NY & NJ Taxing Same Income

[taxgirl26]

I have a client who is a Florida resident. Parent company in NJ. Due to Covid, client was required to do work in NY for a few months. W2 is showing taxable for the same amount in both States. Will one of the States give client a credit for income tax paid to another State? If so, which form takes that credit.

[Lion EA]

Your client will pay tax to NY for the time he worked in NY. If his NY wages are also on his NY return, see if NJ gives a credit for taxes paid to another jurisdiction. (I haven't filed any NJ returns for a few years, so don't keep up on that state.)

[Yardley CPA]

NJ will give a credit for taxes paid to other jurisdictions. 

 

[Pacun]

What do you mean by parent company is in NJ?

If the person lived in Florida and NY, he doesn't have to pay taxes to NJ.  The W2 is never accurate on the states and you have to either prorate the income per months they lived in a particular state or find a way to separate the income while in FL or NY.

[taxgirl26]

Taxpayer lives in Florida but W2 has NJ income with NJ state income & withholding. I am told that is where the company is located. The same company has w2 for NY income tax & withholding for the same exact amount. Due to covid, client was asked to work in NY location for about 90 days. I can prorate the amount but what form do I use to show NY the proration? Thanks!

[Pacun]

The company can have its headquarters anywhere and that doesn't make the income taxable at that location if the taxpayer didn't work or live in that state. For states, you should look for part year tax forms or non-resident forms and prorate. 

 

[Lion EA]

For states (most of the northeast) that use the convenience of the employer rule, the employee is considered to have his tax home where his employer is located, unless the employer creates a bona fide biz location at the employees home office for the convenience of the employer -- maybe a lot of clients to service in that area, something like that. Most employers are reluctant to do that, because then the employer would have nexus in the employee's state and be required to file biz tax returns, workers' comp, etc. NY is especially aggressive about this. An employee of a NY company will have NY-sourced wages no matter where he works, such as from home in CT during a pandemic. Don't have any NJ clients, so you can research how NJ treats wages earned from a NJ company while working from home in FL.

[Yardley CPA]

You would file a New Jersey Non-Resident Return.  The client should receive their entire NJ withholdings back as a refund since the client did not reside nor did they work in NJ at any point.  As for the NY, make sure to prorate using the IT-203B form.  That will allocate for the amount of time spent physically working in NY.