Allocation of wages for part of the year residents states NJ and NY

[athaureaux6]

Hi dear community, first of all, happy mother's day to all the mothers in the community. 

I need your opinion about this case, taxpayer always lived in the NJ and worked in NY. Last year he moved to NY on 06/01/20 and continue in the same job. He made 130,000 and had tax withheld from NY state. Because he was a NJ resident until 05/30/2020, I allocated $54,600 to NJ which is the 42% time of the year he lived in NJ. 5 months divided by 12 is 42%. Then I multiplied that for 130000 and I got 54600. The w-2 shows a NY state income of 130000. I am assuming I have to use the 58% of that amount for NY state tax return which will be 75400. The result will be he will get a big refund in NY because they withheld taxes based on the 130000 and he will have to pay back in NJ because no tax was withheld in NJ. I noticed the Credit Paid to other jurisdiction did not activate this time. I checked previous years, when he filed a non-resident return, it activated. Does my assumptions are right? Does NY will accept the allocation of the 58% when the w-2 shows 130000? I will appreciate your input. 

[jeffmcpa2010]

Disclaimer: I have no experience with those particular states.

From what I have seen, generally ALL income earned in a state is taxed by that state. Then some amount of a credit is received in the Resident State for tax payed to another state.

With most states I have seen,,,, he should pay tax on all of his NY income in NY. I think your NJ allocation makes sense for the income to report in NJ, but there likely is a credit for the portion of the tax paid in NY on that income on the NJ return.

[PATAX]

Let me preface my remarks by stating that I'm not an expert in the aforementioned States... Your assumptions sound correct and I had a similar situation a few years ago... The client was a resident of New Jersey and worked in New Jersey for the entire year for a large corporation.. For some reason his employer allocated part of his wages and withholding to New York State on his W-2 .. When trying to do the allocation /return I ran into issues like you are... I called a CPA in New York and he advised that I tell the client to call his employer and to correct the W-2.. I did that and the corrected W-2 was issued and then there were no problems... Just my opinion...

[Taxes-by-Rocky]

Sounds like $130,000 taxable in NYS (and NYC?) as nonresident, and then as part-year resident for remainder of year.  Presumably you must deal with the stringent 'for the convenience of the employer' tests in those states, combined with the more recent 'telecommuting regs.' issued for the pandemic by those states.  See the state websites.  Assuming T/P moved, he would likely be taxable in NJ for part year, but it is possible NJ does not offer an "other jurisdiction credit" to part-year residents; rather, it is possible NJ only offers the credit to full year residents.  Check  the instructions to the NJ credit form.  Your T/P may not have notified his employer that he moved...or his HR department looked at their withholding responsibilities and refused to let him go.  Just a suggestion to make additional inquiries of the taxpayer if you need to.

P.S.  This assumes he is not a 'sales person' in those states or belong to one of the other unique EE categories of NYS/NJ.

[Camp1040]

NYS requires that the amount in box 16 NYS wages is equal to box 1, if any of the wages were earned in NYS. You may want to use IT-203-B to allocate wages by formula and days worked in the state as a percentage of days worked for the same employer for the year. Follow the form and it should calculate the percentage .

[qbteachmt]

"taxpayer always lived in the NJ and worked in NY"

"Does NY will accept the allocation of the 58% when the w-2 shows 130000?" <== nope

NY will tax all of it the same as the prior years, because your taxpayer had and has 100% NY Source income. The change of residence didn't change this part. And right now, even people who stopped going to the NY office are learning NY still wants that taxed as NY Sourced.