Multiple State Filings - NY and NC

[jg5statetax]

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]

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.

[jg5statetax]

Thanks for the response and help Lena.  You just helped me about applying for state tax credit in NC.

[jg5statetax]

Hello,

Let me expand on a related tax return.  The individual is based out of New York for work but lives in both North Carolina 9 months (from 1/01 to 9/30) and then move/resides to Colorado 3 months (10/01 to 12/31/21).

As you clarified, the individual will file as a NY non-resident with full year income for NY taxes.  Please verify.  I have applied as partial resident in NC to offset and get credit of taxes paid to NY for 9 months.  I would also apply as partial resident in Colorado for 3 months and get partial tax credit of taxes paid to NY?  Are there state credits I need to list in NC and CO to offset each other?

[LenaH]

Yes, that is correct. The individual would file a nonresident New York return. The individual would also file a part-year resident return for North Carolina and a part-year resident return for Colorado. Both states will give them a credit of taxes paid to New York for the time period in which they were a resident. 

There are no credits that you need to list in North Carolina and/or Colorado that would offset each other. 

@jg5statetax

[Togoroki]

I am active duty and have been based in North Carolina since 2021. From that time to the present day, I have been paying taxes to New York. Now that I am filing my taxes, I am unsure as to whether I should be filing New York or North Carolina taxes. With this being said, how should I go about filing my taxes?

[DMarkM1]

You may not be required to file in either state.  However you will want to file in NY to get the taxes withheld, refunded.  

Let's start with NC.  If you are active duty military and military pay is your only pay, NC does not tax military pay of military members who are NC nonresidents only in NC due to military orders.  If however you have other income besides military pay you will file as NC nonresident and only allocate that income to NC.

As for NY.  As a military member who has NY as their home of record state but who is stationed out of state they may be treated as nonresident for tax purposes under the following circumstances (reference here and see below from page 5). If you are nonresident NY then you would not have any NY source income and are not required to file in NY.

You are considered nonresident:

1. You did not maintain any permanent place of abode in New York State during the tax year; and 

2. you maintained a permanent place of abode outside New York State during the entire tax year; and 

3. you spent 30 days or less (any part of a day is a day for this purpose) in New York State during the tax year.

However you do want to file as NY nonresident to get the taxes withheld refunded (see below steps on filing). 

1. In the "My Info" section indicate you are military and for all of 2022. 
2. Select NY as your home of record (resident state) on 31 Dec and you did not live in any other state.
3. Continue and then scroll down to "Other State Income"
4. If you have other income sources you should select "Yes" and select NC
5. If not, select, "No"
6. Enter your military W2 and in the follow on page "Uncommon Situation" select "Active Duty Military Pay"
7. Complete the federal interview
8. If you have NC income do that nonresident return first and only allocate to NC the nonmilitary income
9. Next work the NY return.
10. If you can be considered nonresident per above rules the "Change the residency" to Nonresident when asked
11. Allocate zero income to NY 
12. Complete the interview
13. This refund all taxes withheld for NY