Is my W-2 incorrect? Employer created a nexus in PA

Forum|Forum|3 years ago
October 18, 2022
2 replies
25 views

Hello,

I used to live and work in New York. The company I work for is a small startup with payroll handled by Trinet. I moved to PA at the very end of 2020. My company decided to create a nexus in PA so I could avoid NY taxes, and this was done at the end of January 2021 (after 2 payroll periods) and my work location was changed to PA.

To make things simple, let's say that my income is $120,000 or $10,000 per month. My W-2 has NY and PA both at approximately $120,000. Shouldn't NY be only $10,000 (1 month) and PA be about $110,000?

When I did my taxes (which I now think are incorrect), Turbotax was saying that my taxable income in both PA and NY was around $120,000. I had to assign a % for NY (and I chose 8% for 1 month), and ended up owing money to NY (even though NY taxes were withheld from my first 2 paychecks in 2021), but I believe the issue is that my W-2 is incorrect.

Can someone help to confirm this?

Thank you.

Cindy

Multiple States

Best answer by TomD8

If you lived in PA all of 2021 and you performed no services within NY that year, your 2021 W-2 should show zero NY withholding.

From New York State tax memorandum TSB-M-02(3)I:

Full-year New York State nonresident employees who do not perform any services in
New York State:
If an employee does not perform any services in New York State for the entire tax year, the
employer is not required to report any New York State wages in the State wages, tips, etc. box on
federal Form W-2.

https://www.tax.ny.gov/pdf/memos/income/m02_3i.pdf

Your personal state income tax obligations are based on where you live and where you actually work, not on your employer's "nexus".

Anonymous_

Level 15

@Critter-3

Critter-3

Level 15

A corrected W-2 should be provided by the employer if you did change residency.

CindybeeAuthor

Level 2

My residency change was effective by the end of 2020 so there was no change there in 2021. The change was to my employment location after the nexus was created in PA. Is the W-2 incorrect?

Hal_Al

Level 15

Your W-2 is not correct. As you surmised, the box 16 amount, for the line with NY in box 15, should only be $10,000. If you cannot get a corrected W-2 from your employer, the workaround, in TurboTax (TT), is to change the box 16 amount at the W-2 screen. That should get TT to do the right calculation. There's still the risk that the NY Department of Taxation and Finance may not accept that calculation, since your W-2 says otherwise.

Even the $10,000 may not have been subject to NY tax, depending on the details. See TomD8's reply.