fulltime remote work for NY - shouldn't be paying state tax, but turbotax....

[kristinelbly]

@Aminy they are an IT-203 addition modification that gets added back and taxed by NYS. Its for a different purpose than wages. NYS taxes your contributions, but any subsequent payments from the plan, are tax-free to NYS residents. It in essence turns the NYS/NYC public retirement plan, into a Roth type system, under the tax law. 

So if you worked long enough for the agency, you could retire in NY and save taxes. About the only time moving into NY is going to save you money. 

[Aminy]

A problem has cropped up when I attempt to e-file:

"Allocation worksheet for PY/NR Wages Salary Etc col D New York wages were reported on federal form w2 but no wage income has been allocated to New York this will cause the efiled return to be rejected by New York state."

As we discussed earlier the solution was to say I was in NY 0% of the time (which is true) and hence I have no NY source of income, but now this has cropped up - appreciate comments from the @kristinelbly @TomD8 @ErnieS0 @Opus 17  braintrust:)

One potential solution is to manually change W2 box 16 "state wages" to be zero? (seems TT won't let me edit this value, so maybe impossible)

[ErnieS0]

New York will not let you e-file a return with $0 wage income. You'll have to mail in your return. Change W-2 Box 16 will not allow you to e-file.

[Aminy]

Thanks, @ErnieS0 .  Do I also need to set "New York Wages" on the income allocation sheet to zero?  (on that same row, I note that I "allocate by effort" 0%).

If I mail in a form saying my box 16 state income is $0 and my employer filed some other number, will NY be smart and see that my effort is 0% or am I likely going to be audited and explain it then?

[Aminy]

Payroll's amazing response on this issue, in summary:

"Yes you do work in NY, we don't care where you say you are, and we'll fill out box 16 for 100% and any consequences of us doing that are your problem."  Of course, I've never stepped foot in NY.

Do I need a lawyer?  Is there some firm that would take this case from a middle class worker?

[TomD8]

Try submitting NY Form 2104-1 to your employer, declaring that you are a non-resident of NY and that you expect that 0% of your services will be performed within New York State.  Here's a link to the form:

https://www.tax.ny.gov/pdf/current_forms/it/it2104_1_fill_in.pdf

The obvious purpose of this form is to guide employers to withhold (or not withhold) according to New York law.

[Hal_Al]

Payroll's amazing response on this issue, in summary:

"Yes you do work in NY, we don't care where you say you are, and we'll fill out box 16 for 100% and any consequences of us doing that are your problem."  Of course, I've never stepped foot in NY.

This is not an uncommon situation. The NY tax people put pressure on employers to withhold NY tax and the easy way for the employer is just do it and let the employee deal with the consequences. 

I suggest you file for a refund, mail your return, attach an explanation statement. If you don't get the refund, file your PA return claiming a credit for the tax paid to NY. 

It is what it is. 

[Opus 17]

I’m not sure about attaching a statement to the NY return.  However, the good news is that the couple of times I have had to call the NY state income tax department, they have been easy to reach, professional and knowledgeable. 

[Aminy]

Thank you all!  Seems like paper filing is the only way.  (with or without a cover letter that says I'm 100% remote)

I'm concerned NY revenue will then say, "Get your employer to correct the w2, if you were truly never here".  Of course my employer flatly refuses to do that.  Then I'm been a rock and a hard place.

[Aminy]

Hi @ErnieS0 and for anyone else facing a similar situation....

Thank you for the advice on how to try to get Turbo tax to efile with zero (0) allocated NY source income.  I actually did get my employer to issue a corrected w2 that lists $0 for state wages. 

However, even with that w2 set to $0 state wages, and setting NY income to $0 in the allocation worksheet, TT says NY will automatically reject it a $ owed 0 NY return.  So even when all signs point to the correct answer (no NY tax owed) I have to paper file.  Who knows what hell awaits after that.

[Aminy]

@kristinelbly 

I'm paper filing NY taxes (got an extension).  Was never once in NY (100% remote).

Is there some magic phrase I need to include on a cover letter?  Will a single sentence saying, "I'm 100% in TN", suffice?  My employer filed a corrected W2 that says have have $0 state wages.  

Or do I not need to say anything?

[TomD8]

@Aminy --

If you have a W-2c that shows zero NY wages in the corrected Box 16, then you shouldn't have a problem.  I wouldn't attach any note or letter.  If NY raises a question later, you can explain at that time.

[kristinelbly]

@Aminy 

It sounds like your employer withheld, given the paper filing requirement.

Complete an IT-203-B, list all the workdays as days worked outside of the State. Enter 0 on days worked from home (on the basis you are not subject to the convenience rule under 132.18(a) to require an inclusion of days on this line). 

You can include a statement with your tax return that says: 

I am not subject to tax under New York State Sec. 132.18(a). Which states, in pertinent part, “If a nonresident employee . . . performs services for his employer both within and without New York State, his income derived from New York State sources includes that proportion of his total compensation for services rendered as an employee which the total number of working days employed within New York State bears to the total number of working days employed both within and without New York State.”

I did not perform services both within and without New York State during the tax year, as I worked 100% remotely from my residence outside of the State. Therefore, I am not subject to the convenience of the employer rule. This point is supported in case law, Matter of Arthur Hull Hayes, where the court stated  "only if, and to the extent that, his services were rendered within this State. Compensation for personal services rendered by a nonresident individual wholly without the State is not included in his New York adjusted gross income, regardless of the fact that payment may be made from a point within the State".

You may get a desk audit notice asking you to obtain a letter from your employer, confirming you did not work any days in New York State. It sounds like your employer will be cooperative (given the W-2 adjustment) in providing that. After the submission of the letter, they should issue the refund (as experience has shown me). Just remember to respond timely. 

[Aminy]

Thank you @kristinelbly, you really the most informed person I know on this and that includes lawyers dealing with residency.  

On form 203b, for line "1o Wages, salaries, tips, etc. (to be allocated)" 

would that be zero or do I put all wages from my employer who is located in NYS?

I have to mail the return because TT says the zero NY income will be automatically rejected by NY state, as I've said I have NY source income.   I don't know why it thinks I have NY source income, as I've always said no to related questions, other than possibly box 15 of the w2, which lists NY.

[kristinelbly]

@Aminy Put all of your Federal wages, and then flow through the IT-203-B where it shows a 0% allocation, and than no NY sourced wage income. 

If your employer can cease NY withholding going forward, unless you have other types of NY source income, you likely don't have a filing requirement in New York State. 

Thank you, I've certainly enjoyed being able to provide a space where people can educate themselves about the complexities of New York tax law and filing requirements.