts of the W-2.

Code: Select all

15 State  | Employer’s state ID number         16 State wages, tips, etc.        17 State income tax
There are two lines for two states for 15, 16, and 17.

If your W-2 has a Georgia line that has a $0 for 16 and $123.12 for 17, what is wrong?

Option 1: file a non-resident Georgia income tax form, showing zero income and the $123.12 of withholding. Apply your refund to your 2014 GA taxes.
Option 2: the same as Option 1, but ask for a refund.

Note that by filing in GA, GA will already have your new address all ready for next year.

Now if your W-2 is wrong, either in the income or the withholding, you can ask for a corrected W-2.
MarkNYC
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Joined: Mon May 05, 2008 7:58 pm

Re: State tax mishap

Post by MarkNYC »

Calm Man wrote:I would pay GA for the one paycheck period declaring a 2 week residence and MD for the rest.
Really? You would file a 2013 part-year GA resident return, declaring untruthfully and under penalty of perjury that you were a resident of GA for the last part of the year? Suppose in late December the taxpayer took a minimum distribution, or realized a large capital gain. Would you also include that income on the GA return, since it was received during the fictitious GA resident period? Knowingly preparing a tax return incorrectly in order to save a little time and paperwork can sometimes backfire in unexpected ways.
MarkNYC
Posts: 2999
Joined: Mon May 05, 2008 7:58 pm

Re: State tax mishap

Post by MarkNYC »

Statch wrote:
My husband and I are trying to figure out how to handle this on our 2013 taxes. We intend to do whatever's right; it's just hard to know at this point what that is. I wonder if anyone here has had any experience with something similar? Should I just go after payroll to make them issue a retroactive change to the W2 once we get it before we have to file...
sscritic has the right approach. If you want to do what's right, here's what I suggest. After you receive your W-2, go back to payroll and insist they issue a corrected GA W-2 showing "corrected" GA wages to be zero. Do not take no for an answer. They won't change the GA tax withholding since those funds will have already gone to GA. File a full-year MD return reporting 100% of your federal wages as taxable to MD, regardless of the MD wage amount on the W-2. File a nonresident GA return showing zero income and the $600 or so GA tax withheld. Attach to the GA return a copy of the both the original and corrected GA W-2. The $600 GA refund will mostly offset the shortfall in MD withholding on your MD return.
Topic Author
Statch
Posts: 115
Joined: Mon Apr 08, 2013 2:23 pm

Re: State tax mishap

Post by Statch »

Thank you! This is the kind of help I was looking for. I need to show this to my husband, who does our taxes, so may be back with more questions. We are definitely going to do it right -- there's never any point in messing with the taxman.
Topic Author
Statch
Posts: 115
Joined: Mon Apr 08, 2013 2:23 pm

Re: State tax mishap

Post by Statch »

Thanks again to everyone for the answers, which were very helpful. I ended up submitting a payroll form to switch my taxes back to Maryland for that next paycheck so that I won't have problems with my 2014 W2. I called payroll back and they did confirm that they can't retrieve the taxes that were erroneously paid to Georgia, but they are going to amend my W2 right away, so the W2 I receive in January or February will be correct. That way I won't have problems with my 2013 Maryland taxes, and I can apply to Georgia for a refund of the amount that was erroneously withheld. Payroll was very helpful, and I feel good to be getting it fixed.
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