As the question states above. For extra detail, the company I worked for is based in a different state but is incorporated in NY and not in NJ, hence why I received W2s for both NY and NJ.
All my googling has shown is that if I withheld in NY then I could receive a credit back for NJ but since I only withheld for NJ I'm not sure if i can get a credit for taxes currently owed to NY. I also withheld the maximum amount for NJ.
If you are a resident of NJ and you never physically work within New York, not even for a single day, then your work income is not taxable by NY and you should ask your employer to withhold NJ taxes only from your pay.
If you work both within and without New York during the year, then the income you earn from the work you perform within NY is taxable by NY. In this situation you would also be subject to NY's convenience of the employer rule. That rule states that if you work remotely for an NY employer from an out of state location, then your remotely earned income is taxable by NY if you are working remotely for your own convenience, rather than because you are assigned or required to by your employer.
You will find New York's employer withholding rules for non-resident employees on page 45 of this reference:
https://www.tax.ny.gov/pdf/publications/withholding/nys50_1223.pdf
Here is a link to NY Form IT-2104.1, which is referred to in the withholding guide:
https://www.tax.ny.gov/pdf/current_forms/it/it2104_1_fill_in.pdf
And here is a link to New York's tax memorandum on the "convenience of the employer" rule:
https://www.tax.ny.gov/pdf/memos/income/m06_5i.pdf
Please clarify, does the company have office workspace you can use in New York?
Do you work remotely because you asked to or because the company contracted you as a remote worker?
The company has a NY office and I was approved and switched by my own choice to become a fulltime NJ remote worker in 2022 so I was entirely remote for 2023.
My understanding is that since I requested it, the NY convenience of employer rule would mean I have to pay taxes in NY, which I wasn't aware of until recently. However, I'm not sure why my company withheld tax for NJ rather than NY in that case.
You are correct. Since you are working for your own convenience, you do need to file a NY return claiming the income you earned while working remotely for NY.
Your company likely withheld based on your address. You do technically have a tax filing requirement for NJ too so that is why they likely withheld for NJ instead of NY. You will want to contact your employer so they withhold for both states.
To avoid paying double taxes, you will complete your NY return first and then you will take a credit for taxes pain to NY on your NJ return. You will be asked this as you walk through the NJ return. The credit you get may or may not result in a refund, it simply depends on if your taxes to NY are more or less than they are to NJ.
NJ will not give you a credit of more than your tax liability on that income to NJ even if NY charged you more.
You can use the tax liability to NY and NJ to ask your employer to withhold accordingly. You will need to fill out a new NJ-W4 and an IT 2104 This will help you avoid the penalty for next year.
Hi, thank you so much for your response. I have a couple of follow up questions:
Regarding "To avoid paying double taxes, you will complete your NY return first and then you will take a credit for taxes pain to NY on your NJ return.":
Do I need to submit the return for NY first? Is that possible in TurboTax to submit state returns at separate times? Or do you mean I should complete NY return and then move onto filling out NJ and then be able to submit everything at the same time?
Yes, you can file your state return at different times in TurboTax. However, in your case you should fill out your NY return first, then your NJ return (so the correct information will transfer between the two states).
You can then file both state tax returns at the same if you want.
Thank you for your helpful reply to the OP's inquiry. It is closely related to mine, but I fear something remains unclear to me.
In my case I too am working remotely in NJ full time for a NY company, but they have apparently opted to only withhold NY taxes. When selecting withholdings as part of the onboarding process, should I select an amount for both NJ and NY? This seems to me that it would be in fact causing the double taxation that NJ would otherwise credit. Am I supposed to go the tax year opting additional withholdings for two states only to be credited for one when tax season comes around (accepting that NJ will only credit up to my liability for the state)?
If you are a resident of NJ and you never physically work within New York, not even for a single day, then your work income is not taxable by NY and you should ask your employer to withhold NJ taxes only from your pay.
If you work both within and without New York during the year, then the income you earn from the work you perform within NY is taxable by NY. In this situation you would also be subject to NY's convenience of the employer rule. That rule states that if you work remotely for an NY employer from an out of state location, then your remotely earned income is taxable by NY if you are working remotely for your own convenience, rather than because you are assigned or required to by your employer.
You will find New York's employer withholding rules for non-resident employees on page 45 of this reference:
https://www.tax.ny.gov/pdf/publications/withholding/nys50_1223.pdf
Here is a link to NY Form IT-2104.1, which is referred to in the withholding guide:
https://www.tax.ny.gov/pdf/current_forms/it/it2104_1_fill_in.pdf
And here is a link to New York's tax memorandum on the "convenience of the employer" rule:
https://www.tax.ny.gov/pdf/memos/income/m06_5i.pdf