My employer sent me two W2s one for NJ and another one for NY. In my NJ W2, my state wages are reported as $7,060. In my NY W2, my state wages are reported as $7000. However, I only earned $1000 in NY and $6000 in NJ in the whole of 2016. I am confused as to how I should file my taxes?
If you didn't live in NJ all year, please clarify where you lived (as that's pretty important too)
I will have to assume that you live in NJ, though you did not specify...
As a resident on NJ, you are taxed on the total income plus NJ adjustments. NJ wages are nearly always higher than NY or federal wages, so this part makes sense.
On top of this, NY employers are required by law to list 100% of federal wages on the W2. It is the employee's responsibility to allocate the appropriate wages on his/her tax return.
So, your W2 seems "NJ/NY-normal". Here's what you need to do:
This process will report the proper amount of income on your NJ return- which is $7060. As an NJ resident, you are taxed on your income from anywhere. And you will get a credit for the taxes paid to NY. The NY return will ultimately show close to $1000 in income after you've done the allocation.