How did Utah instruct an employer to report a Utah resident's wages and state withholding on a Form W-2 when the employee earned wages in more than one state?

Plain-English summary

Utah Private Letter Ruling 00-029 told an employer to report multistate wages and withholding separately by state on Form W-2 rather than combining the state amounts.

The ruling said the federal wage box should contain all federal wages earned across the states.

For the state entries, the employer should separately identify each state's withholding account number, wages, and tax withheld.

If a Utah resident earned no wages in Utah and all wages in another state, the ruling said the Utah wage entry was zero and the other state's entry showed the full out-of-state wages. Utah withholding might still be required under the cited Utah rule.

The payroll developer's request

A developer of payroll and human-resources software asked how to show state taxable wages for a Utah resident who worked in more than one state.

It presented two year-2000 scenarios:

1. A Utah resident earned $50,000 in Utah and $50,000 in another state.
2. A Utah resident earned no wages in Utah and $100,000 in another state.

Report each state separately

The Commission said the W-2 should reflect wages and withholding in all states, not just Utah.

But those state amounts should not be aggregated. The employer should separately identify the information attributable to each state.

The ruling described the then-applicable state-information boxes as containing the state withholding account number, state wages, and state tax withheld.

Scenario 1: wages in Utah and another state

For the employee who earned $50,000 in Utah and $50,000 elsewhere, the Commission instructed the employer to:

• List the withholding account numbers for both states.
• Show $50,000 of Utah wages and $50,000 of wages for the other state.
• State the tax withheld for each state separately.

Scenario 2: all wages earned outside Utah

For the Utah resident who earned $100,000 outside Utah and nothing in Utah, the Commission said the employer might still have a Utah withholding obligation under Utah Admin. R. R865-9I-14(B).

The state information still had to be segregated:

• The Utah wage amount was $0.
• The other state's wage amount was $100,000.
• Withholding account numbers and tax withheld were separately reported for each state.

Additional W-2s

If the form did not have room for two states, or the employee worked in three or more states, the Commission instructed the employer to prepare additional W-2s showing the amounts attributable to each state.

Holding

Under the Commission's year-2000 instructions:

• Federal wages included wages from all states.
• Each state's wages and withholding information were identified separately.
• State amounts were not aggregated.
• Zero Utah wages did not necessarily eliminate a Utah withholding obligation for a Utah resident.
• Additional W-2s were used when one form could not accommodate every state.

What this means for you

Employers and payroll providers

Multistate payroll records must preserve state-by-state wage and withholding amounts. Do not treat this historical ruling as current form-layout guidance; confirm today's official instructions.

Utah residents working elsewhere

The ruling distinguished where wages were earned from whether Utah withholding could still apply to a resident employee.

Accountants and tax professionals

Review both the employee's residence and work locations, then apply current wage-sourcing, withholding, reciprocity, credit, and reporting rules.

Common questions

Q: Did the Commission say to combine all state wages into one state entry?

A: No. It said each state's information should be separately identified and not aggregated.

Q: What did the employer report when half the wages were earned in Utah?

A: The ruling directed the employer to show $50,000 for Utah and $50,000 for the other state, with separate withholding information.

Q: What did the employer report when no wages were earned in Utah?

A: The Utah wage entry was $0 and the other state's entry was $100,000 in the scenario presented.

Q: Could Utah withholding still apply when all wages were earned elsewhere?

A: Yes. The Commission said Utah withholding might still be required under Utah Admin. R. R865-9I-14(B).

Q: What if the form lacked room for every state?

A: The Commission instructed the employer to prepare additional W-2s.

Key source language

• Separate reporting: “the information relating to each state should be separately identified.”
• No aggregation: “the state information reported in these three boxes should not be aggregated.”
• All-out-of-state scenario: “Box 17 would show $0 of income earned in Utah and $100,000 of income earned in the other state.”

Citations and references

• Utah Admin. R. R865-9I-14(B)

Source

• Landing page: Utah Private Letter Rulings
• Official ruling: Utah PLR 00-029
• Fetch note: the exact official URL returned HTTP 404 to a direct request and was then retrieved through Sofya.

Original ruling text

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.

For the Commission,

Marc B. Johnson

Commissioner