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What is the best way to claim VA state withholding when living in DC but working in VA

cmanno
Level 2

I have a client that lives in DC [all year] but works in VA.

His company only took out VA state withholding

Does he need to pay the computed DC tax and separately file for a VA refund using VA form 763-S

Or can he file a tax credit claim using DC D-40 line 29 with Schedule U?

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4 Comments 4
rbynaker
Level 13

Oops.

Step 1: Get the employer to stop VA W/H and, if you're lucky, you might get them to start DC W/H.  But if they have no DC nexus they're likely not required to (they can, however, register and choose to withhold as a courtesy to the employee.)  Then you'll only have 2 1/2 months of this problem next year.

Step 2: You'll file a VA 763-S (on paper) and attach the W-2 showing withholding.  If you file now they MIGHT have the refund in time to turn it over to DC (along with more tax to cover the higher tax rate).

Rick

cmanno
Level 2

Thank You very much.

I have already advised client to get his company to stop VA W/H and change to DC W/H [VA and DC have a reciprocity agreement].  

I get using VA 763-S is a good way to go but was wondering if we could use DC form D-40 with Schedule U to claim a tax credit from VA W/H saving the hassle and delay in claiming a refund from VA?  [The form says to include the resident Tax return so that needs to go first]

And yes, client is aware of the higher taxes in DC relative to VA  ;-(

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rbynaker
Level 13

There's no VA tax to credit.  It's just refundable withholding done in error.

cmanno
Level 2

OK Thanks!  Makes Sense