I live in New Jersey and for half year I worked in NY and then moved to a different office in NJ. I recently received my w2 and the company declared as state wage for both NY and NJ the total annual income (withholds for each state are different
I was wondering whether it shouldn't be listed only the proportional amount to the time I worked each state in such way that NJ + NY income would be equal to my total annual income.
Yes, the total annual wages will be reported on your W-2 for both NY and NJ but this doesn't mean you will pay state income taxes to each state based on this total amount. Instead, you will allocate the income on your part-year returns for both NY and NJ based on your days of work in each state. Each state will recognize that you were a part-year resident even though your total wages are being reported on your W-2 for that state.
So for state tax purposes, you will need to divide up your wages based on the time you were a part-year resident of each state. If your employer only withheld taxes from one state, you may owe taxes in the state for which no state withholdings were taken out but you may get a refund in the state where extra withholdings were taken out.
NY taxes all the income reported when calculating NY state income taxes (whether resident, part-year resident or nonresident) but you will only be required to paid a portion of the total NY state income taxes calculated (your percentage of the total NY tax that relates to your NY source income only)
Each state has a different ways of calculating state income taxes.
The way that the NY state income tax return works is that NY looks at all of your income from all sources and generates a total NY state income tax on all income. When NY is determining the actual NY state income taxes that you owe, NY multiples the total NY taxes on all income by the percentage of NY source income over all source income. So if all your income is $10,000 but NY source income is $8,000, NY will calculate the NY state income tax on $10,000 then multiply this total tax by your NY source income over total income ($8,000/$10,000) to get your percentage of NY state income taxes on your NY source income. So in this instance, your NY state income tax liability would be 80% of the total amount of NY taxes generated (on all income). That is why all your income is being reported on your NY state tax return.
You can preview your NY Tax summary to see what portion of the total taxes for NY you are actually paying.
To preview NY Tax Summary:
- TurboTax Online sign-in, click Here
- Under Tax Timeline, click on Take me to my return
- Go to "My Account" > "Tools"
- Under the Tools Center, select "view tax summary"
- Select "NY Tax Summary"
Check below for more information about filing a part-year state tax return (Please select "see entire answer" to see full answer)