Why Does My W-2 Have Two Different States?

Form W-2, the Wage and Tax Statement, reports your total earnings and the various federal, state, and local taxes withheld from your pay. Receiving a W-2 that lists wage and tax information for two different states is a common situation that arises for several reasons. These are related to your employment, residency, and where you physically performed your work during the tax year.

Common Reasons for a Multi-State W-2

One of the most frequent reasons for a multi-state W-2 is moving from one state to another during the tax year while with the same employer. Your employer is required to report the income you earned while you were a resident of each state separately. For tax purposes, you are treated as a resident of each state for only a portion of the year, which impacts how your income is taxed by both jurisdictions.

Another common scenario involves commuting across state lines for work. If you live in one state but your job is in a neighboring one, the income you earn is sourced to the state where you physically perform the work. Your employer will withhold taxes for the work state, and your W-2 will reflect these earnings and withholdings. This creates a tax filing requirement in your non-resident work state in addition to your home state.

The rise of remote work has also led to multi-state W-2s. If you work remotely for a company that has a physical location in a different state, your tax situation is affected by the laws of both your resident state and your employer’s state. Some states have “convenience of the employer” rules, which can require you to pay taxes to your employer’s state even if you never physically work there, while your home state will also tax your income.

Understanding State Tax Information on Your W-2

The state-specific details on your Form W-2 are at the bottom of the form, with entries for up to two states. If you have income allocated to more than two states, your employer will issue a second W-2. This area is broken down into boxes that provide the necessary information for filing your state tax returns.

Box 15 displays the employer’s state identification number assigned by that state’s tax agency. Box 16 shows the total amount of your wages and tips subject to that state’s income tax. The sum of the amounts in Box 16 for each state may not equal your total federal wages in Box 1, as states have different rules for what constitutes taxable income.

Box 17 reports the total state income tax withheld from your paychecks for that state. When you have two states listed on your W-2, you will see two distinct lines of information, each containing data for Boxes 15, 16, and 17.

Filing Your State Tax Returns

When your W-2 shows income earned in two different states, you will need to file a tax return in both states. The type of return you file depends on your residency status. For the state you moved out of or into, you will file a part-year resident return, reporting the income earned while living there. For a state where you worked but did not live, you file a non-resident return, reporting only the income earned in that state. Your home state requires a resident return reporting all of your income from all sources.

To prevent being taxed twice on the same income, your resident state will offer a credit for taxes paid to another state. You first complete the non-resident or part-year resident return for the state where you worked but did not live. You then claim a credit for the taxes paid to that state on your resident state’s tax return, which reduces your home state’s tax liability.

Some states have reciprocity agreements, which simplify the tax situation for commuters. These agreements allow residents of one state who work in another to pay income tax only to their state of residence. If an agreement exists, you can file an exemption form with your employer to stop tax withholding for your work state, which prevents the need to file a non-resident return.