Nebraska kept 95% of my state refund
I live in Iowa and work in Nebraska. For 5 years I've had the same job and used the same filing service. Throughout the year I get taxed from Iowa and Nebraska but when I file I have always gotten Nebraska taxes back as a refund. Except this year.
The Nebraska Department of Revenue sent a letter saying they adjusted my claim and only gave me 5% of what my filing service said I should get (thousands of dollars) which should be what my state income tax paid into Nebraska shows, box 17 on my W-2. I messaged my filing service, they reviewed my w-2 and said I should get my state income tax back I paid to Nebraska. I'm in the process of getting it reviewed by Nebraska department of revenue but I'm pessimistic I'll get my full return amount back.
So who's correct? And also, should I only need to pay state income tax in the state I live in (Iowa) and not where I work (Nebraska)?