Adjusting Income for NY State Return

[Andrew107]

My wife earned money from a NY college for teaching an online course (our only NY-sourced income). We are nonresidents of NY. When I complete the NY State return, the system uses our Federal Adjusted Gross Income to calculate taxes and does not remove money we earned in our state of residence. When I try to allocate income to NY (and not NY), there is no option to allocate the bulk of our income as not NY income. 

[TomD8]

If your wife never physically worked in New York State - not even for a single day - then she has no income tax obligation to the State of New York for those earnings.

New York does not tax the work income of non-residents who perform no work within New York.

However, if this applies to your wife and her employer mistakenly withheld NY taxes, then she'd have to file a non-resident NY tax return in order to receive a full refund.  On that return she would allocate zero income to New York.

[MarilynG1]

If you indicated you are filing as a Non-Resident, you are able to exclude all but your New York income.   In the NY interview, you will come to a screen where you can indicate that only your spouse had NY Income (screenshot).

Continue, and you will get a screen with 'You Just Finished your NY Return' with topic listings (screenshot).

Update each section under the 'NY Income Allocation' topic, then EDIT the individual items to 'not allocate' to NY (screenshot).

On your IT-203, you will see your NY AGI on Line 31, and on Line 45, NY applies a factor of Federal Income/NY Income to calculate a % of tax.  It does look as if NY is taxing all your income, but they are not (screenshots).

@Andrew107 

[Andrew107]

Thanks for the detailed explanation. The only issue I seem to be running into is that TurboTax gives me the option to edit the amount of income allocated to NY for everything but one W-2 included on our federal form (in total, we have two W-2 entries and three business entries). I don't see an option to add the other W-2, and it didn't populate when I started the NY State return over (deleted the original and started from scratch).