Work From Home Tax Implications. Employer in New Y...
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SK14
New Member

Work From Home Tax Implications. Employer in New York, Employee in Texas

My company is in Manhattan, New York where I was based. With COVID happening and everyone moving to remote work, I went back to Houston, Texas to work from home.

 

Can I claim Texas for State income tax, or at least partially?

 

I understand there's a rule about necessity vs convenience but my company decided to close the office in New York until COVID is completely over. Since we no longer have a physical location, I couldn't work in an office even if I wanted to, so I am not working from home out of convenience.

 

While I have lived in Manhattan and paid taxes there for the last 3 years, I have never officially established residency as I plan to not live there permanently. I have a Texas Drivers License, am registered to vote in Texas, and have credit cards and bank accounts with my Texas address.

 

Since Texas has no state income tax, this represents a material amount. My company has withheld New York state income tax so I'm not sure the process to get that money back. Any help would be much appreciated!

 

 

7 Replies
tbrown21
Level 3

Work From Home Tax Implications. Employer in New York, Employee in Texas

You will have to file a part year resident NY return. The rule "necessity vs convenience" are rules for home office deduction, which is no longer available for W2 employees. If you work from home and your employer is in another state you only pay tax to your home state, which TX is 0. If you work in your employers state part time, then you have to pay tax to that state while you are working there. Good luck

Opus 17
Level 15

Work From Home Tax Implications. Employer in New York, Employee in Texas

 


@SK14 wrote:

 

While I have lived in Manhattan and paid taxes there for the last 3 years, I have never officially established residency as I plan to not live there permanently. I have a Texas Drivers License, am registered to vote in Texas, and have credit cards and bank accounts with my Texas address.

 


That doesn't matter in this case.  NY and NYC will consider you a "resident" if you live and/or work in NY for 183 or more days (half a year) even if you don't formally establish a New York "domicile."  You have been required to file a NY and NYC income taxes as a resident for the last few years.

 

For 2020, if you moved before 183 days, you are a non-resident or part-year resident for 2020, if you lived in NY more than 183 days, you are either a full year resident or a part-year resident.  You are a full year resident if you plan to move back to NY.  You are a part-year resident if you don't plan to ever move back. 

 

 

 


@SK14 wrote:

My company is in Manhattan, New York where I was based. With COVID happening and everyone moving to remote work, I went back to Houston, Texas to work from home.

 

I understand there's a rule about necessity vs convenience but my company decided to close the office in New York until COVID is completely over. Since we no longer have a physical location, I couldn't work in an office even if I wanted to, so I am not working from home out of convenience.

The rule about the convenience of the employer means that, once your employer told you to leave or shut the office, you are no longer subject to NY state and city tax when working remotely.  However, if you went back to Texas voluntarily at first, that period of time may count as NY wages.  Or if you stayed in the city after the office told you to telework, that is NY income because you were living there.  

 

 

 

Since Texas has no state income tax, this represents a material amount. My company has withheld New York state income tax so I'm not sure the process to get that money back. Any help would be much appreciated!

 


You will file either a NY part-year resident or non-resident tax return.  Filing as a non-resident will be tricky since you were considered a NY resident in 2019, and the way you can call yourself a non-resident for 2020 is by relying on the fact that you were never domiciled in NY and were only a resident due to the 183 day rule.  It might be questioned. 

 

I will take the position that you will file a New York return as a part-year resident.  You will give the date that you moved back to Texas as the date your NY residency ended.  Turbotax will ask you to allocate your full year income (from your W-2 box 1 wages) to New York.  Your New York income is the income you earned while you were a NY resident, plus any income earned after you moved to Texas but before the company made the move mandatory.

For example, suppose you moved on April 30, but the company only asked workers to leave on May 31, and closed their office permanently on June 30.  Your wages up to April 30 are NY wages because you were a resident.  Your wages from May 1-May 31 are NY wages because you were working in Texas for your convenience.  Your wages from June 1-the end of the year are not NY wages because you were working remotely for your employer's convenience.  On the other hand, if the company ordered workers to work remotely starting May 1, but you only moved on June 30 due to your lease, then your wages through June 30 are NY wages since you were a resident the entire time even if you were working from home.  

 

In Turbotax, you will show the entire amount withheld for NY (from your W-2).  Assuming you show only a partial year NY income, you will be over-withheld and will get a NY refund when you file your NY tax return. 

 

Separately, you should be able to cancel your NY withholding by contacting your HR department. 

 

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
Opus 17
Level 15

Work From Home Tax Implications. Employer in New York, Employee in Texas


@tbrown21 wrote:

You will have to file a part year resident NY return. The rule "necessity vs convenience" are rules for home office deduction, which is no longer available for W2 employees. If you work from home and your employer is in another state you only pay tax to your home state, which TX is 0. If you work in your employers state part time, then you have to pay tax to that state while you are working there. Good luck


No.  NY is one of 6 states that taxes telework if it for the employee's convenience.  This is separate from any home office deduction.  If you work remotely for your convenience, NY assesses state income tax on those wages.  (Also New Jersey, Nebraska, and some others, I forget which.)

 

For example, suppose you are a graphic designer for an NY firm.  You could work anywhere and the company permits you to work from your home in Vermont.  Your income is subject to NY income tax because you are teleworking for your own convenience.  On the other hand, suppose you are a service technician for an equipment company and Vermont is your territory.  You are working in Vermont for your employer's convenience, so your wages are not subject to the telework tax. 

 

The tax positions involving where one works vs where one lives have, of course, been upended by the pandemic.  And there are some legally interesting implications regarding sales tax and other factors besides employee income tax which are too complicated to discuss here.  But the rule at issue in this post is not really changed by the pandemic; if you telework for an NY company for your own convenience you owe NY income tax.   If the employer instructs you to telework, and you are not an NY resident, you are not subject to NY tax.

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
Hal_Al
Level 15

Work From Home Tax Implications. Employer in New York, Employee in Texas

The fact that your employer is withholding NY tax is a strong indication that you are subject to NY tax on the wages received while working in TX, for them. 

 

Although "my company decided to close the office in New York" adds a new wrinkle to the scenario; working from "home" in TX instead of NY appears, in my opinion, to be for your convenience, not theirs. 

 

Q. so I'm not sure the process to get that money back?

A. You file a part year resident return, claiming only the income received prior to the move as NY income.  Expect push back from the NY Dept. of Taxation and Finance. Attaching a statement, explaining the circumstances may be appropriate.

 

Also see Pending  NY covid legislation  https://taxnews.ey.com/news/2020-1411-new-york-senate-[product%20key%20removed]-businesses-to-treat-...

feiwenw66563
Returning Member

Work From Home Tax Implications. Employer in New York, Employee in Texas

Work From Home Tax Implications. Employer in New York, Employee works from home in NJ due to Covid-19. Can employee reports the earnings in NJ state for the number of days which he "work outside NY State"? Thanks

rjs
Level 15
Level 15

Work From Home Tax Implications. Employer in New York, Employee in Texas

@feiwenw66563  In a post a couple of weeks ago you said that you live and work in Germany. Now you say that you worked in New Jersey.


For this particular question, though, it doesn't matter. No matter where you worked, New York considers the income from working remotely for a New York employer to be New York income. For the duration of the Covid-19 pandemic New Jersey accepts New York's position that it is New York income. So you cannot report it as New Jersey income.

 

feiwenw66563
Returning Member

Work From Home Tax Implications. Employer in New York, Employee in Texas

@rjs This is very helpful. Thanks I am helping to file the tax for my son 🙂

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