Double Tax on RSU income in year 2 after moving from CA to NY

[besjet17]

Here is my situation:

I moved from CA to NY in June 2019. On my 2020 W2 I have RSU income attributed to CA and NY since I worked in CA while the RSUs vested in 2019. 100% of the RSU income is taxed by NY while a percentage of the RSU income is taxed by CA. This means that the RSU income taxed by CA is also being taxed by NY. 

When filing out my taxes I am a full year resident of NY and do not see an option to attribute a portion of that RSU income to my time in CA. What is the correct way to complete my taxes this year?

Thanks in advance!

[DavidD66 · Accepted solution]

The RSU income is taxable by both California and New York.  Since you are a New York resident, you will take a credit for taxes paid to another state.  You don't have to allocate a period of time to working in California, you just have to have California sourced income.  You should prepare your non-resident California return first, and then prepare your New York resident return.

If you created your resident state return before you began work on your nonresident state return, TurboTax may not properly calculate the New York credit for taxes paid to California.

To fix this issue, you will need to remove your resident state return and then create a new resident state return. Doing this has the same effect as entering your non-resident state first, which is how the returns should be entered.

[dboshko1]

Hi I'm facing a similar situation as OP. However, I have an additional wrinkle in that I was living IN and then moved to NY in 2021 all while working for a company in CA. My original RSU grant took place in CA. 

Would I file two tax credits, one for IN and one for NY each claiming a credit for my California sourced income? How do I determine what portion of my RSU income to apply to each tax credit? 

[GeorgeM777]

It depends.  Was your company a CA based company?  If yes, then the work you performed in CA and the RSUs you received or are entitled to receive based on the work performed in CA, would be CA source income.  The rule is, if a nonresident receives W-2 wages for work performed out of CA, even if it’s from a California employer, the those W-2 wages are not subject to CA income taxes.  However, if a nonresident receives W-2 wages for work physically performed in CA, then the income is likely subject to CA income taxes. Thus, what matters most is not who pays the wages but where the work is actually performed. 

Because you lived in IN for a period of time, and received income while living in IN, you will likely pay IN tax on that income.  From your post, you will probably file a part-year, non-resident IN tax return.  For NY, which is now your resident state, you will file a NY part-year resident return.  If your RSUs were based on the work you physically performed in CA, then that compensation is taxable to CA as it would be CA source income.  To the extent IN and NY tax the same income, you will get a credit for having paid tax to CA.  Prepare your CA and IN tax returns first and then prepare your NY return.  NY needs to know the tax you paid to CA in order to know how much credit to apply.  

In terms of allocation, you need to first determine what portion of your RSUs is the result of work physically performed in CA.  If its 30% for example, then allocate 30% of the RSU compensation to CA.  

@dboshko1

[Rob58Por]

Thank you for your response.  However, my daughter (whom I am doing the taxes for) lived in NY until Feb of 2023 and then moved back to CA and she was a resident of CA on December 31 , 2023 , not NY.  What I am gathering from your message is that , I may have to back out some data. I have not even gotten to the State Taxes portion of the software yet, but the software shows the "current" tax liability for all Fed, CA and NY on the dashboard, anyway.  I am only at the deductions and credit portion of the Fed Taxes at the moment.  Could you guide me as to what is the best plan forward?   If I deleted the return entirely and started over again, how would I proceed that will be different than what I have done so far?

Thank you.

[DaveF1006]

Once you begin preparing your State taxes, you will be given the opportunity to allocate income between NYS and non-NYS sourced income. Don't be concerned about what appears on the dashboard because that will change once you make those allocations.

Don't delete your hard work until after you prepared your NYS state return. Just an FYI, prepare the NYS return before preparing the Ca return.

@Rob58Por

[Rob58Por]

Yes, did as suggested. all done and e-filed!  Appreciate the help!!

[emerson8162]

Similar condition. Do as suggested, did CA first then NY, but Turbotax still didn't consider the CA taxed portion automatically. What I did is delete NY state tax, then redo it.

* what could be wrong?

* any more detail regarding which step in NY tax will asking other state's paid tax?

* assume I don't need to file CA tax first, then report NY?

Thanks

[emerson8162]

Similar situation. Question: you're saying when filing NY tax, we can directly allocate income for NY state only (which excludes other state's earning), instead of claim a credit from other states?

I tried latter, except no other state credit option in Turbotax.

Thanks

[AmyC]

New York allows you to file a part year return and allocate the NY income. See instructions NR and PY. 

• One job- 2 states income Once you select that you had income besides NY, you can allocate the income.  
• Multiple jobs - After the allocation of wages from the same company, you have NY income and nonresident income.
• Credit for double taxed income - Continue through and select credit for taxes paid to another state for the double taxed income.

@emerson8162