NY vs IL Part-Year Residency – Remote Work & Convenience Rule Allocation

[jackkgan]

I’m looking for guidance on NY vs IL wage allocation for a 2025 part-year move.

I lived in New York City from Jan 1 – Jun 5, 2025, and then moved to Illinois, where I worked remotely for the remainder of the year.

Details:
- W-2 reports NY wages in Box 18 (tied to a NY office)

- W2 has my IL apartment address, Employer address is NY. 

- I have flight tickets to IL, lease of apartment in IL. 

- Employment verification letter lists below, while also confirming continued employment throughout 2025
- Workplace indicator: Traditional office
- Work location: New York, NY

However, in practice:
- I worked fully remotely for the entire year and did not physically work in New York during 2025
- No NY office or desk was assigned to me
- After my move on June 5, I worked exclusively from Illinois
- My Illinois address was updated in company records after the move

Filing approach (draft):
- NY part-year resident: Jan 1 – Jun 5
- IL part-year resident: Jun 6 – Dec 31
- Wages allocated between NY and IL based on time/residency (using Box 18 wages and NY days for NY portion, remainder to IL)

Questions:
1) Under NY’s “convenience of the employer” rule, do these facts (no physical NY workdays, no assigned NY office, fully remote work from IL after June 5) support allocating only a portion of wages to NY, or is NY likely to treat all wages as NY-source due to office assignment on the W-2/HR records?

2) In this situation, is it more appropriate to:
- allocate wages between NY and IL based on residency/time, or
- report 100% of wages to NY and claim a credit in IL (more conservative approach)?

3) How much weight does the employer letter (showing NY as work location) carry compared to contemporaneous evidence of actual work location (lease, move date, travel records, etc.)?

I’m trying to choose the most defensible and practical approach that aligns with both NY’s convenience rule and IL part-year residency rules.

4) Wondering what I should enter for the 2nd field in the TurboTax query below:
Title: Work Days Outside of New York
Note: If you telecommuted to your job from a location outside the state, those days will still count as New York workign days unless specific conditions are met.
Field 1: Outside of New York: 146 (Working days in IL)
Field 2: Worked Outside of New York at Home: 0 or 146? 

Any guidance would be greatly appreciated. Thank you!

[MaryK4]

1. Under New York's Convenience of the Employer rules, New York state will almost undoubtedly look to tax all the income.   They are very aggressive especially with remote employees for companies that do not have an office outside of New York where they can at the very least assign the employee to.  

2. You should allocate the income to New York and take the credit for taxes paid to another state for Illinois.  

3. New York in general, does not look at physical work location with the Convenience of the Employer rules- they look at the other factors, see TSB-M-06(5)I:(5/06) - Tax.NY.gov.

They have been successful in litigation unfortunately, which allows them to be so aggressive.   

[jackkgan]

Thank you so much @MaryK4  for the reply and for raising the NY convenience rule.

For further context, my facts are:

• I was a New York resident from January 1 through June 5, 2025.
• I then moved and became an Illinois resident for the remainder of 2025.
• I am filing as a part-year NY resident and a full-year IL resident.

My current understanding is:

• New York taxes my wages and investment income during my NY-resident period.
• Illinois, as my resident state after the move, taxes my post-move wages, dividends, and capital gains.

Given that I changed residency mid-year (rather than being a full-year nonresident telecommuter), I would appreciate clarification on the following:

1. Does New York’s convenience-of-the-employer rule apply to wages earned after I became an Illinois resident?
2. If so, would those wages still be treated as NY-source income despite the change in residency?
3. In that situation, would Form IT-112-R allow a credit for Illinois tax on that same post-move income, given that the NY resident credit is generally limited to income taxed during the NY-resident period?

Separately, my understanding is that post-move dividends, interest, and capital gains are sourced to Illinois as my state of residence at the time and are not reclassified as NY-source income under the convenience rule.

Please let me know if that is correct.

Thank you for your guidance.

[MaryK4]

1. Yes, the New York convenience of the employer rules would only apply after you left New York.  

2. Yes the wages for the time after you moved to Illinois would be considered NY-source, so it would be nonresident NY-source income.

3. According to the 2025 IL-1040 Schedule CR Instructions, you would be able to claim the credit for the taxes paid to another jurisdiction because your W2 does not have Illinois wages.    However, because you did physically work in Illinois, you may be required to pay state taxes on the income to both New York and Illinois.  

Enter the amount of wages not shown as Illinois wages on the state copy of the W-2 form(s) you received. Do not include wages taxed by another state if they are also shown as Illinois wages.

You may want to speak with your employer to ask about their position on your remote work (because it is always more difficult to defend against New York if they are doing the New York withholding).

You are correct that any other income received after you moved to Illinois would be Illinois income and not taxed by New York.

@jackkgan   

[jackkgan]

Thanks a lot for the detailed response.

Just to clarify one point: in my case, I was not assigned to a New York office and my role was fully remote with no required work location.

Given that, would the convenience-of-the-employer rule still apply to treat post-move wages as NY-source income, or would physical work location after the residency change be the determining factor?

Also, given the potential for Illinois not to fully credit NY tax imposed under the convenience rule, would allocating wages based on residency periods be a reasonable approach in this situation?

[MaryK4]

You are asking the correct questions, and I appreciate that you seem to have thoughtful application.  

The problem with the Convenience of the Employer rules is that it purposefully and completely ignores the realities of remote work.  Your employer "assigns" you to a work location because that is the main criteria New York uses- the "headquarters" or office location of the employer.  For larger companies, they are able to assign their remote workers to a non-New York location to avoid the convenience rules; but if your company does not have offices in other cities this is more difficult. 

You have identified the biggest flaw- Illinois does not give the credit for taxes paid to another state if the work is physically done in Illinois, so you could be taxed twice on that income at the state level.  There are court cases but as I said before New York is actually winning these.  See Zelinsky II—The Continuing Saga of Remote Work.

It used to be that they did not scrutinize as much especially with lower income, but in general that is not the case anymore- and New York does not only go after the employees, they can ensure compliance by the employers exactly in the way your employer has it set up to do withholdings for New York state only.  

You can choose to allocate the wages and hope for the best (no New York audit), and I apologize for being a bit meekish because it is obvious you have good knowledge and are not in any way trying to get away with anything but rather looking to do the right thing.  

@jackkgan