I work for a NY company, remotely from NC. I spent 1 day in 2017 on site, but my W-2 has full salary in the state earnings boxes for both NC and NY. How can I allocate?

[ThomasM125]

You may be required to file a New York tax return, especially if New York wages were listed on your W-2 form. However, you may not have to pay any New York tax based on the income you earned in New York and the other income you earned during the year.

@PANYtax

[kristinelbly]

@PANYtax I need some more facts. Is your primary office for your employer based in New York? Was the one day you were in New York for work or personal purposes? How did your employer treat your wages, did they withhold any NY tax? 

[PANYtax]

Thank you @kristinelbly ! It was for personal reasons. My employer's primary office is based in New York and the employer witheld the full NY state tax for the year.

[FangxiaL]

It sounds like you had NY-source income in 2021. If your resident state is NC, you need to file a nonresident NYS return and pay income tax to NY. But it does not mean that you will also pay tax to NC on the same income. You claim the credit for the tax paid to NY on your NC resident return. 

@PANYtax

[kristinelbly]

@PANYtax Based on the facts provided you don't owe taxes to New York State (assuming all of your wage income is related to the current year, or if in prior years the facts are the same). Your physical presence in the State is not sufficient. You have to be performing services both within and without the State for 132.18(a) to apply. I'd gather any documentation you have to support it was a personal day (easier if it was a weekend). Things such as any documentation showing you took PTO on that day with your employer, the reason you were in New York and supporting proof (credit card charges, contemporaneous email/texts, invitation, medical records, etc.).

On your return, TurboTax will likely want you to include a form IT-203-B. Review the NYS return before submitting, lines 1h and 1i should be identical and line 1n should be zero percent. The IT-203-B may force 1l to be all the days you worked at home, making 1n a high percentage, contact TurboTax for a fix to this. A better scenario is to not include IT-203-B at all, if the software has no ability to address your particular circumstances. Absolutely do not report 1 working day in NY as a work around on this form to trigger the allocation ratio at 1n. You won't be able to dig yourself out of that hole on an audit for misrepresenting that day.  It may be worth the money to have an accountant prepare your return who can include an attached statement, and paper file your return if necessary to make a manual correction to that form. 

Again should you be audited (1) prove your presence was not work related, (2) cite NYCRR 132.18(a), (3) cite NYS 2013 Nonresident Allocation Guidelines page 19, and (4) cite NYS Supreme Court Case Matter of Arthur Hull Hayes, 61 AD2d 62 in your response of why you don't owe taxes.  If they ask why your employer withheld taxes, you can say that NY's withholding tax laws/guidelines for employers is not the same as NY's personal income tax laws. 

If you feel there is some other nuanced fact here that needs to be disclosed,  please just Google my name and call me. Good luck with everything.  

[PANYtax]

Thank you SO much @kristinelbly  for the very detailed response.

[DianeW777]

The detailed response is not exactly how New York (NY) tax law works.  If you have NY source income (employer is physically in NY) then you are required to pay tax to NY and then get a credit for taxes paid to another state on your resident return of PA.

You stated the following: My employer's primary office is based in New York and the employer withheld the full NY state tax for the year. They withheld the tax because of the NY tax law.

• New York Nonresident filing information (Rules for Nonresident)
• You must file Form IT‑203 if you meet any of the following conditions:
  • • You have income from a New York source
    • • a business, trade, profession, or occupation carried on in New York State whether or not as an employee (see TSB-M-10(9)I, Income Received by a Nonresident Related to a Business, Trade, Profession, or Occupation Previously Carried on Within New York State); 

When completing your return in TurboTax, be sure to complete the Nonresident New York tax return first in order to ensure the credit for taxes paid to another state, pull into your resident state tax return correctly.

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

@PANYtax

[kristinelbly]

@DianeW777 I assure you my answer is correct, and the reason its correct is in the response you provided. You cited:

"You have income from a New York source

  • a business, trade, profession, or occupation carried on in New York State whether or not as an employee"

@PANYtax specifically said that while his employer was located in New York, he did not perform services for his employer in the State of New York at all during the tax year. So he does not have New York Source income. 

Here is the exact excerpt from the 2013 Nonresident Allocation Guidelines (p. 19) written by the New York State Tax Department. These are the Guidelines State tax auditors are provided, as a helpful resource, on how the State interprets its own laws:

Moreover, it is important to remember that the convenience rule does not apply where an employee works entirely out of state and performs no services within New York. Thus, in
the Matter of Arthur Hull Hayes, 61 AD2d 62, a nonresident formerly employed in New York performed consulting duties at his home in Connecticut. He no longer had an office in New York and performed no services in New York. In determining that he was not subject to New York taxation, the State Supreme Court stated:

“A nonresident who works in another state but who performs
no work in New York is not subject to New York State tax liability no matter for whose convenience or necessity he performs the work.”

[unknownzack]

Thanks Kristine, Daniel, Tom, Dave for the assistance and very insightful comments.

I have taken the practical guidance to prepare and have gotten a letter from my employer on Company letterhead that states ("Effective January 1, 2021 "Name" transferred roles to Florida and has not worked in the state of New York since then") and moving company contract as proof of the move prior to 2021. I have a few item that I wanted to confirm that I've made the right selection to move forward.

1. In regards to the question of living quarters maintained in New York State/NYC by a nonresident, would I answer "YES" to this, as my Condo didn't sell/close until Nov 2021 (took a year + to sell)?

2. Similarly we still have a small studio condo that is rented out fully, would we also have to include this as a living quarter maintained in New York State/NYC by a nonresident?

3. As guided, I've allocated 0% to NYS income on wage and it looks like the "Allocation Worksheet for PY/NR:NY wages reported on Fed W2 but no wage income allocated to NY. The efiled return will be rejected by NY" error is popping up, does this mean that I can't e-file and would  just need to paper file going this route?

Thank you!

Prior background for reference -

Similar but different situation. I work for a large company in their satellite NYC office and have purchased a home and settle in FL since Nov 2020 with my wife and two kids. I work remotely and live in FL since than and have not return to work in our NYC office since then. Our kids goes to school in FL and we have only set foot in NYC for a few days total in 2021 to list and sell our Condo since our move, which finally sold in Nov 2021. Note that we also have a small studio apartment in NYC that is rented out and haven't been sold yet. I have changed my resident state with HR to FL effective 1/1/21 and have still been withheld NYS and NYC taxes for the whole of 2021. Given my situation, am I correct that NYC taxes does not apply to me since I'm not a resident or have lived in NYC in 2021; but for a few days to list and sell and much less than the 184 days requirement?  In regards to NYS taxes, can we assume that NYS tax would still likely apply given the telecommuter convenience rule, even though we only set foot in NYC for a few days to list and sell and not work for the whole of 2021. If the above is correct, would we file as a NY nonresident to claim back NYC taxes and just pay the NYS tax portion? Thank you.

[kristinelbly]

@unknownzack 

1. Yes, check box. You'll be instructed to file an IT-203-B where there is a second question as to whether you maintained a residence at the end of the year. 

2. No. You don't have unfettered access to a place leased to a third party,  so its not a permanent place of abode. 

3. Interesting. I've seen plenty of nonresident returns filled with NYS that don't have allocated wage income.  Maybe Dan, Tom or Dave can chime in to that point and offer more guidance. I'd paper file with private delivery service if you ultimately can't. 

4. Your physical presence in NY isn't sufficient to trigger the convenience rule, but you'd have to prove to NYS that you weren't working on those days. So if you took paid vacation days from your employer where you can show your time report or payslip for those days, plus any type of contemporaneous calendar that shows you were out of office or on vacation. 

If your compensation contains a component of prior year services (annual bonus, stock,  units, etc.) you'll need to allocate that to NY based on the days you worked in NY to which the compensation relates. For example if you receive a bonus in January 2021, for services rendered in 2020, you'd allocate that based on 2020 work days. If it's all current year salary, I think you have the position to exclude the wages entirely.  

Lastly, youll need to report your overall income or loss from your rental property in NY as NY source.  

[Jpw15]

Hi Kristine, I would be interested to hear your (and others) opinion on my situation as it seems very similar to others in this thread. 
I work for a New York based company. In August 2020 we opened a small office in West Palm beach and one of our employees moved there. I was offered the opportunity to move to Florida also as an increasing number of our clients have moved to the region and it makes sense to have a base here to serve them. I deceived to move our family to Florida and we decided to leave CT July 1st 2021, the day after our home rental lease expired .
During March 2021, the employee we had in Florida resigned from the company and so we did not renew the lease on the office space after April as it was decided we would look for an office space in Miami and I would just work from home until then. 
Full disclosure, I’m a stock broker performing core duties, I buy/sell shares on a daily basis and solicit business from clients based all over the globe. 
So, my 2021 tax filing. My company stopped withholding NY state tax from my pay check in August (month late but that’s a different story.)

We filed already and my accountant prepared the usual NY state and CT filings as we always have. 
I have now received the standard inquiry from NY state tax authority regarding the time worked etc to see if I actually owe more than I have paid and mentioning telecommuting rules. 

Now, this has brought to light that my accountant didn’t know I was working from home in Florida, as I never thought to mention that to him, and he has said that NY may have an issue for obvious telecommuting issues.  He was expecting it to just be a standard split year filing. 

From reading this thread however, I’m now questioning whether I have filed incorrectly in the first place as I worked from home in CT from Jan 1st 2021 until June 30th 2021. 
We moved office in November 2020 and I have not even been to our new office nor do I have a desk assigned to me there. I’m pretty certain I didn’t set foot in NY state all of 2021, and if I did, it was most definitely personal reasons such as a visiting Costco on the NY/CT border or driving through the state the day I left CT to drive to Florida. 

I guess I have a few questions here, did I file incorrectly? Should I refile ? Or should I just reply to the inquiry and see what they come back with ? 
My company will provide a letter stating that I was relocated to Florida to service a growing client base, that I perform core services from my home office (continuing to trade and solicit business globally ). They will also state that I have not performed any services in NY state during 2021, and that I do not have a desk assigned to me in the NY office, in your opinion, would that be good to add to the the letter ? 
Should they also add that my home office in Florida is my primary office ? 

I’m less concerned about the 2021 rebate than I am cleaning this up for 2022 and going forward as my accountant said I could be liable for NY state tax still until such time we have a permanent office in Florida. 

Appreciate there’s a lot to unpack there but I wanted to give as much color as possible. 

thanks all

[kristinelbly]

@Jpw15 my bio is in my profile. Give me a call to discuss. You have many more variables than a typical taxpayer, and in an effort to not confuse anyone reading this thread, happy to talk through it or email you directly. 

[GeorgeM777]

It depends. The issue you raise is fact specific and therefore, you will need to compare your facts with existing NY law and policy on the issue of telecommuting.

It the situation you describe, NY will apply its Convenience of Employer Test in order to determine whether the employee must pay NY income tax.   The primary consideration when applying the Convenience of Employer Test is whether the employee's home office is a bona fide employer office.  There are several factors to consider whether the employee's home office is a bona fide employer office.  If the employee's home office meets the definition of a bona fide employer office, then any work performed from that office, and assuming such office is outside of NY, will be treated as work performed outside of NY and thus not subject to NY income tax.  

The attached memorandum has been prepared by the NY State Department of Taxation and Finance and while it is dated from May 2006, NY tax instructions for non-residents and part-year residents continue to refer taxpayers to this memorandum regarding the issues you have raised.  Thus, it continues to be NY's current tax policy.  The discussion about what constitutes a bona fide employer office begins on page 2 and continues through the end of the document at page 6.  You will find this memorandum very helpful.

New York State Department of Taxation and Finance Office of Tax Policy Analysis Technical Services D...

@Jpw15

[goodfella]

The convenience rule does not apply. 

Per Hayes v. State Tax Commissioner, 401 N.Y.S. 2d 876, “A nonresident who works in another State but who performs no work in New York is not subject to New York State tax liability no matter for whose convenience or necessity he performs the work.”

To tax someone who did not work a single day in the state would be against the Due Process Clause in the constitution.  One could argue that the convenience rule does as well, and it should be litigated at a federal level. 

Essentially, if you worked 1 day or more in NY then they can use the convenience rule.  Otherwise, their own non-resident guidance suggests the convenience rule does not apply.  

[Jpw15]

Thanks, I’m still waiting for NY state to come back to me. Will update with the outcome when they do.