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 on Form W-2, 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 W-2 is compiled in error, and the correct 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 Form W-2, there are a couple 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.
- From within your TaxAct return (Online or Desktop), click on the State tab. On smaller devices, click the menu icon in the upper left-hand corner, then select State.
- Click Massachusetts directly below the tabs
- Click Income Topics to expand the category and then click Wage Adjustment
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. 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 on Form W-2, Box 16 to properly reflect the amount of wages that are taxable to Massachusetts. In this case where wages are doubled in Box 16 of the W-2, you will manually need to make an adjustment to each states' Box 16 so that the total wages reported in all Box 16's are equal to the total
amount of state wages earned.
- From within your TaxAct return (Online or Desktop), click on the Federal tab. On smaller devices, click the menu icon in the upper left-hand corner, then select Federal.
- Click Wages and Salaries to expand the category and then click Wage income reported on Form W-2
- Click Add to create a new copy of the form or click Review to review a form already created
- Click Quick Entry or Step-by-Step Guidance
- If you select Quick Entry, fill in the form to match your paper copy of Form W-2 and be sure to scroll down to answer questions.
- If you select Step-by-Step Guidance, the program will proceed with the interview questions for you to enter or review the appropriate information.
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. Note: You will want to verify the correct amount is still reported on any other state's return that you may also be attached to your return.