I live in NJ but work in NY, should I be paying taxes from my pay to both states on every paycheck? I do not want to be double tax.

[thiagosrpt]

Hi All,

I came across a weird situation with NY State Tax Department, and hope anyone on this thread could shed some light on here:

1. After 2 years living in Brooklyn, NY - My spouse and I moved to Jersey City, NJ on Dec/2019.
2. I filed the 2019 return, and not big surprises there.
3. During 2020, I worked remotely for a company based in NYC - so I paid NY State Tax, but no NY City Tax. However, my spouse continued paying NYC City and NY State taxes as my spouse never requested the change to remove City Tax from his income and continued working in NYC until September of 2020.
4. In February/2021, I field my return Tax via TurboTax - no surprises at all - Turbo Tax calculated the following:
   1. Owed a very low amount for NJ State tax.
   2. Got a refund for Federal Tax.
   3. Got a higher refund for NY Tax.
5. The NY Tax Refund was never received - A month after I filled, I got a notice from NY Tax Dep asking to confirm my address - I had been living in Jersey City since December 2019. Therefore, I created an account  in their website and provided all the proofs of address they requested.
6. Two months later, on May/28th, I checked the status of my refund on NY Tax Website and saw a noticed (with no explanation whatsoever) that I owe almost twice as much what I was entitled to get as refund. Even during the time I lived in NYC, I've never owed NY Tax.

Has anyone been in a similar situation? Any possible explanations?

Any help will be much appreciated!

Thank you,

Thiago

[yoomsters]

Hi, i know this seems redundant to ask a similar question for a new year but this is my first time filing for NJ while working for a company in NYC. I lived in brooklyn for the first 3 months of 2021, so I did my NY part-year resident return with no trouble (including the calculation of my wages earned with my brooklyn address). I should be receiving a small refund from NY State. 

My job only taxes me NY State rate on my salary now (took off the dread city tax after the move yay!). 

Now while working through my part-year resident return for New Jersey, I'm concerned because currently it shows I might owe almost 1.8k in taxes. Where could I possibly be going wrong? Everyone online mentions I shouldn't owe too much in taxes and if anything, I'd be getting a little credit to offset NY state's higher income tax rate compared to NJ state. 

Any tips would be highly appreciated and if not, who has a cpa in jersey city they recommend that's not too expensive lol 

[FangxiaL]

By moving out of NYC to NJ, you don't pay any more NYC taxes. You work for a New York company, and New York taxes is withheld from your paychecks. Besides NY part-year return, you also file NJ-1040 resident return, and make sure to claim the credit for taxes paid to NY by filing Schedule NJ-COJ Credit for Income or Wage Taxes Paid to Other Jurisdiction. You may also qualify for renter's credit if you lived in NJ for over 6 months. If you paid enough taxes if NY and had no NJ source of income, you may receive a small refund (around $50 renter credit).

TurboTax can handle your tax situation.

[raghu487]

All we want to know is, will we get any money back in our bank accounts on NY income tax returns after the tax owed to NJ is credited. Because up to a certain salary NJ income tax is lower than NY. What happens to the difference between the tax owed to NJ and NY? Will NY keep the difference with them or return it to the person filing the taxes?

To frame the question differently,

I understand that if the tax owed to NJ is more than the tax withheld in NY we have to pay it. What happens in the other case i.e, Tax owed to NJ is less than the tax withheld in NY? Do we get the difference back or does NY keep it?

[DianeW777]

The best way to explain how the tax credit works (taxes paid to another state on the same income) is shown below. Prepare your nonresident state return first, then prepare your resident state return.

If your resident state tax is a higher rate, then all of the tax paid to the nonresident state will be applied.  If the nonresident state tax withholding is at a lower rate than your resident state you will make up the difference when all the calculations are complete. In reverse, if the state withholding on your nonresident state is at a higher rate than your resident state, you do not get the difference refunded unless the withholding was more than you tax liability for that nonresident state.  Your resident state will not refund any money they never received.  The notes below will explain how it works.

The credit for taxes paid to another state on the same income is used on your resident state because they do not want you to pay taxes twice on the same income.  As the resident state all worldwide income must be included.

The credit for tax paid to another state on the same income will be the lesser of:

1. the tax liability actually charged by the nonresident state, OR
2. the tax liability that would have been charged by your resident state

If you don't have tax in one of the states, then there is not going to be a credit for that state. Review the link below if you have questions about a particular state.  You can also add any question here as you start to prepare your state returns.

[csrirama002]

Hi All,

I am in the same situation here. Based on my W2 information and taxes withheld for both NY and NJ, I am getting a tax credit from NJ, however it states I have under-payed my NY tax., i.e I still have to pay some tax to NY. I was wondering if this is possible and if there is any explanation to it?

[FangxiaL]

It is quite possible for a balance due to NY if the withholding is not enough to cover the tax liability. If you are a NJ resident and work in NY, you have NY source of income and you pay income tax to NY. You are a NJ resident and you pay income tax there but you receive a credit on your NJ return for taxes paid to NY.

When you prepare your state tax returns, make sure to prepare the non-resident state first so that the tax credit can carry over to your resident state tax return properly.

[Isamaniego2]

Hey I’m young so I don’t know about any of this. If I live in NJ but work in NY and I was recently told I could work hybrid

, would i be able to start a c2c to avoid paying taxes in NY? 

[MarilynG1]

If you physically work in New York, you are subject to NY tax as a 'non-resident''

However, you get credit on your New Jersey return for tax paid to New York.

Click this link for more info on How to File a Non-Resident State Return.

However, if you are an 'independent contractor' you may not be subject to NY tax (only NJ). 

This link has details about New York Independent Contractors.

The major difference between C2C and 1099 is that with C2C, you don't have to pay self-employment taxes on your income. However, you must pay yourself a set salary, as well as pay all required employee and employer taxes.

Here's more info on Corp to Corp.

[jschwartz2425]

I have a similar question-- I worked for an NY based company half of 2021, but lived in NJ all of 2021. I had $43,613 in NY AGI and owed around $2,168 to NY. I had $2,922 withheld, so will be getting a refund from NY. My question is if NJ did not withhold from that income and my NJ state wages was $45,095, do I still qualify for the credit for taxes paid in another state? In other words, would I put that $43,613 as income taxed by NJ & NY even though NJ did not withhold? 

[TomD8]

@jschwartz2425 --

Since you're a resident of NJ, ALL your income is taxable by NJ - regardless of whether or not your employer withheld NJ taxes.  Your NY-sourced income is also taxable by NY - so you're entitled to claim a credit on your NJ return for the taxes you paid to NY.  Note that the credit may not exceed the tax that you would have owed if the income had been taxed by NJ alone.

[JillS56]

Yes, you will have to file state taxes to both NY and to NJ.    Most state tax returns begin with the AGI from the federal return.   This would carry over from the federal return.   The full amount would be reported to both states.   Prepare the NY non-resident return first and then the NJ resident return.   In order to get the correct amount of credit, also prepare the non-resident state first. 

As far as paying taxes to both states on every paycheck, that is something you will need to take up with your employer.   To avoid paying taxes to NJ you would want to have taxes withheld from your paycheck.   If your employer will not take out for both states, then you could make estimated payments to NJ so that you have taxes paid in and would not have to pay at tax time.