Special forms for NYC tax

[th1nkannie]

Hi There, 

I currently reside in California and have received my W-2. Previously, I worked in New York City, and I am facing an issue where NYC is still taxing me for my full income instead of vested stocks. Is there a specific form I can file that reports only the transacted amount from the stocks, rather than my full year's income in California? Thank you.

-Annie

[th1nkannie]

Another question is which version of TurboTax should I use since I need to file for both NY and CA? 

[SharonD007]

TurboTax will guide you through allocating your income when you move from one state to another during the year. When you are preparing your part-year resident tax returns for California and New York returns, you will allocate your income to the state that you were a resident of when you received it. 

If you've already entered your personal information, review your entries to help ensure that TurboTax will help you create the correct part-year tax returns. 

1. Open TurboTax and select My Info
2. A Personal profile summary screen will pop up
3. Select Revisit by your address
4. Scroll through the screens to help ensure that you have the correct answers for your state of residence and choose that you lived in another state. A new section will appear asking for your previous state of residence. Select the other state that you lived in.
5. Scroll down to Other State Income and select Edit
6. Check your answer for Did you make money in any other states? Answer the questions and select Continue.

After you complete your federal tax return and you move to the State Taxes sections, both of your part-year state returns will be listed.  Prepare the state that you moved from first, then the state that you live in.

Please visit this TurboTax Help articles How do I file a part-year state return? and  How do I allocate (split) income for a part-year state return? for further explanation.

[th1nkannie]

Hi, I just want to clarify something. I've been living in California for the past two years, but my W-2 still reports my full annual income as taxable in both California and New York. My HR explained that I am being taxed in New York because of stocks that have continued to vest.

In TurboTax, where can I adjust the taxable income for New York so that it only reflects the income from my ESPP stock transactions, rather than my full annual salary?

[DawnC]

You need a NY nonresident return instead of a part year return since you did not live in NY at all during 2024.  When you go through the nonresident return, you will be able to tell TurboTax how much of your total income belongs to NY.   You will go through each income category, only apply the portion that belongs to NY on the NY nonresident return.  

How do I file a nonresident state return?

Prepare the NY return before you prepare the CA return.  

[th1nkannie]

Thank you. Is there someone from turbo tax that can walk me through live? 

[KeshaH]

How you'll file and whether all of your income is taxable in New York depends on whether you're working remotely for your convenience or if your job necessitates your working out of New York. In both cases, you'll file a nonresident California return.

If your job requires you to work outside of New York, your wages wouldn't be subject to take in New York. The vested stock is taxable to New York based on how many days you worked in New York during the vesting period. The vesting period is the time between when the stock was granted and when it vests. If you were out of New York by the time the stock was granted, none of your vested stock income would be taxable to New York. If your stock was granted before you moved out of New York, some of your vested stock income would be taxable to New York.

If your job doesn't require you to work outside of New York, but you choose to - all of your income would be taxable to New York. This is called the convenience of the employer rule - remote workers that work for New York employers are treated as working inside New York. In this case, you'd file a nonresident return but allocate 100% of your income to New York. The income would also be taxable to California since you live there. California would give you a credit for the taxes you paid to New York to avoid double taxation.

When completing your New York return, you'll come across a screen that says New York Income Allocation and asks if all of your income was earned in New York State. Click No on this screen and then follow the prompts to allocate your income appropriately.

It's also important to note that New York starts with calculating income tax on your total income and then applies an income percentage to prorate the tax based on how much income you earned within the state. Therefore, sometimes it may seem like you're being charged tax on your entire income - but if you see an income tax percentage that's less than 100%, you're not really paying tax on the full amount.

@th1nkannie 

[th1nkannie]

sorry this information confused me. I'm not a remote worker and I based in CA. I believe these are stocks that have continued to vest when they were granted in NY but vesting when im in CA. Does this change the situation and what do i need to do? 

[th1nkannie]

My employer has provided the below information. Given this, I dont know how to file it in Turbo Tax. Can you please provide detailed instructions? 

Hi,

As you know, there are payroll reporting and withholding requirements for employees who have unvested stock awards, have transferred from one US state to another, and subsequently vest in those awards. Please refer to the communication sent to you previously. We wanted to inform you that you are able to obtain your New York state stock vest income via Total Rewards.

For W-2 reporting, the state of New York requires the amount reported in Box 16 to match Box 1. In other words, all compensation, not just compensation allocated to New York is reported on the W-2 for New York state.

For your stock awards vested after you transferred from New York State, you can pull a report that provides you the portion of your equity income reportable to New York state due to your transfer. To do so:

[KeshaH]

If they were granted while working in New York, then the amount of vested stock income you would include in your income would allocated based on how may days within the vesting period you worked in New York.

For example, if the stock was granted and then you left NY 90 days later, you'd prorate your vested stock income to New York based on 90 days/# of days in vesting period. If the vesting period was one year, then you'd report roughly 25% (90/365) of the vested stock income on your New York nonresident return. Your employer may also provide a statement.

Since you didn't live in New York during the full vesting period, you wouldn't need to include all of your vesting income on your New York return.

@th1nkannie 

[Edited 3/5 at 4:40pm Eastern]

[KeshaH]

While completing your New York return, you'll see the New York Income Allocation screen asking if all of your income was from New York sources. Click No on this screen.

On the next screen, you'll see a screen with your W-2s listed. Click Edit next to your W-2.

On the next screen, you'll see the various ways to allocate the income. Choose to allocate based on number of days or percentage.

Fill out the remaining screens based on the allocation method you chose. At the end you should see a screen showing how much of your income is taxable to New York.

@th1nkannie 

[th1nkannie]

Thank you.