1) Q: There is an amount on line 12 of my W-2. Is this information relevant when preparing my tax return?

A: Yes, in some situations the information is relevant. This information can have a dramatic affect on certain items. One example is that it can trigger a "Saver's Credit". This credit can save a taxpayer as much as $2,000.

Example: A taxpayer is enrolled in a 401(k) plan at work. Over the course of the year he contributes $2,500 to the plan. At the end of the year this amount shows up on line 12 of his W-2. This contribution enables the taxpayer to qualify for the "Savers Credit" which reduces his tax liability by $1,000.

2) Q: I worked in one state for the first part of the year and then I moved to another. To which states do I need to send a state tax return?

A: A state tax return generally should be filed for states where income has been generated.

Example: A taxpayer works in California, New York, Nevada and Florida during the course of the year. The taxpayer needs to file only a California and New York tax return because Florida and Nevada do not have an individual income tax therefore no tax return is required in those states.

3) Q: My W-2 shows that my state tax withholdings were withheld in the wrong state. What should I do to set things straight?

A: One way to handle this would be to simply file state tax returns for both the state where you owe taxes and the state where withholdings where mistakenly withheld. You would receive a tax refund from one state, and you would owe the full amount of your annual taxes to the other state.

Example: A taxpayer lives and works in Milwaukee but on his W-2 his withholdings were withheld for Illinois. The taxpayer files both an Illinois and Milwaukee state return. He receives back all of the Illinois withholdings and owes the full amount of the Milwaukee taxes. The amount of Milwaukee taxes he owes may be greater than the Illinois refund because the Milwaukee tax rate is higher than that of Illinois.