Client, a Virginia resident, receives Florida W-2 with zero state tax. Does he pay Virginia taxes on this income? No credit on Form OSC?

[itonewbie · Accepted solution]

Provided your client was a full-year tax resident of VA, VA income tax would be due on the FL W-2.  Since FL has no SIT, there will be no credit to claim even if the compensate was derived from services performed without the state of VA.

Question is why there is a FL W-2 if your client was a full-year tax resident of VA.  If your client telecommuted for a FL employer from VA, the FL employer would still be obliged to report and withhold VA taxes on the wages.

Given how you phrased the question, my presumption is that it is not a case where your client relocated to/from VA.  If so, it would depend on whether there was sufficient ground for your client to terminate residency, when that occurred vis-a-vis the receipt of that income, and where the services related to that income were performed.

[Greta]

Client was employed by a company that worked him in three different states. Occasionally I run into clients who travel and work in several states but are employed by one company. I have never understood why they get their state withholding split among the states. It sure makes preparing their state returns unpleasant for me and I have to buy separate softwares for the non-Virginia states. I assume the company's CPA (who knows more than I do) tells them that they must split up the state withholdings. After enough annoyance, I tell them to go to H&R Block.

[itonewbie]

What they should do is report 100% to the resident state and also whatever amount that is attributable to the other states these employees traveled to on business.  Some companies like accounting firms rely on timesheets for these allocations and reporting.  That is the proper thing to do.