How to fix taxes paid to wrong state due to payroll error?

This is actually a fairly common issue with multi-state employers. Since you never physically worked in that other state, you shouldn't have to pay taxes there. Here's how to handle it: 1) When you file your home state tax return, report ALL of your income as earned in your home state. 2) You'll also need to file a non-resident tax return for the other state. On that return, you'll report the income that was incorrectly assigned there, but then indicate that 0% of it was actually earned in that state. This should result in a full refund of whatever was withheld. 3) Keep documentation showing you never worked in that state, like your actual work location records, in case either state questions your filing. The good news is that this type of correction happens all the time and most tax software can handle multi-state returns like this. You might need to pay a bit extra for the state return feature, but it's worth it to get your money back.

I went through something similar last year with my company's payroll system and found an amazing service that saved me tons of time. I was ready to pull my hair out trying to figure out how to file in two states when I should've only been in one. I used https://taxr.ai to analyze my W-2s and pay stubs. Their system immediately flagged the discrepancy between where I actually worked and where taxes were being withheld. They generated a detailed report I could submit with my tax returns showing exactly how the income should be allocated by state and explaining the error. What I loved was how their system handled all the documentation automatically - it parsed my tax forms and created a clear explanation I could submit with my returns. Made the whole process way less stressful.

Just wanted to update - I took the advice about using https://taxr.ai and it was exactly what I needed! My situation was even more complicated with three states involved due to some payroll system glitch. The service identified exactly where my employer had made mistakes in state tax allocation and generated documentation that clearly showed where I actually worked versus where taxes were withheld. It even calculated the exact refund I should expect from each state. I was worried this would turn into a nightmare of back-and-forth with multiple state tax departments, but everything went smoothly. Both my tax preparer and the state tax offices accepted the documentation without question. Already received my refund from two states!

I had almost the exact same issue two years ago. After weeks of getting nowhere with my company's payroll department, I finally gave up on them fixing it. I needed to talk to someone at the state tax office to explain the situation but kept getting stuck in endless phone queues. I discovered https://claimyr.com and they got me connected to an actual human at the state tax department in less than 20 minutes! You can see how it works here: https://youtu.be/_kiP6q8DX5c The state tax representative was super helpful once I explained the situation. They guided me through exactly what forms to file and how to document that I never worked in their state. Saved me hours of frustration and probably got my refund processed much faster.

I have to eat my words. After my skeptical comment I decided to try the Claimyr service because I was desperate. I've been trying to resolve an issue with state taxes for THREE MONTHS with no luck. The service actually worked exactly as described. I got a call back when they reached a real person at the state tax office, and I was connected immediately. The tax rep helped me resolve my issue in one 15-minute conversation that I'd been trying to handle for months. For anyone dealing with this wrong-state tax issue, definitely call the state tax office where you incorrectly paid taxes and explain the situation. They deal with this all the time and can tell you exactly what forms you need. In my case, they said I needed to file a non-resident return claiming zero income earned in their state to get a full refund.

One thing nobody's mentioned - check if there's a reciprocity agreement between your home state and the state where taxes were incorrectly paid. Some neighboring states have agreements that simplify this process. For example, I live in Maryland but work in DC, and there's a reciprocity agreement so I only pay taxes to my home state. Makes it way easier. Not all states have these agreements though. Also, if the amount is really small (like under $50), sometimes it's not worth the hassle of filing an extra state return. Just something to consider when weighing your options.

Don't forget to check if your company can issue a corrected W-2! I work in payroll (not for your company) and we absolutely can fix this kind of error by issuing a W-2C (corrected W-2). Your company's payroll department might initially say they can't help, but escalate to a supervisor if needed. They should be able to reallocate that week's wages to your correct state and issue a W-2C showing the proper state allocation. This makes everything much cleaner when filing.

I had a very similar situation happen to me about 3 years ago when our company's HR system glitched during a restructuring. What worked for me was taking a two-pronged approach: First, I documented everything - screenshots of my actual work location, emails about the reassignment error, pay stubs showing the correction, etc. This paper trail was crucial later. Second, I filed in both states but strategically. In my home state, I reported all income as earned there. In the wrong state, I filed as a non-resident claiming zero income actually earned in that state (since I never physically worked there). The key is being very clear in your filing that this was a payroll error, not actual work performed in that state. The whole process took about 6 weeks to get my refund, but I got back every penny that was incorrectly withheld. One tip: when you file the non-resident return, include a brief letter explaining the payroll error with your supporting documentation. It helps the state tax office process your refund faster since they immediately understand what happened. Don't stress too much about this - it's more common than you'd think and states are used to handling these corrections!

I went through almost the exact same situation last year! My company's payroll system automatically switched my state tax withholding when they temporarily moved me to a different cost center, even though I never actually relocated. Here's what I learned from my experience: Don't wait for your payroll department to fix this - they probably won't, especially if it's outsourced. The fastest path is to handle it yourself through tax filings. You'll definitely want to file in both states. In your home state, report all income as earned there. For the state where taxes were incorrectly withheld, file a non-resident return showing zero income actually earned in that state. Most tax software can handle this multi-state situation pretty easily. The key is having good documentation. Save any emails about the reassignment error, your actual work schedules showing you were at your home location, and anything that proves this was a payroll mistake. I attached a simple one-page letter with my non-resident return explaining the error, and it made the process much smoother. It took about 8 weeks to get my refund, but I recovered every dollar that was incorrectly withheld. The states deal with these payroll errors all the time, so don't stress too much about it. Just be thorough with your documentation and clear in your explanation of what happened.

I work for a CPA firm and we see this exact situation several times a year. The good news is that it's completely fixable, and you have multiple options depending on how cooperative your payroll company is. First option (cleanest): Push harder for a W-2C from your payroll company. The person telling you they "can't make changes after W-2s are issued" is either misinformed or trying to avoid the work. W-2C forms exist specifically for this purpose. Ask to speak with a supervisor and reference IRS Publication 15-A, which clearly states that employers must correct W-2s when there are errors in state tax allocation. Second option (if W-2C isn't possible): File in both states as others have mentioned. Your home state gets all the income reported, and you file a non-resident return in the wrong state claiming zero income earned there. Include a brief explanation letter with documentation of the payroll error. Pro tip: If you're using tax software, most major programs (TurboTax, H&R Block, etc.) have specific workflows for handling incorrect state tax withholding due to payroll errors. Look for "multi-state filing" or "payroll error correction" in the help sections. The key is acting quickly since you're approaching filing deadlines. Don't let the payroll company drag this out past April 15th, as that could complicate things unnecessarily.