Hybrid Work State Tax Filing - NY/NJ

[joselee]

I live in NJ but my company is based in NY. 4 days a week I work remotely from my home in NJ, while 1 day a week I go into the office in NYC. 

I know I need to file NJ state tax form for the 4 days a week I work from home but how do I make sure I'm not double taxed in NY, since I only work 1 day a week there? Am I supposed to be double taxed on all my income? If not, how do I specify I should only be taxed for 52 days of work in NY?

Originally my employer didn't even have me withholding ANY money for NY but it's my understanding I do have to file NY taxes. 

After talking to HR (who seems to have no understanding of what I need to file) they have me filling out a W-4, an NJ W-4, and a IT-2104 (NY.) Does this sound right?

[rjs]

Why do you work from home? Does your employer require you to work from home four days a week, or is it your preference? The reason makes a difference. The tax treatment depends on whether you are working remotely for the "convenience of the employer" or for the "convenience of the employee."

[TomD8]

Here's how it works:

Since you're a resident of NJ, NJ can tax ALL your income, regardless of where you earn it.

In addition, NY can tax you as a non-resident on any income you earn from work you physically perform within New York State.  NY can also tax the income you earn by working from home, if you're working at home for your own convenience.  That's why the question raised by @rjs is critical.

In any case, you'll be able to claim a credit on your NJ tax return for the taxes you pay to NY, so in effect you won't be double-taxed.  The only question is how much of your income will be taxable by NY.

[joselee]

Ah, that's a good question. I would need to determine that. That's just how I was hired, though from my understanding their NY office doesn't have dedicated space for us because it's so small. So I suppose it's for the convenience of the company.

[rjs]

It does sound like you are working remotely for the convenience of the employer. So (roughly) 4/5 of your income is NJ source income, and 1/5 is NY source income, for the time that you actually work physically in NY. When you prepare your NY nonresident tax return you will be asked how much of your income should be allocated to NY. You can do the allocation based on the number of days. So NY will tax only the NY source income. Ideally you should keep a record of the days that you actually work in each state.

When you prepare your tax returns, do the New York nonresident tax return first, then the NJ resident tax return, to make sure that the NJ credit is calculated correctly for the tax that you pay to NY.

If your employer can withhold tax for both states, that will be helpful, so you will not have to make estimated tax payments to either state. You will be paying most of your tax to New Jersey.