How to handle incorrect wage allocation on 2020 Forms W-2

If you have clients who normally work in one state but live in another state, and are now working from home due to the COVID-19 pandemic, they may have received Forms W-2 with improperly allocated wages.

Since wages should be allocated to the state where work was physically performed, you may need to allocate clients’ wages based on the number of days worked while in their home state.

What should my client do if their W-2 is incorrect?

Your client should ask their employer for a Form W-2c (a corrected W-2) allocating income to the state in which the work was performed. Only the employer can change W-2 information.

If the employer refuses to provide a Form W-2c:

1. Work with your client to determine how many days they worked from home. Allocate the wages accordingly to Minnesota for that employer. Important: Do not adjust state withholding.
2. Attach a statement explaining how you determined your client’s total Minnesota wages. Include the number of days worked in Minnesota for each employer in your calculation.
3. Report the employer’s name and contact information for refusing to provide a Form W-2c. You may remain anonymous when sending a tip.

Note: If your client receives an underpayment penalty due to incorrect allocation, they may request an abatement of the penalty.

 

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