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As a Massachusetts resident, all wages earned are taxable to Massachusetts. When a Massachusetts resident works out of state, those wages are still taxable to Massachusetts. Some employers will list in Box 16 the amount that is taxable to the state where the wages were earned, and will also will report the amount of wages that are taxable to Massachusetts, due to the employee's state of residency. Typically there is withholding reported for both states in this situation.

This becomes an issue for residents using MA Form 1, because the amount of taxable wages is often greater than it should be. This occurs because Massachusetts residents are taxed on all wages, regardless of which state they are earned in. Because the wages were listed twice on the W-2, they are now also listed twice on MA Form 1.

The Massachusetts Department of Revenue informs us that this type of W-2 is compiled in error, and the recommended course of action is to request a corrected W-2 showing only the amounts in box 16 attributable to the state in which they are earned, not each state for which the wages are taxable.

If the employer will not issue a corrected W-2, there are several options available to complete your tax return reporting the correct amount of wages that are taxable to Massachusetts.

Option 1: (Paper filing only, E-File not allowed)

The first option to correct this issue is to make the adjustment reducing the amount of wages directly on Line 3 using the Wage Adjustment Field. Enter a negative adjustment in the amount of the wages that were duplicated on Form W-2. This will properly report the amount of wages taxable to Massachusetts. When using this option you are not allowed to E-File because Massachusetts will reject the return due to total wages in Box 16 of form W-2 being lower than the amount reported on line 3. See Massachusetts - Wage Adjustment for instructions on using this option. 

Option 2: (E-File Allowed)

If you want to electronically file your return and cannot get a corrected W-2, you can adjust the amount of wages in Box 16 of Form W-2 to properly reflect the amount of wages that are taxable to Massachusetts. In this case you will need to manually make an adjustment to each state's box 16 so that the total wages reported in all Box 16s are equal to the total amount of state wages earned. When you make this adjustment, you should generally adjust the W-2 so that Box 16 for each state reflects the total amount of wages earned in each state. In addition, you will want to verify the correct amount is still reported on any other states that you may also be attached to your return.

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