Help splitting W2 Income between CA and NY

[Ryushi]

I worked in CA till end of May and joined the NY office of the same employer starting in June till December 31st. TurboTax classified my as Part-Time resident in both the states.

I am having a hard time figuring out how much of my Federal Income should be allocated to NY in the "New York Income Allocation" section of the NY state tax return.

My W2 reports Federal Income of (say for e.g.) 100K of which about 63K are reported to CA in Box 16. As is the rule, for NY the whole Federal Income is reported (100K) in Box 16. I live in NYC, so the city tax is being reported about 56K in Box 18.

I have company RSUs vesting which were granted over the previous few years which vested throughout 2022. This explains why CA wages are so high (even though I left in May) since the vest amount is split proportionally based on the period vesting in CA.

NYC city takes all the income (100% of vest value of RSUs) as taxable income, which probably explains that number.

Now, what do I put down as the NY state wage? If its 100K - 63 (CA state), that would be 47K which is < NYC tax (which causes an error when auditing step later in the flow).

TurboTax has a few options of 

1) Allocate everything (not applicable to me)

2) Allocate by number of days
3) Allocate by percentage
4) Don't allocate.

My intuition is that NY wage should be :
a) regular income wages earned from June - December

b) pro-rated vest value of RSUs received from June - December, where pro-ration would be according to the time spent in NY.

Won't this just be Federal Income - CA wages ? - but this is less than NYC city tax, as the city tax doesn't have the proration for RSUs ?

[ErnieS0 · Accepted solution]

Generally, New York City wages are a fairly accurate equivalent of New York state income, assuming you changed your address on time.

I’m assuming that part of your RSUs vested in New York and were double-taxed by California and New York, in which case you would have $19k ($63k - $56k) of double-taxed income that you can claim a credit for on your New York return.

You can check your pay stubs to verify that RSUs that vested in NY were included in NY income.

The best way to do the NY allocation is to use the percentage method. Using days will give you the wrong result due to double taxation.

[Ryushi]

Thank you for the help!

As for the NY income - yes all the RSU that vested are included in the income.  I checked my stock paystub.

Also, the W2 box for NY has the same income as Federal.

My work address has been in NYC city since the start date. So it looks like NYC reported wages and NY wages should be the same.

[Ryushi]

For filing for tax credit in NY for the portion of the wages taxed in CA and NY.

In form IT-112-R (CA), I totaled all the RSU incomes that vested after I moved to NY and put this number down in line 1 column B.

My employer has given a detailed breakdown for each vesting event:

 - Wage for US Federal tax

 - Wage for CA

 - Wage for NY

 - Wage for NYC
So basically I totaled all the CA wages after my move to NY.

And along with this I totaled all the state tax withheld in California for the above vesting events and reported that number in  as the tax imposed by the other state - line 24A.

I think this should do it for claiming credit ?

[LindaS5247]

Yes, it sounds like you have it all covered.

Remember:

When entering your state tax returns, when multiple states are involved, you should enter your nonresidential state tax return first (CA).

Then enter your residential state tax return (NY).

It is recommended to prepare the nonresident state first, because your resident state will provide you a credit for the tax you pay to the nonresident state.  By preparing the nonresident state first, TurboTax can transfer the credit information to your resident state to return. 

Regardless of whether you're a part-year resident or a nonresident in the state where you are working, you will probably need to complete an apportionment schedule if you have income in more than one state. This form can usually be found in the state's part-year or nonresident income tax return. You use the schedule to "apportion" how much of your income is taxable in each state.

Click here for additional information regarding apportionment of income in multiple states.

Click here for additional information on filing multiple state returns.

Click here for information regarding filing multiple states returns.

Click here for how to delete your state return in TurboTax desktop.

Click here for how to delete your state tax return in TurboTax Online.