How to fill in IT-112-R for MA to NY relocation but continuing to work for same MA employer remotely, who only withheld MA state income tax?

[jlook13]

I moved from MA to NY last year and continued working for same MA employer who only withheld MA tax for the whole year. I'm having trouble filling out form IT-112-R. Should column A show all income earned for the year (MA wages, interest income, etc) and column B only the income that should be taxable by NY for the period I was a resident, which was instead taxed by MA ? What does this look like for interest income that wasn't actually taxed - do I allocate part of it to NY in column B based on number of days as resident ? And should the resulting tax credit to NY for MA taxes paid be less than what is owed to NY given the higher tax rate relative to MA?

[DanielV01 · Accepted solution]

Several questions here, so I will try to answer the different questions involved.  

First, with regards to the IT-112-R, this form will be filled out properly once you allocate your income.  First, prepare the Massachusetts nonresident/part-year return, since all of the income is taxed there, since it was all earned there (Massachusetts' new telecommuter policy to use the "convenience" principal that New York has used for years is why all of the income is taxed there).  Be sure that if NY appears on your W2, that you mark that the NY-marked income on the W2 is not considered as taxable in MA (double-reported).

On the New York return, make sure you have input your residency dates.  For the allocation screens, I recommend the percentage method.  Just divide the number of days you lived in NY by 366 and enter as number.  For instance, 56.25%  will be entered as 56.25.  If you need to manually enter what Massachusetts taxed (that NY also taxes), use this same percentage on the income, and the net tax paid (taxes withheld minus tax refund or in addition to additional tax owed).

Interest income attributed to either state will not be taxed in the other.  Just simply report the interest to the state that it belongs to.  If it was interest earned throughout the year, you can split that income proportionately.  Interest is only taxable in the state you were living in at the time you were credited for receiving it.

Your credit in NY for taxes paid to another state will be the lesser of:  

• What NY taxes the income, or
• What the other state taxes the income

If no NY tax was withheld, it is possible that you still might have an amount due if the credit from Massachusetts does not fully cover the amount NY taxes on that income.