The adjustment does not happen at the beginning of the NY interview, but towards the middle. It is important that your W2 is marked correctly in the system and that you entered that you did not maintain a residence in New York. You will see a number of screens dealing with allocation. Ignore all of them. You will be asked about NYC and Yonkers. Ignore those screens also, You will finally come to a screen entitled Changes to Federal Income. Note the following:
- The second subheading says Wage and retirement adjustments and the first option is Received Military Pay.
- Click Start on that selection.
- Then, you will see the screen Military Pay.
- On this screen, enter the Federal amount of Military Pay reported, and then the NY portion that was earned while stationed outside of NY. This amount (probably all of it) will then be exempted from your income.
I've attached a screenshot on the Changes to Federal Income screen where to click:
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