how do I withhold when I live in DC and have NYC based income?

[Anonymous]

Hi,

I recently started a new job. It's based in New York City but for the time being I'm living in Washington, DC and working remotely. That situation might last through the end of this year.

I know that I need to file a NYS tax return as well as a DC return. My questions are:

- Do I get a credit on my DC taxes for taxes I have to pay to New York State? (based on previous responses, it sounds like the answer is "mostly yes")

- How do I fill out the W4s for my new job? My employer told me to fill out NY and DC. I just filled them out like I normally would in previous jobs when I lived and worked in the same place, thinking that somehow my employer would figure out how the withholding should work (probably dumb). I just got my first paycheck and it looks like the full withholding is happening for both NY and DC. Should I be adjusting DC somehow to reflect the NYS taxes?

Thanks for your help!

[TomD8]

Yes, DC will allow you to claim a credit for the taxes you pay to NY on your work income.  The credit can't exceed the rate of tax charged by DC.

Since the credit will be granted by DC, you should have your employer withhold NY taxes.  (Because you won't be able to take any offsetting credit on your NY return.)

[Opus 17]

Working remotely for an NY company does not always subject you to NY state income tax, there are several factors that must be weighed, see this memo from NY.

https://www.tax.ny.gov/pdf/memos/income/m06_5i.pdf

Assuming you do owe NY tax, you would file a non-resident NY return and a DC resident return.  You will owe NY tax on NY-source income (but not other income like investments) and you will owe DC tax on all your world-wide income.  DC will give you a credit for tax you pay to NY.

You should definitely have NY tax withheld.  For most incomes, DC tax is 1%-2% higher than NY's income tax.  If you have full withholding for DC, you will have a lot of extra tax withheld and get a huge refund while not having the money in your pocket.  I think it would work to have NY tax withheld, no DC tax, and then make estimated payments to DC on their web site, in the amount of 1.5% of your income.  (This is a very quick off the top of my head guesstimate.)  You can make the payments weekly or monthly but no less often than quarterly.