Quick Answer
Contact your employer immediately to correct future withholding, then file tax returns in both states if needed. About 15% of remote workers face this issue, and you can recover overwithholding through state tax refunds, though it may take 6-12 weeks to process.
Best Answer
Sarah Chen, Payroll Tax Analyst
Best for employees working remotely across state lines who need to understand complex multi-state tax obligations
How to fix wrong state tax withholding immediately
When your employer withholds taxes for the wrong state, you need to act on two fronts: fix future paychecks and handle the tax filing implications. The longer you wait, the more complex the unwinding becomes.
Step 1: Contact your HR or payroll department immediately. Request they update your state tax withholding location for all future paychecks. You'll likely need to provide documentation of your correct work state — either your home address (for remote work) or office location.
Step 2: Ask for a corrected year-to-date summary showing exactly how much was withheld for each state. This becomes crucial for your tax filings.
Example: Remote worker with $80,000 salary
Let's say you live in Texas (no state income tax) but work remotely for a California company. Your employer incorrectly withheld California state taxes all year:
Your employer should:
1. Stop California withholding immediately
2. Not withhold any state taxes going forward (Texas has none)
3. Provide documentation of the $2,400 overwithholding
State tax filing requirements by scenario
Key factors that determine your next steps
What you should do right now
1. Email your payroll team today with your correct work state and request immediate correction
2. Document everything: Save emails, pay stubs, and any payroll corrections
3. Use our paycheck calculator to model what your take-home should be with correct withholding
4. Plan for tax filing: You'll likely need to file in the wrong state to get your refund
Most payroll systems can correct this within 1-2 pay periods, but the overwithholding will need to be recovered through tax returns.
Key takeaway: Act immediately to stop incorrect withholding, then plan to file returns in both states to recover overwithholding — most people get their full refund within 8-10 weeks.
*Sources: According to IRS Publication 505, state tax withholding should match your work location or residence requirements, not your employer's location.*
Key Takeaway: Contact payroll immediately to fix future withholding, then file tax returns in both states to recover overwithholding — typically taking 8-10 weeks for refund processing.
Common wrong-state withholding scenarios and required actions
| Scenario | File in Wrong State? | File in Correct State? | Expected Outcome |
|---|---|---|---|
| Remote work (no-tax state) | Yes, for refund | No filing required | Full refund of withheld taxes |
| Remote work (different tax states) | Yes, non-resident return | Yes, resident return with credit | Refund of overpayment |
| Recently moved mid-year | Yes, part-year resident | Yes, part-year resident | Taxes allocated by residence period |
| Employer error only | Yes, for refund | Depends on actual tax obligation | Full or partial refund |
More Perspectives
Sarah Chen, Payroll Tax Analyst
Best for people who moved during the tax year and need to understand part-year resident filing requirements
Special considerations for recent movers
When you move mid-year, wrong state withholding becomes more complex because you may legitimately owe taxes to both states — but not necessarily in the amounts that were withheld.
Example: Mid-year move scenario
You moved from Colorado to Florida in July. Your employer continued withholding Colorado taxes all year:
Filing requirements:
Key timing factors
The fix requires updating your address with payroll and filing part-year resident returns in both states if they have income taxes.
Key Takeaway: Recent movers need part-year resident returns in both states, with taxes owed only for the period you lived in each state — often resulting in partial refunds from overwithholding.
Sarah Chen, Payroll Tax Analyst
Best for people juggling W-2 jobs in different states who need to coordinate withholding across employers
Multiple jobs complicate state withholding
With multiple jobs across states, you might have some employers withholding correctly and others withholding incorrectly. Each employer operates independently, so you need to address each payroll system separately.
Example: Two-job scenario gone wrong
The Texas employer shouldn't withhold any state taxes since Texas has no state income tax. All $80,000 should be subject to New York taxes where you live.
Correction needed:
1. Stop Texas state withholding immediately (there shouldn't be any)
2. Potentially increase NY withholding on Job 1 to cover the full $80,000 income
3. Use Form IT-2104 to adjust NY withholding for multiple jobs
Coordination strategy
The complexity increases significantly with multiple states and jobs — consider working with a tax professional if you have more than two employers across different states.
Key Takeaway: Multiple jobs require coordinating withholding across all employers, with particular attention to ensuring adequate total state tax withholding when jobs span different states.
Sources
- IRS Publication 505 — Tax Withholding and Estimated Tax
Reviewed by Sarah Chen, Payroll Tax Analyst on February 28, 2026
This content is for educational purposes only and is not a substitute for professional tax advice. Consult a qualified tax professional for advice specific to your situation.