--- title: Incorrect State on W-2? Here’s What Employers & Employees Need to Know description: Errors in state tax withholding on a W-2 require payroll corrections by the employer and multi-state tax filings by the employee to address. image: https://paysteady.com/hubfs/paysteady-logo.png --- [![PaySteady-logo](https://paysteady.com/hubfs/PaySteady-logo.svg "PaySteady-logo")](http://PaySteady.com) - [Why PaySteady](https://paysteady.com/why-paysteady) - [About Us](https://paysteady.com/about) - [Blog](https://paysteady.com/blog) - [Contact Us](https://paysteady.com/contact) [Schedule a Demo](https://meetings.hubspot.com/paysteady/demo-with-paysteady) Payroll Tax # Incorrect State on W-2? Here’s What Employers & Employees Need to Know Errors in state tax withholding on a W-2 require payroll corrections by the employer and multi-state tax filings by the employee to address. [Daniel Rafeedie](https://paysteady.com/blog/author/daniel-rafeedie) Mar 10, 2025 --- Errors on a W-2 can lead to frustration and complications during tax season. A frequent issue arises when an employee’s W-2 shows income tax withheld for a state other than their state of residence. This typically happens when an employee resides in one state but works at an office or job site located in another state. ### Does It Matter If the W-2 Lists the Wrong State? Indeed, it does. Generally, an employee is responsible for paying state income taxes in the state where they reside. For example, if an employee lives in Maryland (MD) but their W-2 indicates that income tax was withheld by their employer in Virginia (VA), they will need to address this discrepancy when filing their personal income tax return (Form 1040). ### How to Correct the Issue Moving Forward In the example above, the employer should review the employee’s tax settings in their payroll system to reflect MD as the applicable state for income tax withholding. This will ensure that moving forward, MD taxes are properly withheld from their paycheck.    ### How to Handle the Current Tax Situation For the current tax year, the employee will need to address the discrepancy when filing their personal income tax return: - While filing their tax returns, the employee should specify their residence in MD. - This will result in the employee's tax liability being allocated to MD, which will likely require them to pay the appropriate taxes to MD. Since VA taxes were reported on the W-2, the employee may need to **file a nonresident return in VA**. - If applicable, this would trigger a refund of the previously deposited taxes to VA by the employer.  *Please consult a tax preparer for guidance on ensuring accurate filings.* ### Final Takeaway Payroll errors like this can be fixed, but they require both employer adjustments and employee action during tax season. Ensuring state tax information is correct in payroll systems helps employees avoid unnecessary tax complications and ensures compliance with state tax laws. If you’re an employer, double-check tax settings to prevent future issues. And if you’re an employee dealing with this, consult a tax professional to ensure you’re filing correctly.   ### Need Help? 📞 **Call us at** (703) 672-1225 📧 **Email us at** [payroll@paysteady.com](mailto:payroll@paysteady.com) At PaySteady, we make payroll simple. Contact us if you need help with your payroll during tax season or at any other time throughout the year! [Payroll Tax](https://paysteady.com/blog/tag/payroll-tax) ## More from the blog Payroll Tax ### [SUI Tax and Employee Relocation: What Employers Need to Know](https://paysteady.com/blog/work-location-changes-and-state-unemployment-insurance) This blog explains how employee relocations can cause state unemployment insurance (SUI) tax complications and how employers can manage them Daniel Rafeedie Feb 3, 2025 Payroll Legislation ### [2021 Employee Retention Tax Credit: What happens as COVID restrictions ease?](https://paysteady.com/blog/paysteady/post/reopening-impacts-the-employee-retention-tax-credit) As COVID restrictions lift and the country starts to open back up, many businesses are wondering if they still qualify for the Employee Retention... Daniel Rafeedie May 18, 2021 Payroll Best Practices ### [7 Most Common Questions From Employers About Spending Accounts](https://paysteady.com/blog/paysteady/post/how-do-hsas-and-fsas-work-with-respect-to-payroll) Employee spending accounts are a terrific benefit for employees, but if administering these plans has left you with feeling overwhelmed, you're not... Daniel Rafeedie Oct 26, 2020 [Google Reviews 5.0stars 60 reviews](https://maps.app.goo.gl/T1WwBRRJSfrF1oU26) ##### Offerings - [Why PaySteady](https://paysteady.com/why-paysteady) - [About](https://paysteady.com/about) - [Blog](https://paysteady.com/blog) - [Contact Us](https://paysteady.com/contact) - [Privacy Policy](https://paysteady.com/privacy-policy) - [Careers](https://paysteady.com/explore-career-options-and-join-our-team-at-paysteady) ##### Contact (703) 672-1225 payroll@paysteady.com [Follow us on Facebook](https://www.facebook.com/paysteady) [Follow us on LinkedIn](https://www.linkedin.com/company/40910431/) [Follow us on Instagram](https://www.instagram.com/paysteadypayroll/) © 2026 All rights reserved. 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