New york Preparers - When to complete IT-203-B??

[Yardley CPA]

My practice is predominately made up of residents from New Jersey and Pennsylvania.  I have several  that work in New York.  I recognize it is necessary to file a nonresident NY state tax return for these folks and take the credit paid to other jurisdictions on their home return.  Can someone with experience please let me know if the IT-203-B should be completed in the following example:

This is a new client who had had their 2015 returns prepared by a CPA who son is on the same soccer team.  The believe he made an error when completing the New York return.  Here are the specifics:

•          MFJ, 2 dependent children age 13 & 7.
• -          Husband is in Management, high income earner.  Wife is Home Maker.
• -          Live in Pennsylvania
• -          He works for a New Jersey based company that does work in New York City 2 days a week.

-          W2 Shows following:

       Wages: 1,198,393 (Includes income from Excise Non-Statutory Stock Option of $706,136.08, indicated on line 12b as a V)

N     NY Wages  1,198,393

       PA Wages   729,980

        Pennsylvania Department of Revenue asked employer to verify PA Income.  Employer sent the following information:

       In response to your request, attached pleas find a full set of 2015 W2.s for CLIENT.  The W2 statement show the reconciliation and provide explanation of differences between federal         wages and state wages (PA & NY).

A      As further explanation, the taxpayer has $491,758 allocated to New York for time worked in that state.  This amount has been excluded from the Pennsylvania State Taxable Wages.

 

T    The New York Non - Resident Return, IT-203 reflects New York wages as 1,198.393, with taxable income of 1,180,350.  There is no form IT-203-B completed. It is the Nonreisdent and Part-Year Resident Income Allocation and College Tuition Itemized Deduction Worksheet.  Shouldn't this form be completed to show the allocation and indicate the number of days the employee worked in New York.  It was only about 80 days and completing this form would significantly decrease their NY State Tax.   Shouldn't this form always be completed when a    non-resident only works occasionally in New York?

       Thank you. 

   

     

 

 

   

 

 

 

 

 

 

 

 

 

 

[Lion EA]

Prepare the B.

[SaraEA]

Complete the 203B.  The problem we all have with this scenario is that NY (and a few other states) demand that total wages be allocated to NY on the W2. (So if the client made $50k, $1k in NY, the state portion of the W2 will show $50k for NY, $49k for PA, making it look like he made $99k.)  Only way out of this is to complete the B.  On request, some employers will send a letter, based on expense reports, to break down the state income.  Without that, you have to count the days.

The reason the states do this is that they want to tax you at your highest marginal tax bracket.  In my example, if you only made $1k in NY you wouldn't owe any tax. If you made $50k, however, you'd be in the, say, 8% bracket.  They want to make sure that $1k is taxed at 8%.

[Yardley CPA]

Thank you both, very much.

 

[michaelmars]

why would any of the stock option be allocated to NY?

[Lion EA]

NY argues compensation earned in NY...