NC Wages Allocation Code

[kels202]

I moved to North Carolina from New York City in March, but am still working for my New York company remotely. I have the exact amount that I made in New York before moving to North Carolina, but don't know which codes to assign to the wages since I am a resident of NC but my salary is coming from New York. I've listed all of the options below. 

-NC Resident Income
-NR NC Source Income
-PY NC Source Income
-Not NC Source Income

[SteamTrain]

OK....Assuming your are still being taxed by NY as a telecommuter  (i.e. you are not assigned to, and being paid out of a NC job site for that company).....and thus there is only one state line for boxes 15,16,17 and all of that W-2 is assigned to NY........

When you get to the W-2 allocation page in the state interview, you would break down the NY wages into two lines on the allocation page....Example is for an original 70,000 where 50k was earned while living in NY, and 20k was after moving to NC.

((BUT...if you moved in March, and were paid fairly evenly over the year, the relative amounts may be reversed.  The exact amounts are something you are going to have to determine from your own records and bank statements.  Print copies of all your monthly statements that show when/how much paid, since either NC or NY may ask for details as a audit at any time, and you may not be able to find those details 3-to-10 years from now.))

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[kels202]

Hi, 

Thank you so much for the detailed response. You are correct that I am still being taxed by NY as a telecommuter. Just wondering why my income earned while living in North Carolina would receive the "PY NC Source Income" code. Let me know what that means!

Thanks in advance!

[SteamTrain]

It just means that you are a PY (part Year) resident of NC, and that sub-amount of income from that particular W-2 is also taxable by NC.

Any income, from anywhere is taxable after you moved to NC.  NY will still tax all of that W-2, but you will be able to take an NC tax credit for the taxes you had to pay to NY on that W-2 NC-PY part, since NY gets first crack at it....But, the NC credit is just for  the PY-NC part.....not all of it.  AND there is some mathematical handwaving for that credit since the NC credit allowed is only ""Up-to" what NC would-have charged for the same income.  So if NY taxes it at 8%, and since NC only taxes at a  max of ~5.25%, the credit would only be for the NC ~5.25%.

Don't know how well that works out in the end since I don't have NY software...you do have to get your NY part-year tax return filled in perfectly first ..before working on any of the NC part-year.  (Well...except the full Federal part has to be correctly filled in before NY too).  So Federal first, then NY-PY, then NC-PY.

[zyufan]

Important Notice for Part-Year NC Resident taxpayers:

TurboTax for NC State tax return misses a wage allocation code for PY NC Resident Income or PY Not NC Resident Income. In NC, we need to allocate the amount of PY NC resident income in D-400 Schedule PN box1, Column B. We exclude the amount in PY Not NC Resident Income because that income is not taxable in NC if the income is not NC Resource. However, TurboTax for NC State Tax Return has two buggers in "NC Wages Allocation" section:

1. For PY NC Resident Income, part of the income is not taxable in NC if that income is made when the income is made during taxpayers are not NC Resident, and the income is not from NC Resource. Therefore, in NC,  "PY NC Resident Income" and "PY NC Source Income" are not the same: all of "PY NC Source Income" are taxable in NC, but only part of "PY NC Resident Income" are taxable in NC. TurboTax doesn't distinct them, and led to or lead to taxpayers paying more tax in NC
2. When TurboTax fill in the form, D-400 Schedule PN, on box 1, TurboTax will take the wage amount from Federal (W-2 box 1) to fill in Column A, but take the wage amount from State (W-2 box 16) to fill in Column B. Because the amount in W-2 box 1 might not be the same as the total amounts in W-2 box 16, so when TurboTax calculate the percentage of the NC Resident income rate (NC Income / Total Income), TurboTax might get a wrong percentage number in box 24 of D-400 Schedule PN and also in box 13 of D-400. Since in many case, total State Income (from W-2 box 16) are more than Total Federal wage (W-2 box 1), therefore, TurboTax makes Part Year NC Resident taxpayers pay more NC state tax.

[zyufan]

TurboTax should consider the wage from Federal Wage (W-2 box 1), however, TurboTax take State Wage (W-2 box 16) instead, such would come up with a wrong the NC Part-Year Resident Income percentage/rate in D-400 box 13 and D-400 Schedule PN box 24.

Different States have their own definition on stage wages, therefore, for the same Federal Wage (W-2 box 1), in different states, the amounts in W-2 box 16 might not be the same, therefore it might not be a good method to calculate the state income percentage/rate based on different state amount wages since most of state tax rules are based on the Federal Wage percentage to determine the tax rate.

[zyufan]

Be careful if you follow the instruction posted by SteamTrain in above to allocate your NC wages because TurnboTax will rollback you change after it done with "Review" but before "File". That is a defect in TurboTax NC State return because it change or update some tax forms after TurboTax finish the "Review" on all Federal and States tax return forms, and post message saying it "Confirm 100% accuracy", but then on next step of "Summary" (or "File" if you click "File" button instead of "Continue" button to skip the "Summary" step). That is very "dangerous" because TurboTax makes change in silent after users already confirm their enter data and TurboTax already passes the Review on the tax forms, such might lead to some wrong tax forms submitted to NC Department of Revenue and get some trouble, like audit.

TurboTax rollback all the change made by users on the columns of "Payer's Name" and "Wages" on the section of NC Wages Allocation, but it doesn't rollback users' change on "Status". Therefore, the best way to update your wages Allocation is to change "Status" to "Not NC Source Income" for all the initial entries created by TurboTax, then add your own NC Wages Allocation on the blank. Please know, all the entries of "Not NC Source Income" (or "Not NC Resident Income") are ignored by TurboTax and those entries are not shown on any tax forms or worksheets.

Also, as I already mentioned in my posts above, you should enter the part of  Federal Wages (W-2 box 1) in "Wages" column, not the State wages (from W-2 box 16), because in many cases, state wages are higher than federal wages, especially in the companies with great pension, retirement plan, and health benefits, otherwise, you would pay more tax than what you should pay.