00-029

Response September 26, 2000

REQUEST LETTER

00-029

Re: Reporting of State Tax (Box 17) on a W-2 Form

Dear: Sir/Madame,

Thank you for taking time our of your busy schedule to assist me with my inquiry, it is greatly appreciated.

I have some questions with regards to the appearance of the Utah State taxable wages on the form W-2 in box 17. My question arises when the employee works in more than one state (or earns all wages outside of resident state). I will provide two scenarios below and would like you to please reply in writing how each should appear for your state on the form W-2. Please include a telephone number that you may be reached at in case I have further or follow-up questions.

Scenario #1- An employee resides in Utah and earns a total income of $100,000 for year 2000. $50, 000 were earned in Utah and $50,000 were earned in another state. What should the Utah wages be in box 17?

Scenario #2- An employee resides in Utah and earns $100,000 for year 2000. All $100,000 were earned outside of the state (in other words, all wages were earned outside of resident state). What should the Utah wages be on form W-2 in box 17?

If you have questions, you can reach me at the below telephone number. Due to the nature of our business, it is very important to have clear written documentation to substantiate our actions. Please be kind enough to respond to us in writing as quickly as your schedule will allow. Also, if at all possible, please fax your response to me at #####. I can also be e-mailed at #####.

COMPANY is a developer of in-house payroll and H/R software applications. Our goal is to maintain an accurate system and meet all required compliance.

Sincerely,

NAME

RESPONSE LETTER

September 26, 2000

RE: Reporting State Taxable Income on the W-2 Form (AW-2")

Dear NAME,

You have requested us to explain how an employer should report state wages in Box 17 of the W-2 for a Utah resident who earns wages outside of Utah. We will first explain what wage information Utah expects on the W-2 under these circumstances, then address your two specific scenarios.

When an employee works in two or more states during a given year, Box 1 of the W-2 should contain 100% of the federal wages earned (the income from all the states combined). To report information pertinent to state income and state withholding taxes, the W-2 provides three boxes in which an employer reports information: (1) Box 16, where the state withholding account number is listed; (2) Box 17, where wages subject to state taxation are listed; and (3) Box 18, where the amount of state withholding taxes withheld and remitted is listed. The state information provided in these three boxes should reflect the wages earned and taxes withheld in all states, not just those wages earned in and those taxes withheld and remitted to Utah. However, the state information reported in these three boxes should not be aggregated. Instead, the information relating to each state should be separately identified.

Scenario #1. If a Utah resident earns $50,000 in Utah and $50,000 in another state, the employer should list in Box 16 the withholding account numbers for both states. Box 17 would show $50,000 of income earned in Utah and $50,000 of income earned in the other state. Lastly, Box 18 would indicate separately the amount of taxes withheld for each state.

Scenario #2. If a Utah resident earns $0 in Utah and $100,000 in another state, the employer may still be required to withhold and remit Utah taxes pursuant to Utah Admin. R. R865-9I-14(B). Accordingly, the employer would still need to provide information segregated by state. Box 16 would contain the withholding account numbers for both states. Box 17 would show $0 of income earned in Utah and $100,000 of income earned in the other state, while Box 18 would indicate the amount of taxes withheld for each state.

If there is not enough room to include the information for both states on the W-2 or if the employee worked in three or more states, then additional W-2's should be prepared showing the amounts attributable to each state where wages were earned. If you have any follow-up questions concerning this advisory opinion, please contact NAME.