My husband retired mid year 2019. He is also participating in a voluntary separation program that will give him severance pay for his years of service. This payment will be made in 2020.
I filed a tax exemption form with his company indicating he should be exempt because he did not perform any work in the state. We live in NJ.
The response from their tax attorney was that because it was a payment for prior service, it would be taxable - except the non-resident tax return income allocation asks for number of days worked in the state, holidays, vacations, and days worked at home. Those days count for NYS taxation purposes. Only the wages for work performed in another state get removed from taxable income.
I did a pro-forma return using TT 2019 and when I fill out the allocation form showing no work was performed in NYS, every dime of the taxes he paid gets refunded.
I'm not sure how to handle this - I would prefer not to give NYS a large loan only to have to wait for a refund next year. One option is to file an updated W-4 NY equivalent and claim a load of dependents so it's not taxed as much.
Can anyone offer some insight?
You are on the right path. If you believe you will not owe NY for 2020 and that all of the income received in 2020 is not subject to NY tax, you should continue with your plan to update your W-4 NY. Just make sure your numbers are accurate. You do not want a large tax bill next year.
You are on the right path. If you believe you will not owe NY for 2020 and that all of the income received in 2020 is not subject to NY tax, you should continue with your plan to update your W-4 NY. Just make sure your numbers are accurate. You do not want a large tax bill next year.
Thank you! That's what I thought. The corporate tax guy probably is not experienced with dealing with personal non-resident returns, and the situation is a bit odd.
NY taxes NY source income. If the income is from a NY source, it will be taxable to NY. Please see page 7 of the NY filing instructions.