New York state part-year resident return while working remotely out of state

[litcandles]

Hi! Would greatly appreciate any tax guidance on the below situation for 2020 as it relates to remote work for a NYC based job:

I started out the year as a resident in New York City but left late March due to the pandemic. I went to KY, where I have a permanent home, and stayed there until August, when I went back to NYC to get out of my lease and move out of my apartment. I moved to NJ in September and stayed there for three months, after which I went back to KY (so did not stay in any of these 3 places more than 183 days each).

After the pandemic started in March, I worked remotely all year. I work in consulting, and per our company guidelines, they insist we log all time based on our physical location where the work was performed. Because of this, I have withholding for taxes for the time I worked in KY/NJ from home (and any time we travel to a different state for work, the income while we are in that state is counted as source income from that state for which we need to file a non-resident state return).

However, it seems that all the time worked remotely (while my job is still based out of the NYC office) should be included in the % that counts towards NYS taxes. In this case, would it be fair to say I have been double taxed on the remote work income (the sum of my state wages – box 16 – across all of my states is ~60k more than my wages – box 1 – so it definitely seems like it)? And how would I claim credit for the additional tax paid? 

Per my understanding, I would file as part year resident for NYS and part year resident for KY and non-resident for NJ. So in my NYS return, would I claim the credit for the tax paid to KY and to NJ? Or would I need to do something different?

Any advice would be greatly appreciated. 

[MaryK4]

You will be able to get a credit for the New York and New Jersey taxes you paid on your Kentucky tax return- however, since the New York income is included on the New Jersey tax return, you would not be able to double count the income.

In your case, you may have some of the income double-taxed because you cannot claim a credit for New Jersey, so part will be taxed by NY and NJ with credit to KY.  This is an issue because New York has the tax on nonresidents who work for a New York company even if they work in another state under their "convenience of the employer" test.  

[TomD8]

"I went to KY, where I have a permanent home..."

If your main, permanent home (your domicile in tax terminology) was in KY all of 2020, then you would file taxes as a resident of KY and a non-resident of both NY and NJ.

A part-year resident is a person who moves their domicile from one state to another during the tax year.  A taxpayer can have only one domicile at a time.

These definitions may help you:

https://www.tax.ny.gov/pit/file/pit_definitions.htm

If the above scenario is correct, you'd be able to claim an 'other state credit' on your KY return for taxes you paid to NY and NJ on the portion of your income that was taxable by either state respectively and also by KY. 

[litcandles]

Hi, thanks for the quick response. My domicile was in NYC at the beginning of 2020 (I filed as a NYC/NYS resident in 2019) and I moved my domicile to KY in the middle of the year. I have a KY driver's license and also am registered to vote in KY. 

Unfortunately I don't think there is any overlap between the income taxable by NJ and by KY. The overlap would include the income while I was working remotely in NJ that has been withheld by my employer for NJ and is now being claimed as NY income per their tax policy on telecommuting. If I am filing as a part-year resident of NY and of KY is there any way I can get that back? 

[DanielV01]

If what you are saying is that you are claiming New York as a part year and Kentucky as a part-year, the income taxed by both NJ and NY will be a credit on the KY return.  But neither NY nor NJ has an obligation to give a credit on each other's nonresident return.  (Even though you may be filing a part-year NY return, the income you are speaking about falls into the "nonresident" portion).

[litcandles]

Thanks for the info – could you explain that last part a bit more?

When filling out the NYS form (where I am filing as part year resident), I am asked if I have been taxed on the same income by another state – so for this question I would not be able to put the NJ income/tax paid on my non-resident NJ return? And also not able to put the KY income/tax paid on my part-year KY return since my domicile was KY at end of the year?

[TomD8]

New York's law regarding the "other state credit" is that the credit is allowable "only for the portion of the tax that applies to income sourced to and taxed by the other taxing authority while you were a New York State resident."

https://www.tax.ny.gov/pdf/current_forms/it/it112ri.pdf

Since none of your income while you were a New York State resident was taxable either by KY or by NJ, there is no other state credit available to you on your NYS part-year resident return.

However, you should be eligible to claim an "other state credit" on your KY part-year resident return, since you did have income taxable by other states during your period of KY residency.  Note that your "other state credit" cannot exceed the tax you would have owed had the income been taxable only by KY.

[DMarkM1]

From your post it appears maybe your domicile was KY all year.  You were in NY and NJ only for work.  You will file KY resident for all income and all sources.  You will file NY non-resident for time actually there and NJ non-resident for time actually there.  You will get a credit on your KY return for the taxes paid to each of those states.  As @TomD8 mentions there was not a time as NY resident to claim any NJ taxes.  

[TomD8]

@DMarkM1 --  In one of his posts the taxpayer stated, "I moved my domicile to KY in the middle of the year".