Married last year, and spouse moved from NJ to NYC. I lived in NYC for the entire year. We both worked in NYC for the entire year. What state residency status do we use for both states?

[ezrakwak]

TurboTax is suggesting full year residency for NY, and nonresident for NJ.  We setup federal filing as Married filing jointly.  We are not sure if we need to fill out as part time resident for either

[DanielV01 · Accepted solution]

Filing as a full-year resident of NY is one option, and may be your best one.  Please click on this website for additional information: Filing status - Department of Taxation and Finance - New York State.  Note this excerpt:  

In nearly all cases, you must use the same filing status that you used on your federal return. If you did not have to file a federal return, use the same filing status that you would have used if you had filed. Same-sex married couples see Personal income tax information for same-sex married couples.

The only exceptions to this rule apply to married individuals who file a joint federal return and:

• one spouse is a New York State resident and the other is a nonresident or part-year resident. In this case you must either:
• file separate New York State returns using filing status 3 (married filing separate in NY state); or
• file jointly, as if you both were New York State residents, using filing status 2 (married filing joint).

For NY, filing as full-year residents may be the best option because all of your income is taxed there regardless.  Note, however, that you want to enter in her correct NYC residency so that she is not taxed to NYC on income she received while still living in NJ (NYC only taxes you when you live there, not when you work there).  Filing jointly as residents will be simpler, and may entitle you to greater deductions/credits than if you file separate returns in New York.

For New Jersey, however, she will want to file a part-year resident return.  For New Jersey she will use the Married Filing Separate status.  See the screenshot below to have the double-reported New York income exempted from her NJ return (check on the NY box).  Her NY income earned while living in NJ is taxed in both states, but NJ will give a credit for the amount of tax she pays to NY for income earned in NY while she was still living in NJ.

Here is the NJ screenshot to assist you (and congratulations on your marriage):  

[edchen]

@DanielV01 I'm in the same boat as this in which I lived and worked in NYC for the entire year and my spouse lived in NJ for most of the year, but worked in NYC. Based on this thread, it seems that I should file MFJ for federal, MFJ for full-time NY resident, but MFS for NJ part-year resident. Can this all be done in the same return within Turbotax? I just got to the state section and was able to complete full-year resident for the NY state return, but it seems to be lumping all of the income in one when I'm trying to do MFS for NJ part-year resident.

[DanielV01]

@edchen  For you it depends.  You are not required to file as Married Filing Joint in New York in your situation even though you file a joint Federal return.  Please see this New York website:  New York Married Filing Statuses.  Since your spouse works in NYC, it probably is disadvantageous for your spouse to file as a full-year New York resident, since a New York city resident working in NYC is liable for the NYC local tax also.  But, since you have options to file, then you certainly explore your options to see which option results in less tax and then use that one.

Filing a joint Federal Return and separate state returns can be a bit tricky.  Usually it is better to use desktop software for this, because it will be necessary to mail in some of the returns (particularly your spouse's if you are the primary taxpayer on the return.  This Help Article gives instructions on how to do this:  How do I prepare a joint federal return and separate state returns?

However, and this is important, you almost certainly will need to use this technique for your spouse's separate New Jersey return.  If you do not, then the system will try to turn your spouse's return into a New Jersey joint return (which might not end up in more tax, by the way, but will include your income).  To file a separate New Jersey return, even if you end up filing a joint New York return, use the technique described in the Help Article.

[edchen]

@DanielV01 thank you for your help! I'm using the desktop software, and I was able to create a joint NY return where I had full-time NYC residence but my spouse only had part-time NYC residence to avoid the extra NYC local tax. However, you were right in trying out different filing options as filing separate for NY was actually better for us.

You mentioned that it is necessary to mail in some of the returns namely my spouse's since I'm the primary taxpayer on the return which seems to imply that I can efile my NY return. Since my MFJ federal return is on one tax file and we each have our own state returns on separate tax files, is it still possible to efile my NY MFS return?

[DanielV01]

If your NY MFS tax return is sent with the same account as the Federally Filed MFJ return, it probably will be able to file and accepted electronically.  If not, TurboTax (and NY state) will let you know accordingly.  

Your spouse's MFS NY return will need to be mailed because it is "detached" from your Federal MFJ return, because you are using a separate account to prepare the mock return.

[edchen]

@DanielV01 I tried to efile my NY MFS tax return after e-filing my Federal MFJ return and it doesn't allow me to e-file the NY return saying that "it cannot be e-filed before my federal return has been e-filed." This is on the desktop application. Am I missing something to be able to e-file?

[DanielV01]

@edchen If you cannot e-file your NY MFS return either, please print and mail it.  Because your NY return is MFS while the Federal return is MFJ, the submission from the software might not be acceptable for the state.  If this is the case, mail it in.  It's an exception to NY's e-file "mandate":  when the software simply cannot e-file the return.