NY State Taxes and Income

[MW-NJ]

I am an employee in but not a resident of NY.   It looks like the Turbotax NY State form is including my wages, my spouse's income even though they did not work in NY, non-resident income I earned in another state, and retirement benefits that have nothing to do with NY.   Is that legit?   Do they really capture all the household income even though only part of it is related to NY?

[AmyC]

1. Yes. NY uses the allocation and ratio method for taxing non-residents.

2. Yes. The NY return has a column for total income and a column for NY income. Like most states, NY taxes the full amount of income and then prorates the tax liability based on the income earned in NY. You can see the percentage on line 45 of the IT 203.

[MW-NJ]

AmyC: 

Thanks for pushing me to the form.  Looking at it was enlightening.

Lines 1 to 31 have the NY and Federal amount with parallel adjustments and then uses the Federal amount in the Deductions (lines 33-36) and Tax Computation (lines 37 to 43) sections to establish the base tax on Line 44 on the Federal Amount.  The Allocated NY State Tax on Line 46, while it is adjusted, is still based on the Federal amount.

I did a test where I removed all the other income and compared it to the total family income.  I owe twice the amount of taxes for the full family (where my withholding was underpaid) than if my NY income was our only income (and my withholding was overpaid).  

Is the real answer: NY uses the allocation and ratio method for taxing non-residents based on my Federal AGI after some adjustments?

[ErnieS0]

Yes. Your New York tax rate is based on NY adjusted gross income (which is federal AGI after state adjustments).

Your NY tax is the NY income percentage of the total tax you would have paid if all your income were earned in NY.

For example, if you earned $100,000 total and $30,000 in NY, your tax rate would be based on $100,000. Say the NY tax on $100,000 is $10,000. Then your tax would be 30% ($30,000/$100,000) of $10,000 or $3,000.

[MW-NJ]

Thanks, ErnieSO, for the extra detail.  I am still annoyed at having to pay NY taxes on income not earned in NY. But I have also encountered this for another state where I earned about $2500 but have to pay based on the Federal AGI there too.  I am not one to complain about paying my fair share, but if shares were actually fair, then states wouldn't have to do this.  Time to move on and file.  Thanks again, MW-NJ