State Tax Question for Telecommuting for Out of State Employer

Anonymous · ‎April 5, 2021

Hi all, I have a situation where some advice would be greatly appreciated. I am a CA resident who worked remotely for a NJ company in 2020. I never set foot in NJ all year. I received 2 W-2s, one CA and NJ. Taxes were withheld for both CA and NJ.

I filed my taxes as a CA resident and filed a NR return with NJ to claim all the taxes erroneously withheld to NJ since I never physically worked there. Now, NJ sent me a notice asking for a corrected W2 and a letter from my employer stating that I never worked in NJ. However, my employer refuses to draft that letter for me and has taken a company wide policy to report wages based on where they are located (NJ) and not where I work (CA). So technically the W2s are withheld correctly.

Any idea on what to do? If I have no other option, the only thing I can think of is to file an amended return with CA to get the taxes I paid to them back and refile NJ as well.

TomD8 · ‎April 5, 2021

Normally the income of a non-resident who never physically worked in NJ would not be taxable by NJ. However, NJ issued the following guidance during the pandemic:

"However, during the temporary period of the COVID-19 pandemic, wage income will continue to be sourced as determined by the employer in accordance with the employer’s jurisdiction."

https://www.state.nj.us/treasury/taxation/covid19-payroll.shtml

So I think your best course of action is to file a NJ non-resident tax return along with your CA home state return, and to claim a credit on your CA return for the taxes paid to NJ.

For this to work in TurboTax, you must complete the non-resident NJ return before you do your CA return, so that the program can calculate and apply the credit correctly.

**Answers are correct to the best of my ability but do not constitute tax or legal advice.

Anonymous · ‎April 5, 2021

Yeah, before I filed my taxes I asked the NJ Tax Dept regarding whether NJ taxes out of state telecommuters, even if they never physically worked there. They responded no and to file a NR return to claim any and all taxes withheld to NJ. So I did just that and filed CA return and paid taxes there, as well as a NJ non resident return, claiming a full refund. The problem in my situation is this letter that NJ is requiring my employer to write, basically stating that I never physically worked in NJ - which they refuse to write. I guess, it looks like my only option is to file amended returns for both CA and NJ. Hopefully, this won't cause CA to now hound me for taxes.

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