Midyear Switch in Remote Status - Does Tax Law Follow State Business Incorporated or Nearest Location?

[llevin3486]

Background:

• I live in New Jersey.
• My company is incorporated in and headquartered in Wisconsin.
• They have a number of office locations around the country, including New York.
• I used to be an employee of the NY office.
• As of April 1, 2024, I was made full time remote from my home in NJ (not a NY office worker working from home, my physical office location for work is listed as my home in NJ with no connection to NY).
• At that time, they stopped taking NY taxes from my paychecks.
• Since I did work in NY for 3 months, my W2 has NY reporting.  The tax is just for 3 months, but my full year income is listed.
• This year (2025) they will not even be reporting my income to NY.

I know NY tax law means if you work remote in another state for a NY based company, you have to pay NY tax. However, as listed above, my company is incorporated and based in Wisconsin. NY is just one of their office locations. My accountant is telling me that it doesn't matter if they are incorporated in Wisconsin, that no matter what, I have to pay all NY tax for the full year and continue to do so going forward. I understand paying for the 3 months.  My argument is that the company is incorporated and headquartered in Wisconsin, and it should follow Wisconsin and NJ (as my location) tax law. I only happened to temporarily report to one of their offices that happened to be in NY. Another employee of my company who is a remote worker based in NJ from day 1 has never had to report anything to NY. This is why they automatically stopped taking NY tax out of my paychecks. Why would I forever be linked to NY then? That means it would have been better for them to fire me and then rehire me with NJ listed. 

I'm panicked because since they stopped taking taxes out, I'm going to owe NY thousands of dollars. 

[Hal_Al]

I think your accountant is wrong about "going forward". If you never work (not even 1 day) in NY in 2025, you do not owe NY any income tax.

2024 is not quite so clear and usually hinges on why the change in work location. Does Tax Law Follow State Business Incorporated or Nearest Location? It depends on the details. In your case, you were already working in the NY office, so that office is the nexus.  But, mostly it follows the convenience of the employer rule.  Was the change made for your convenience or the employer's (e.g. no space for you at the NY office or clients for you to call on in NJ, job change).  If for your convenience, you owe NY tax on all your 2024 wage  income, since you worked part of the year in NY.  The fact that your employer stopped withholding NY tax is helpful to your case, but is not conclusive.  You may have to just wait and see how NY responds when you file your NY non resident return and only claim the 3 months wages .

Wait for additional replies.  There are several other contributors, in this forum, knowledgeable on this subject. 

[TomD8]

I agree with @Hal_Al that for tax year 2025, if you will never physically work within NY, not even for a day, then your 2025 work income will not be taxable by NY.  Your employer in that case should withhold NJ taxes only.

For 2024, since you worked both within and without NY, you became subject to NY's "convenience of the employer" rule.  The key issue in your case is whether or not NY will consider your home in NJ to be a bona-fide office of the company.  NY has detailed criteria for this; they are listed on pages 2-5 of this NY tax memorandum:

https://www.tax.ny.gov/pdf/memos/income/m06_5i.pdf

IF your home qualifies as a bona-fide office, and IF your employer assigns you to work there, then the remotely earned portion of your 2024 work income would not be taxable by NY.

[llevin3486]

Thank you! Honestly, I didn't work a single day in NY in 2024 (or in 2023 or in 2022 or 2021). The last time I worked a day, even part of the day or stepped foot in office in the NY office was in March 2020. I've been paying NY tax anyways as, per HR, there was pressure from NY not to actually make anyone out of state a remote worker due to the loss in tax. But because I was on record as an employee located at the NY office, I've had to pay the tax all this time. 

One big change is that I switched jobs from our NY based North America legal team to our Internationally based reinsurance legal team at the end of 2021.  There is no longer a desk for me at the NY office, my badge was taken away and no one I work with is there. Everyone is in Bermuda or London and other than working from home, I go into the Bermuda office 4 times a year (I know, tough gig!). Based on this, they FINALLY approved my change to officially be on record as a NJ remote employee with no connection to NY. The annoying thing is that they took forever to get it into the system, hence the three months in 2024. I just don't know how that plays out exactly with the convenience rules.

[TomD8]

The work income of a non-resident of New York who never physically works within New York during the tax year, not even for a single day, is not subject to New York income tax.

The convenience rule applies only to employees who physically work both within and without New York during the tax year.  See the first paragraph of the New York tax memorandum that I cited in my earlier reply.

If New York income tax is incorrectly withheld, the taxpayer's remedy is to submit a non-resident NY tax return, showing the withholding but claiming zero New York income.