A non-resident of New York who never physically works within New York, not even for a single day, has no income tax obligation to the State of New York. From the Appellate Division of the New York Supreme Court:
“ A nonresident who works in another State but who performs no work in New York is not subject to New York State tax liability no matter for whose convenience or necessity he performs the work.” Hayes v. State Tax Comm, 61 A.D.2d 62, 64 (N.Y. App. Div. 1978)
Your wife's income is 100% taxable by her resident state of California. Ideally her employer will withhold only CA taxes from her pay.
Your wife should file New York form IT-2104.1 with her employer in order to have them cease withholding NY taxes. Here's a link to that form:
https://www.tax.ny.gov/pdf/current_forms/it/it2104_1_fill_in.pdf
New York's "convenience of the employer" rule applies only to those who perform services both within and without New York State during the tax year. See the first paragraph of the relevant New York tax document:
https://www.tax.ny.gov/pdf/memos/income/m06_5i.pdf
If her employer cannot withhold California taxes for her, then she must make quarterly estimated tax payments to CA.
https://www.ftb.ca.gov/pay/estimated-tax-payments.html
**Answers are correct to the best of my ability but do not constitute tax or legal advice.
