Changed Office from CA to NY and started working remotely from abroad

[CoffeeBreak]

Hi,

I've been a CA resident since 2017 and my wife since 2019. For most of the 2021 I worked for my CA employee while my wife continue to take care of our home and baby. In the September of 2021 I was officially transferred by my employee to NYC office. At the same time I left the USA and started working from abroad (Europe) - I moved there with the rest of my family (wife & baby) and cut all of my ties with California state. I did not establish a residency in NY - I just got my NY driver license as I wanted to get rid of my California license and a postal box over there for some formal reasons related to my employment.

Now, my employee granted me RSUs (Restricted Stock Units) back when I was working for them in California and part of these RSU vested when I was working from abroad for my new office in NYC. The vest happened in in 11/2021.

Now, due to the way California taxes RSUs I need to pay California taxes on the RSU that vested in 11/2021 even though I worked for my NYC office at the time. At the same time NY also wants to tax this income since they consider it to be NY sourced income. 

I'm trying to figure out how can I avoid double taxation on my RSU vest that happened in 11/2021. Should I pay my California state tax and claim a tax credit for the paid CA taxes on my NY non-resident state income tax return? Can I even do that as a NY non resident?

Thank you for all the help in advance.

[ErnieS0]

Please clarify your question. Where you are living? Are you in New York and overseas? If overseas, what state, if any, is tax on your wages being withheld? Is CA and NY tax just being withheld on your RSUs?

[CoffeeBreak]

Due to change of circumstances I am back in the USA now. I've lived in NYC starting from 02/2022. Back when I was living overseas - from 09/2021 to 02/2022 NY state taxes were withheld on my wages.

CA and NY tax are withheld on my RSUs (the ones that vested in 11/2021).

[DMarkM1]

No, you would not need to report income that you never received.  According to IRS Publication 538, as extracted below. this situation does not fall under constructive receipt.  

Constructive receipt.

Income is constructively received when an amount is credited to your account or made available to you without restriction. You do not need to have possession of it. If you authorize someone to be your agent and receive income for you, you are considered to have received it when your agent receives it. Income is not constructively received if your control of its receipt is subject to substantial restrictions or limitations.

Example.

You are a calendar year taxpayer. Your bank credited, and made available, interest to your bank account in December 2021. You did not withdraw it or enter it into your books until 2022. You must include the amount in gross income for 2021, the year you constructively received the interest income.

[CoffeeBreak]

Sorry but I do not understand how is this related to my question. I did receive an income in the form of RSUs in 11/2021 and I'm trying to figure out how I should handle state taxes related to it.

[CoffeeBreak]

To sum up my work history for 2021 as I realized that my original question had wrong dates in it (2019 as opposed to 2021). So the summary is:
1. Until 9/2021 I worked for CA office of my employee.

2. From 9/2021 to 2/2022 I worked from overseas for NY office of my employee (it's the same employee as previously in CA, I was just officially moved to NYC office). NY state taxes were withheld from my wages from this period of time.

3. I vested RSUs on 11/2021. NY and CA taxes were withheld. 

4. I moved to NY in the February of 2022. I do not consider myself a residence of this state prior to this date.

Now, I want to understand how to handle state taxes related to my RSUS vest that happened in 11/2022 (point 3.) to avoid double taxation.

[MaryK4]

It sounds like you are trying to convince California and/or New York that you were not a state resident from 9/2021 to 2/2022.  State residency is based on DOMICILE, which includes intent and other acts of establishing residency.  In addition, you cannot abandon one domicile without establishing a new one - so I hope you took affirmative steps to establish residency in Europe (and getting a New York driver's license may not be enough to show you abandoned California).

It is established that the RSUs are California source income since they are related to the time you worked in California so you will have to pay California taxes on it.   

The question is- why did your employer "move" you to the NYC office if you were going to work and live abroad?  It would have made more sense to keep you in the California office.  Why did your employer withhold New York taxes?  

If you contend you were not a New York resident, you do not have to file a New York state tax return as a nonresident if you did not work in the state; or in the alternate, if the convenience rules apply, you would not have to report the RSU income as New York source.  (Of course since there was New York withholding, you  will have to file a nonresident return to get the withholding back.)

@CoffeeBreak

[CoffeeBreak]

MaryK1101

It made more sense to move me to New York office as New York timezone is closer to Europe timezone that I worked from. 

My understanding was that NY taxes all income that's NY based and that would include any wages/RSUs that I earned while working for NYC office even if I worked from overseas and consider myself to be a non-resident.

So since there was a California and New York withholdings on my RSUs that vested in 11/2021 how can I avoid a situation in which I end up paying double state taxes on these RSUs? That was my original question. I know that I need to file a NY state tax return - what I do not know is whether I can claim tax credit on taxes paid to CA in my NY state non-resident tax return. Is this something that's allowed or is there another mechanism that would allow me to avoid paying double taxes in my case?

[ErnieS0]

You are not able to avoid double taxation on your RSUs.

California considers this CA income because you earned it while performing services in California. 

Equity-Based Compensation Guidelines

New York taxes it because it was received while you were considered a New York employee by your company, so it would be New York-based compensation.

You cannot claim an other state tax credit on a NY non-resident return as a nonresident. You can claim a New York State resident credit as a part-year resident.

Credits for New York State residents

New York has plenty of accountants who special in expatriate taxes. You would get better answers by speaking with someone in person who can ask questions to get a full understanding of your situation.