I live in New York and started a job in July that's based in New Jersey. However, because of Covid I'll be working from home all year. How do I handle state withholding?

[shirarobin]

I won't be physically working in New Jersey at all this year, but my company has been withholding New Jersey income taxes since I started my job. I want to understand if I will owe NJ taxes and what I might need to ask my company to adjust.

[TomD8]

NJ says this:

New Jersey sourcing rules dictate that income is sourced based on where the service or employment is performed based on a day’s method of allocation. However, during the temporary period of the COVID-19 pandemic, wage income will continue to be sourced as determined by the employer in accordance with the employer’s jurisdiction.

https://www.state.nj.us/treasury/taxation/covid19-payroll.shtml

Since your employer is withholding NJ tax, it appears that your income is being "sourced" to NJ, and therefore is taxable by NJ.

And since you are a resident of NY, that income is also taxable by NY.  (Your resident state can tax ALL your income, regardless of its source.)

Therefore for 2020 you'll have to file both a non-resident NJ return and your normal home state NY return.

You'll be able to take a credit on your NY return for the taxes paid to NJ on the income that is taxed by both states, so you won't be double-taxed.

In TurboTax, be sure to complete the non-resident return first, before you do your home state return, to make sure the credit is calculated and applied correctly.