Moved to NY during the year, but box 16 of W-2 for NY says I made all of my income in NY

[sbear]

I moved from MN to NYC in August 2021, but my W-2 for NY says, according to Box 16 (State wages, tips, etc.) all of my income was made in NY (basically my Box 1 and Box 16 match for NY). However, for MN, my Box 1 and Box 16 differ correctly to reflect that I moved part-year (My Box 16 for MN is about 2/3 of Box 1). My employer is (and has been all year) in Minnesota, it's just me who moved from MN to NY in August.

My question is: how should I answer the "Allocate Wages to New York" question on TurboTax? I only made 1/3 of my income in NY, but it's asking me to report it as it is shown on my W-2.

Please advice. Thank you!

[FangxiaL]

You should select Allocate by Percentage on the screen that says Allocate Wages to New York, and enter 33 to represent 33% on the next screen. 

If you only earned 1/3 of your wages after you became a NY resident, allocate 1/3 to NYS. Because you are a NYS resident for part of the year, you only pay tax on the income earned while you are a NYS resident. 

Since you have two state returns to prepare, prepare your MN return first, then your NYS part-year return, this way the credit for taxes paid to MN will properly flow to NYS return. 

In Minnesota, part-year residents are taxed on all income received while a resident of Minnesota and on Minnesota-source income received while a nonresident. So you will pay income tax to MN on all the income reported on that W-2.  

In New York, as a part-year resident, you are taxed on the income you earned after you moved to NYS and any income you earned from NYS- source while a nonresident. 

Since you will pay tax on the same income to MN, so make sure to take a credit on your NYS part-year return so that you are not double-taxed on the same income by two different states. 

Remember, as a NYC resident, we also pay NYC income tax. Since you were a NYC resident for part of the year in 2021, you need to file IT-360.1, Change of City Resident Status, to compute New York City resident tax. 

[rjs]

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@sbear wrote:

my W-2 for NY says, according to Box 16 (State wages, tips, etc.) all of my income was made in NY (basically my Box 1 and Box 16 match for NY).

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New York has an unusual rule that the amount in W-2 box 16 for New York must be the same as box 1, no matter how much you actually earned in New York. Any adjustments to the amount of New York income are made on the tax return. That's why the New York interview asks you to allocate the appropriate amount of your wages to New York.

[sbear]

Hi, thanks for your reply. I have a follow-up question:

I'm filing MN state tax first, but one of the questions TurboTax asked me for MN return was if I was taxed in another state on the same income, to which I replied I was, in the state of New York. Then it told me to enter AGI and income tax paid, but only the income that was taxed by NYS while I was a MN resident. I should enter 0 for this, right? Because I was never taxed by NYS while I was a MN resident.

So in conclusion:

1. Should my income that was taxed by NYS while I was a MN resident, be $0? 

2. Is the amount of income taxed by NYS before itemized or standard deductions were subtracted (AGI) 1/3 of my box 1 of W-2?

3. After entering my answers while assuming the answers to my questions were both yes, I got a message from TurboTax that based on my answers, I have no Minnesota credit for taxes paid to New York. Is this correct?

Thank you!

[DMarkM1]

All are correct as you stated.  Since you allocated only NY income to NY and that was all that was taxed by NY, you would have no credit on your MN return for taxes paid to another state.  That is because there was no double taxation.  MN taxed MN allocated income and NY taxed only NY allocated income.  The two did not overlap.