CO State tax credit

Forum|Forum|4 years ago
February 13, 2022
1 reply
0 views

My wife is a full time resident in CO and worked full time in CO. Her employer is headquartered in NJ. She paid NJ state taxes (box 15 shows NJ).

Should there be a credit applied for CO state taxes? Is this form 104CR? How is this completed on TurboTax?

DanaB27

Level 15

Yes, you will use Form 104CR to get a credit for tax paid to another state (NJ in your case). Please complete the NJ Nonresident State return first to ensure the credit is correctly calculated.

Please click "State" on the left to start the NJ Nonresident tax return. TurboTax will carry any credit over to your CO Resident return.

**Say "Thanks" by clicking the thumb icon in a post. **Mark the post that answers your question by clicking on "Mark as Best Answer"

Anonymous

Thank you! I completed the NJ non resident form and CO state form. This applied the credit to CO.

So it's considered earned income (box 16 state wages) in NJ even though I never worked in the state of NJ, only in my home residence of CO?

Why would my W-2 not reflect my home state of CO, where I lived and worked all year?

ErnieS0

Level 15

New Jersey is among the states that use the "convenience of the employer" rule. Under this rule, a remote employee's income is taxed to New Jersey if the employee is working out of state for their convenience, and not out of a business necessity, such as having special equipment nearby that cannot be found around the NJ office.

Your employer is not withholding Colorado tax because your credit for NJ tax paid is large enough to offset your CO tax.

Speak with your payroll department and confirm that they should be withholding NJ tax. It's possible they were not properly informed of your hiring status. Some small employers don't want the added expense of withholding in another state if they only have one or two employees in say, Colorado, so they will just withhold for the home state.

**Say "Thanks" by clicking the thumb icon in a post. **Mark the post that answers your question by clicking on "Mark as Best Answer"