Multiple State Filings - NY and NC

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I moved from New York to North Carolina in 2020 so I filed partial residency for both states. My employer continued to have me based in NY, so my 2021 W-2 reflects full NY state income tax withholdings of my 2021 wages but no NC state income tax withholdings.

I'm filing 2021 NY as a non-resident using form IT-203 and reflecting $0 income in NY to get my full state refund from NY and paying NC full year state resident income taxes. Is this correct?

LenaH

Alumni - Expert

No. Since you stated that you continued to be based out of New York, it seems as if you have a full year of New York sourced income.

Per NYS, if you are a nonresident whose primary office is in New York State, your days' telecommuting are also considered days worked in NY state unless your employer has established a bona fide employer office at your telecommuting location in North Carolina. There are a number of factors that determine whether your employer has established a bona fide employer office at your telecommuting location. In general, unless your employer specifically acted to establish a bona fide employer office at your telecommuting location, you will continue to owe New York State income tax on income earned while telecommuting.

In addition, under the New York “convenience of the employer” rule, the wages of an individual who is a resident of a state other than New York but who works for a New York-based employer, are considered to constitute New York source income unless, out of necessity, the employee is obligated to work outside of the state.

Considering the factors above, you must reflect 100% of your wages as sourced in New York.

North Carolina will also tax you on the income as a resident of their state. However, they will give you a credit of taxes paid to New York so you are not double-taxed.

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