W-2 State Wages Question

[GLReneau]

I'm reviewing a past 1040 for one of my new clients who lives in New Jersey. She filed a multi-state return for the year in question as she had income sourced from New York. She brought in her W-2s and for the W-2 issued for the state of New York, it shows an identical amount of wages in Box 1 and Box 16.

However, the employer generated a separate W-2 for the state of New Jersey, and in Box 16 (State wages, tips, etc.), it shows a dollar amount approx half of what shows in Box 1. (By the way, what shows in Box 1 in the New Jersey W-2 is the same amount as what shows in Box 1 and Box 16 of the New York W-2.)

Does anyone have a guess as to why the employer would issue a W-2 statement for New Jersey wherein Box 16 is so different in amount from Box 1? Not to mention so different from what shows in both boxes on the New York W-2. Again, the client is/was a full-time resident of New Jersey.

[Terry53029]

You should determine the amounts earned in each state, and match them to the amounts on each w2 box 16, state wages. I have saw that a lot of employers will issue multi W2's, and it is sometimes confusing. Just be sure that the correct wages earned in each state is correct.

[GLReneau]

I'm not sure I understand what you are saying. If the client worked in New York but resided in New Jersey, the state of New Jersey would consider ALL of those wages earned in NY as taxable for purposes of the NJ 1040. On the NJ 1040 it credits any tax payments made to New York as an offset against the tax owed to New Jersey. This doesn't explain why a W-2 would be issued by the employer showing wages different in New Jersey, unless I'm missing something. If anything, given tax law in New Jersey, BOX 16 on the New Jersey W-2 statement should reflect the total wages earned as I stated above.

[Taxes-by-Rocky]

If this is beyond the usual duplicative reporting that NYS and NJ do on their Form W-2s (go read the instructions) and not a covid-mobility issue, then maybe the employer moved their headquarters to NJ even though your client remained a NYS/NYC(?) employee?

Just throwing it out there. 

[Terry53029]

Just saying you should ask client how much was earned in each state, and make sure the W2's reflect that. I didn't say anything about resident taxes, as far as I am aware it is common knowledge that world wide income is taxable to resident state. Just so you know NY has different resident vs part year resident rules, and you should research that.

[BobKamman]

She didn't tell the employer until halfway through the year that she moved to Jersey.  

[GLReneau]

That's because she didn't. As stated earlier she is a resident of New Jersey and only worked in New York. (I would have indicated she was a part-time resident.) 

[BobKamman]

She could have moved five years ago and just got around to telling the employer.  Or maybe when she started working there they assumed she was a NY resident and someone figured it out later.  

[GLReneau]

Certainly making a mistake about her residency is a possibility but if that were the case wouldn't the W-2 for the state of NY reflected this? 

[BobKamman]

Have you asked the client why she thinks it happened?  Did they withhold NJ tax?  Maybe the company started doing business in NJ, mid-year, and its accountants and lawyers told it there were employment and tax laws that now required compliance.  

[GLReneau]

I appreciate everyone's feedback.

The background is very simple, the client lived in NJ for the entire year and the employer was located in New York for the entire year. (The client didn't work at the employer for the entire year, but that fact shouldn't have any impact on the Box 1 and Box 16 difference discovered on the NJ W-2.)

In any event, I think the only way I'd be able to get to the bottom of this is to actually contact the employer but given the time that's passed since the client worked there, doing so is not feasible. Perhaps this will be one of those mysteries that will remain so. Thanks again.

[Accountant-Man]

NJ taxes wages differently than federal or NYS. Federal and NYS are identical(assuming 100% taxable in NYS).

NJ doesn't deduct pre-tax medical expenses, so NJ wages are higher then federal by that amount. Additionally, you can then ADD the pre-tax medical to the rest of your medical expenses for NJ only.

NJ also follows federal law for 401k deferred compensation, but NOT for 403b or 457 deferrals. This means that since NJ has already taxed the employee's contributions to those deferrals, there is cost basis to be allocated to the distributions when they retire.

Meaning, regular 401k distributions are 100% taxable to both federal and NJ, but 403b and 457 distributions are 100% taxable to federal but NOT to NJ. NJ has a 3 year recapture of retirement basis or an annual allocation of basis.

I almost forgot this part: However, the employer generated a separate W-2 for the state of New Jersey, and in Box 16 (State wages, tips, etc.), it shows a dollar amount approx half of what shows in Box 1. If they lived in NJ the entire year(or the entire employment during the year for that employer) then 100% of the wages should be in Box 16, subject to the adjustments above.

IN ADDITION, did she work at home in NJ during the year, and NOT in NYS? (Assuming it was for the convenience of the employer and not the convenience of the employee. Or some such nonsense.) That would allow some of the NYS wages to be prorated out of NYS. NJ should still be 100%.