I am a NYS full time resident, who worked for a company that has its official business address in NJ, but at a location in NY. My company withheld NJ state taxes, not NY state taxes. Was this correct?

[stressedtaxpayer21]

I am a NYS full time resident who I was working on my taxes this week with Turbotax online, I found out that one of my employers, that has its official business address in NJ, withheld NJ state income tax, but not NY state income tax, from my paycheck.  I don't think this was correct, because I did not actually physically work in NJ for this employer, but in NY. 

However, now I am stuck with a big tax bill AND underpayment penalty to NY state, and it seems I must file a nonresident tax return for NJ state just to get back the state income tax that was withheld.  It also seems from other answers to similar questions I read here, that I have to complete the NJ tax return BEFORE I complete the NY tax return, but unfortunately I have already completed (and paid for) my NY return, I only realized the mistake in my final review of my returns.  So, is there anyway to fix this?  Is there a way to delete my NY tax return,  complete the NJ tax return, and then complete my NY tax return again?

[TomD8]

You are correct that your work income from your NJ-based employer is not  subject to NJ income tax, since you are a non-resident of NJ and you never physically worked inside NJ.

In order to obtain a refund of the incorrectly withheld NJ taxes, you must file a non-resident NJ return on which you show the withheld NJ taxes, but allocate zero income to NJ.  (My answer assumes that you have no other income from NJ.)

Your income is of course fully taxable by your home state of NY.

The sequence in which you prepare your state returns is important only if you have income taxed by two states, and thus are able to claim an "other state credit" on your home state return.  Since you actually owe no taxes to NJ, there is no credit to be claimed in your situation.

Additionally, if you still have the same job, and your employer will not withhold NY taxes for you, then you must make quarterly estimated tax payments to NY.

https://www.tax.ny.gov/pit/estimated_tax/

[stressedtaxpayer21]

Thanks, FYI I did work for this same company in the past at an NJ location, so in the past I did file a NJ nonresident tax return, did pay taxes to NJ, and got a credit for that payment on my NY taxes.  I assume whoever is in charge of payroll did not realize that my work situation in 2022 had changed and I did not work in NJ at all that year, I did not even visit the company HQ in NJ.  Just wanted to make sure before I put a zero for "total New Jersey income" on my NJ tax return for 2022.

[TomD8]

@stressedtaxpayer21 --

NJ Statutes define wages and salary as NJ sourced only if they are "remuneration for services performed in the state."

New Jersey - Income Attributable to State Sources - Income Taxes, Personal - Explanations - CCH Answ...

The New Jersey employers' withholding instructions only require NJ tax withholding from non-residents working in New Jersey.

https://www.state.nj.us/treasury/taxation/pdf/current/njwt.pdf