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Virginia non-resident HELP!!!

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I hope someone from Virginia can help me.

I've never done a Virginia return, and this one is kicking my butt.

Non-resident, TP lived in DC, but has VA income (then moved to OR, because 2 states isn't complicated enough). 

I'm trying to figure out how to allocate the non-Virginia income so he doesn't have to pay Virginia taxes on all of his income.

Now, it seems stupid to me that the software can't figure out that if the W-2 has VA in box 15, then heck, maybe that's the VA income? And if box 15 has anything other than VA in it, ya think maybe that's NOT VA income? I mean, I know there are exceptions, but it seems to me that they could at least default to that, and allow over-writes, rather than defaulting to ALL income, regardless of the state, is taxable to ALL states, and force the preparer to over-write ALL the state software.

But whatever.

Now, I've done part-year/nonresident state returns for at least 8 or 9 different states -- including NY and CA, two of the most complicated in the country -- and they all have a very clear place for the preparer to enter federal vs. state income.

There is nothing like that anywhere on the Virginia forms that I can find.

So I'm in the Form 763, line 9, and it's trying to charge all $50k of income as Virginia source income. Which it isn't. I look at lines 1-8, and the only place that looks even remotely like where I would enter non-Virginia-source income would be line 7.

So I click on the little blue magnifying glass on line 7, and it takes me to Schedule 763 ADJ. The only place there that looks like it might fit the bill is "Other Subtractions." (Because it really doesn't belong anywhere else.) So I click there, and it lists every fracking obscure type of income, except for PLAIN OLD ORDINARY INCOME THAT ISN'T EARNED IN VIRGINIA?!?!?!?!?

So where do I put non-Virginia income?!?!?!?

To top it all, I quoted $350, and the customer thinks that's too high, so I might just give everything back to the customer and tell them to go to H&R Block, because I'm so frustrated with this.

But I would like to know if Virginia really thinks it's entitled to double-taxation of everyone's income?

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[I'm getting an Authentication Error, trying to post this, apologies if it posts multiple times!]

First, some clarifications.

Sounds like your client was a part-year DC 1/1/19 - x/x/19 and part-year OR x/x/19 - 12/31/19 resident.

Was the VA income only from a W-2 and only while the client was a DC resident?  VA & DC have reciprocity when it comes to wages, so they are taxable on the DC resident return.  Sounds like the employer may have withheld VA taxes in error.  If that's the case, you might not need a VA 763.  Instead you need a 763-S with Exemption 1 selected:

https://www.tax.virginia.gov/sites/default/files/taxforms/individual-income-tax/2019/763-s-2019.pdf

The bad news is I think these still have to be paper filed (with the W-2 attached).  The worse news is that this income is going to be taxable to DC without any DC income tax withheld so you probably have a big balance due and possible underpayment penalties.

To get ProSeries to not cough up a hairball, on the W-2 entry, enter $0 as VA wages and the full amount as DC wages (add an extra state line below VA).  Be sure to set up the part-year and non-resident stuff at the bottom of the Fed Info Wks (PY DC, PY OR, NR VA).  The VA NR Wks should pick up the $0 wages from the W-2, you may need to enter other $0 amounts but it should be easy to chase down any red boxes.  I'll leave DC vs. OR for you to figure out, but ProSeries does a pretty good job of pulling the data from the PY Wks.

Once you have that stuff sorted out, go into the VA state and see if you can find where to tell it to use a 763-S instead of a 763.  I don't have the software in front of me right now but it shouldn't be too hard to find.

View solution in original post

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Level 10

[I'm getting an Authentication Error, trying to post this, apologies if it posts multiple times!]

First, some clarifications.

Sounds like your client was a part-year DC 1/1/19 - x/x/19 and part-year OR x/x/19 - 12/31/19 resident.

Was the VA income only from a W-2 and only while the client was a DC resident?  VA & DC have reciprocity when it comes to wages, so they are taxable on the DC resident return.  Sounds like the employer may have withheld VA taxes in error.  If that's the case, you might not need a VA 763.  Instead you need a 763-S with Exemption 1 selected:

https://www.tax.virginia.gov/sites/default/files/taxforms/individual-income-tax/2019/763-s-2019.pdf

The bad news is I think these still have to be paper filed (with the W-2 attached).  The worse news is that this income is going to be taxable to DC without any DC income tax withheld so you probably have a big balance due and possible underpayment penalties.

To get ProSeries to not cough up a hairball, on the W-2 entry, enter $0 as VA wages and the full amount as DC wages (add an extra state line below VA).  Be sure to set up the part-year and non-resident stuff at the bottom of the Fed Info Wks (PY DC, PY OR, NR VA).  The VA NR Wks should pick up the $0 wages from the W-2, you may need to enter other $0 amounts but it should be easy to chase down any red boxes.  I'll leave DC vs. OR for you to figure out, but ProSeries does a pretty good job of pulling the data from the PY Wks.

Once you have that stuff sorted out, go into the VA state and see if you can find where to tell it to use a 763-S instead of a 763.  I don't have the software in front of me right now but it shouldn't be too hard to find.

View solution in original post

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Yup. W-2 wages with DC and VA. Wow, I've never seen that before, and now that I'm looking at it, I don't think I've ever done a DC return, either. You east-coasters, I swear ....

I'll check in with the client, but it looks like what you say is correct, and the employer made a mistake. And I might just throw the whole thing back at the client since they're already balking at the price with 3 states and 9 pages of stock trades including a metric crap ton of wash sales. 

THANK YOU!!!! Now, get some rest. Isn't it like 4AM where you are?

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I think your $350 is not unreasonable (except it might be on the low side).  I hate part-year states.  Being in VA, our state return pretty much automatically fills itself out based on the federal.  There are a few obscure items (LTC insurance, 529 plans) that need adjusting at the state level, but for 80% of my VA returns it takes no extra time to do the state once the federal is done.  PY returns are a completely different animal.  I explain to folks that it's 3X the amount of work I would normally have to do.  Your 1099-INT shows how much interest you received during the year.  It does not tell you how much you earned in VA vs. OR.  So not only do we have to enter 3X the data, we can't get it from the usual "easy" sources.  We have to dig into YTD totals on bank statements.  Stock trades have to be identified by date.  With DC to OR, you probably don't have to deal with W-2 issues (except your broken VA problem), but we have a lot of DC > VA or VA > MD where you move but you're working for the same employer.  Care to guess how many times the taxpayer forgets to tell their employer that they suddenly need a different state tax w/h?  So I often have that headache to deal with (which means pulling paystubs from the time of the move).  Yeah, the more I think about it, the more $450 is sounding like a reasonable price.  Maybe closer to $500. 🙂

Rick

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