I work for a NY company, remotely from NC. I spent 1 day in 2017 on site, but my W-2 has full salary in the state earnings boxes for both NC and NY. How can I allocate?

[DanielV01]

@unknownzack  I agree with @kristinelbly that you were not a NYC or NYS resident for 2021, and should file IT-203 as a New York nonresident.  Since New York City does not tax nonresidents, at the very least any New York City withholdings should be refunded.  And it does not surprise me that your company's payroll processing is challenged on how to change your withholdings, because of New York's requirements for employer withholding.  

Having said this, I think it is wise that if you take a position that your income to be not taxable to New York State, that you disclose why you are doing so.  This entire thread contains a very enlightening discussion on the subject, and one of my biggest takeaways is what often happens with taxing issues:  facts and circumstances dictate.  When you work from home on behalf of a New York office, the tax department's first inclination will be to state your income is taxable in New York.  So you may be asked to prove otherwise.  With total respect to kristinelby's clear experience and in-depth knowledge of the subject, I'm also willing to go out on a limb to state that more often than not, New York questions this position for the reasons @TomD8 states above.  

One situation in which I feel you probably have an argument is if your work in Florida, while on behalf of the New York office, is directed primarily at non-New Yorkers.  But if working virtually for a New York office is business directed at New Yorkers or for a New York interest, I have to believe the state does not believe you to be working "without" New York.  

Main thing is to understand:  if you say you didn't work in New York, you will probably have to defend your position, and you may not win.  But you shouldn't pay NYC tax regardless.

[TomD8]

@kristinelbly --

@unknownzack stated:   "I work remotely and live in FL since than and have not return to work in our NYC office since then."

I believe he meant that he is now working remotely for his NY employer.  Hence NY's "convenience of the employer" doctrine does apply.

[kristinelbly]

@DanielV01 I get your point, so I'll provide a bit more practical guidance. You are right, more likely than not, taxpayers will get audited for this. Although its a pretty easy thing to represent yourself pro se for, and many people have come across this thread and done just that based on the guidance herein.

So what is likely to happen? When you file your return, it will more likely than not get selected for something called a desk audit. You will get a letter in the mail that requires you to substantiate your position and respond within 30 days. Write a letter, explain that you don't live in NYS, provide proof of any move if needed, and then that you didn't work in NYS during the tax year (feel free to copy and paste the references to law and cases throughout this thread). 

Subsequently you will likely get asked to produce a letter from your employer that you did not work at the New York office during the year. It must be on company letterhead. On almost all of the cases I have handled this year, this is being accepted as sufficient evidence to release the refund payment. 

What if your employer fails to provide such a letter? Even if your employer failed to supply you such a letter, but you are certain you performed no services in NY during the year, tell the auditor to subpoena your AT&T or Verizon Wireless cell phone records (they know how to do this, and do so in the vast majority of audits). Your cell phone records will support that you weren't physically present in New York. Your New York office may also have swipe card records that substantiate you did not enter the building. Your employer also likely maintains a record of your VPN access points, which will substantiate your out of State work. So there are lots of documents to support your position here. 

If a desk auditor rules against you (because of their inexperience), and asserts you still owe the tax, they will issue something called an assessment. Shortly thereafter you will receive something called a Notice of Deficiency - this is important - you have 90 days from the date of this notice to appeal the desk auditor's decision. Again, its pretty easy to fill out the form and appeal the decision. The next step is the State will connect you with the Bureau of Conciliation and Mediation Services. This group has extensive experience, and see both taxpayers who represent themselves pro se, and those that engage legal counsel. Ultimately, they have the expertise to know your wages are not taxable. 

In response to your statement "But if working virtually for a New York office is business directed at New Yorkers or for a New York interest, I have to believe the state does not believe you to be working "without" New York." Employees allocate their wages based on days worked in NY, divided by days worked everywhere, whereby days worked in New York includes days worked at home for your own convenience. So the use of the word "without" in the context of Section 132.18(a) for an employee is the taxpayer's physical presence out of the State.  A New York "interest" would only be relevant to a partner or shareholder, who are allocating distributions from income earned within and without New York. The two are completely different and should not be conflated. 

https://casetext.com/case/hayes-v-state-tax-comm an excerpt from this link: 

"According to respondent's regulations, the New York income of a nonresident individual includes compensation for personal services "only if, and to the extent that, his services were rendered within this State. Compensation for personal services rendered by a nonresident individual wholly without the State is not included in his New York adjusted gross income, regardless of the fact that payment may be made from a point within the State" (20 NYCRR 131.4 [b]). When services are performed within and without the State, the regulation provides that 20 NYCRR 131.15 through 131.17 control. 20 NYCRR 131.16 provides that if services are performed both within and without the State, the employee can disclaim salary paid for days worked without the State only if the work was necessarily performed outside the State.

Although under petitioner's agreement with CBS he could have been required to work in New York, it is undisputed that he did not work in New York. That he could have been called to New York is of no import since the regulations make it plain that services rendered wholly without the State are not taxable in New York. Only when some work is performed within New York may some or all of the income be taxed in New York, and only then should respondent determine if work was performed for the employer's necessity. It is impossible to find a different meaning in the regulations."

[DanielV01]

@kristenelby You have personally worked with this, so to an extent I defer to your expertise.  You state in essence that there is a path to argue New York's position, and that it has been argued successfully.  What is on the books currently for New York when it comes to the telecommuter and the convenience principle is more recent than the 1978 Hayes case you cite.  And it's a position that New York has argued and won more successfully than not.  This is no way is a means to advocate New York's stance, but simply a recognition that their stance is what it is.

Clearly, with the convenience principle, New York has established, and backed up in the courts this position.  A most noticeable precedent more recent than Hayes is Zelinsky v. Tax Appeals Tribunal of the State of New York, 42 1 N.Y.3d 85, 801 N.E.2d 840, 769 N.Y.S.2d 464 (2003) as explained here.  In the following article that provides guidance on the convenience principle The Connecticut Vs. New York Convenience Rule Battle, it shows that other states have had to acquiesce to New York's stance.

I won't argue that all of the procedure you mention as being true.  But what I believe to be at the real crux of the matter when it comes to the telecommuter is not whether they are physically without New York when performing their work, but rather whether or not their work "rises to the level of necessity of the employer" or not.  And I can see how two different desk auditors can look at the exact same set of facts and circumstances and reach different conclusions, and justify their conclusions.  

For the circumstances of those who you have reached out to in this post, I have to believe that they were able to establish with the auditors that their telework was performed because of necessity and not convenience.  While it seems logical that someone living in Florida is not working in New York out of convenience, I can see how New York can argue that they are, particularly if they moved from New York and that move was for personal and not business necessity.  In such a case, I'm sure it could be argued that, while the individual is no longer taxable to New York as a resident, the income is still being performed (virtually) within New York due to the convenience of the employee working from home.

I hope you can see this as healthy debate on this subject, which is what is meant here.   You obviously have tremendous first-hand expertise that I won't contest.  But I'm sure you'd also recognize with that expertise that it's not a clear-cut issue, and there are risks (smaller or greater) for a taxpayer taking a position contrary to what is the "official stance" of the state.  

[kristinelbly]

@DanielV01 NYS Regulation Section 132.18(a) is the current State regulation, it's not old.  The reason there hasn't been a case since the Matter of Hayes, is because it was binding precedent to the State. In order to overturn it, the State would need strong grounds to do so. No such grounds have existed in the past 40+ years.

You make it sound like I am suggesting the convenience rule isn't applicable in most cases, I never said that. The convenience rule applies for employees who perform some of their services in New York, and some of their services for their employer out of State, for their convenience. It does not apply to employees who perform ALL of their services out of the State. There is a very important distinction that you are failing to recognize between none and some.

The case you cited doesn't align with the facts given by @unknownzack.  Zelinsky was a NY professor that worked in New York, and did some work at home in Connecticut. Where in the post, did @unknownzack suggest he performed some services in New York during the 2021 tax year? He has a New York employer, that is not sufficient to subject his wages to allocation under NYS Reg. Sec. 132.18(a).  He has to at least work one day in New York for the convenience rule to potentially apply. 

If he worked lets say 20 days in New York in 2021, then yes, he would be subject to the convenience rule unless he could show that his home office met the bonafide home office test or he worked from another bonafide office location of his employer in Florida. That is not the topic of this particular discussion.

And no, with all due respect, this isn't a debate. For those that work zero days in New York in any given calendar year, it is a clear-cut topic, no NYS taxes on their wage income. If you want to do a bit of due diligence, email one of the contributors to the article you sent to me, and ask them. I have 100% confidence any one of them will tell you the same thing. 

[DanielV01]

@kristinelby  Again, since you've worked in this field I respect your position.  However, I see verbiage in the statute itself that supports what @TomD8 has posted previously.  If you notice in his post previous to my most recent one, he brings up Memo TSB-M-06(5)I, which is the state's taxation department's application of Regulation 132.18(a) when it comes to telecommuters, which is the topic in question.  Here is the point I believe that is being missed from the Reg. itself, which I am pasting verbatim from this website that is quoting the statute Casetext: N.Y. Comp. Codes R. & Regs. tit. 20 § 132.18:

(a) If a nonresident employee (including corporate officers, but excluding employees provided for in section 132.17 of this Part) performs services for his employer both within and without New York State, his income derived from New York State sources includes that proportion of his total compensation for services rendered as an employee which the total number of working days employed within New York State bears to the total number of working days employed both within and without New York State. The items of gain, loss and deduction (other than deductions entering into the New York itemized deduction) of the employee attributable to his employment, derived from or connected with New York State sources, are similarly determined. However, any allowance claimed for days worked outside New York State must be based upon the performance of services which of necessity, as distinguished from convenience, obligate the employee to out-of-state duties in the service of his employer. In making the allocation provided for in this section, no account is taken of nonworking days, including Saturdays, Sundays, holidays, days of absence because of illness or personal injury, vacation, or leave with or without pay.  (Bolding and italics added)

It is the part highlighted that we are mentioning could apply in the taxpayer's case, because of telecommuting and the convenience principle.  According to this statute, physical presence (even for the year) without New York is moot if the work involved is qualified as "at the convenience distinguished from necessity of the out-of-state-duties in the service of his employer".  In that case, the employee could in theory spend the entire year without New York and still be considered taxable by statute if those services are performed on convenience, which is the center of the telecommuting issue.

This brings us back to the Memo referenced earlier.  In it, New York recognizes when a telecommuter is performing such work out of "necessity" versus "convenience".   There is one catch-all primary factor, which, if established, constitutes necessity:  if the home office is closely located to specialized facilities (it gives an example of a race track for testing vehicles, which I remember comes directly from case law).  Otherwise, to be considered necessity, the home office would need to meet at least 4 of the following conditions:

1. The home office is a requirement or condition of employment.
2. The employer has a bona fide business purpose for the employee’s home office location.
3. The employee performs some of the core duties of his or her employment at the home office.
4. The employee meets or deals with clients, patients or customers on a regular and continuous basis at the home office.
5. The employer does not provide the employee with designated office space or other regular work accommodations at one of its regular places of business.
6. Employer reimbursement of expenses for the home office.

If the taxpayer can establish 4 of the foregoing, then they also must establish 3 of the next conditions:

1. The employer maintains a separate telephone line and listing for the home office
2. The employee’s home office address and phone number is listed on the business letterhead and/or business cards of the employer.
3. The employee uses a specific area of the home exclusively to conduct the business of the employer that is separate from the living area. The home office will not meet this factor if the area is used for both business and personal purposes.
4. The employer’s business is selling products at wholesale or retail and the employee keeps an inventory of the products or product samples in the home office for use in the employer’s business.
5. Business records of the employer are stored at the employee’s home office.
6. The home office location has a sign indicating a place of business of the employer.
7. Advertising for the employer shows the employee’s home office as one of the employer’s places of business.
8. The home office is covered by a business insurance policy or by a business rider to the employee’s homeowner insurance policy
9. The employee is entitled to and actually claims a deduction for home office expenses for federal income tax purposes.
10. The employee is not an officer of the company.

According to Memo TSB-M-06(5)I, this is what determines whether convenience is applied or not.  I would probably grant that spending 0 days in New York may go a long way to proving some of the factors in that list that determines convenience for the telecommuter, but respectfully speaking, by statute is not the sole determining factor.  

Again, I am not so bold as to say your information is wrong; it's quite the contrary.  You give good information that can help someone fighting with New York over the taxability of their income with possibilities on how they can win their argument, and that's a good thing.  In the end, for me, reading the statute, it boils down to the individual case proving that their work was necessity and not convenience.  (And having worked with auditors personally, I know they can be lenient and give the taxpayer the benefit of the doubt when it is reasonable to do so).

[kristinelbly]

@DanielV01 In order to get to the highlighted portion, the taxpayer must first meet the underlined portion. 

There isn't an "or" provision, so it's not possible to parse the latter portion of 132.18(a). Since the employee isn't performing services both within and without New York State, the entire subsection of 132.18(a) does not apply to taxpayers who work entirely outside of the State. I get that its a very nuanced read of the Regulations, but its appropriate, and has been upheld by the Courts. The use and ordering of conjunctions are extremely important on the interpretation of any law/regulation. 

(a) If a nonresident employee (including corporate officers, but excluding employees provided for in section 132.17 of this Part) performs services for his employer both within and without New York State, his income derived from New York State sources includes that proportion of his total compensation for services rendered as an employee which the total number of working days employed within New York State bears to the total number of working days employed both within and without New York State. The items of gain, loss and deduction (other than deductions entering into the New York itemized deduction) of the employee attributable to his employment, derived from or connected with New York State sources, are similarly determined. However, any allowance claimed for days worked outside New York State must be based upon the performance of services which of necessity, as distinguished from convenience, obligate the employee to out-of-state duties in the service of his employer. In making the allocation provided for in this section, no account is taken of nonworking days, including Saturdays, Sundays, holidays, days of absence because of illness or personal injury, vacation, or leave with or without pay.  (Bolding and italics added). 

I think taxpayers could clearly benefit from an article on this issue. So I'll make this the topic of the month. I'll post the link once the article goes live. 

[DanielV01]

@kristenelby.  Wow!  Thank you for being persistent in clarifying this.  Personal opinion aside, New York isn't exactly forthcoming in making this detail of their convenience law clear (and probably purposefully so).  So, if I understand what you are pointing out in the law, the convenience law applies if there is at least some physical connection to New York (thus the convoluted "within and without" description used in the statute), and that there is a certain "de minimis" threshold that must be reached of "within New York" in order for New York to claim convenience and tax the telecommuter's income.  

A write-up on the subject would be helpful, and I personally would welcome a clear description of this without the legalese.  I can't tell you the number of blogs and articles I have read on the subject and have never run across the description you have provided in this thread, nor this simple angle that is buried "in plain sight" within the New York statute, which really doesn't surprise me too much.  

Thank you for your contributions to our Community.

[TomD8]

@DanielV01 @kristinelbly  --

So the advice to @unknownzack would be to submit a non-resident NY tax return, allocating zero income to NY, so as to obtain a full refund of the withheld NYS and NYC taxes?

[DanielV01]

@TomD8.  That is exactly what I am understanding from @kristinelby 's information on the subject, and I do find this perspective enlightening.  I can't say I'm personally comfortable in recommending a client to take that position (as it's new to me), but, if they do, it does sound like the position is defendable.  If the article is produced and available, I will likely use it as a reference in the future.

But claiming $0 to New York certainly will not mean that the customer won't have to defend their position, and, as has been brought out in earlier posts, I'm also uncertain that this position could be covered under of TurboTax's guarantees.  I've seen you post a number of these types of questions also, with the same guidance I believe I've contributed in this thread, because any piece of public information leads to the understanding I've held on the subject.

[kristinelbly]

@DanielV01 Precisely. So as it stands right now, an employee who performs no services in New York State is not subject to taxation under 132.18(a), confirmed by the case Matter of Hayes. 

Then comes along Matter of Thomas L. Huckaby. Huckaby works for a New York employer, remotely from his Tennessee home, but travels to his New York office 25% of the time. The court upholds the convenience rule, and the ability to tax 100% of his wages as New York source. 

There is one paragraph in Huckaby that I find to be most interesting: 

"In Zelinsky, we found the minimal connection called for by due process on account of the taxpayer's "physical presence in New York and because he . . . purposefully avail[ed him]self of the benefits of an economic market in" New York (Zelinsky, 1 NY3d at 97 [internal quotation marks omitted]). Here, petitioner objects that, read and applied literally, the convenience of the employer test would allow New York to tax 100% of the income of a nonresident who worked out of his employer's place of business in New York just one day a year. He argues that due process demands proportionality in order to prevent this presumed overreaching. Whether [*9]due process would countenance this particular result taxation of 100% of the income of a nonresident who spends a trivial amount of time working in New York is simply not before us. We conclude that the minimal connection required by due process plainly exists in this case where petitioner accepted employment from a New York employer and worked in his employer's New York office approximately 25% of the time annually. Moreover, the amount of time that petitioner spent working in New York25%is significant enough to satisfy any rough proportionality requirement called for by due process."

So we know that a taxpayer who works no days in New York cannot be taxed. We also know that a taxpayer who works 25% of his time in New York meets the minimal connection required to be taxed at 100%. The question is, what about a taxpayer who works something more than zero days but less than 25%? What is a "trivial amount" that the Court would deem covered under Due Process?  I suspect the Tax Department has spent the last sixteen years settling cases as to avoid further addressing and litigating this issue. As a result of the pandemic, and an increased remote work force, we may see that answer play out over the next several years. 

I would only advise a taxpayer to apportion their income to the State, if they worked somewhere between 0.01-25% in New York, if they fully understood the risks associated with that argument. I would also tell them to pay the amount in full, and file an amended return under protest with full disclosure. This way if the State ruled against them, they wouldn't be subject to interest and/or penalties. But it is still a "grey" area of the tax law. 

[DanielV01]

@kristinelby  Please reach back out to me when you write and publish your article. I even suggest a title:  "New York's Convience Rule for Telecommuters:  What it Means, and What it doesn't".  As I mentioned earlier, nothing that I have seen published on this subject has even hinted that this is how New York really treats the telecommuter.  Presuming that this stance is correct and legally founded (and you've given me plenty of source material to say that it is), it seems that all of New York's employment taxation policies related to this subject are deliberately vague.  While not going to motive, it at the very least creates a barrage of red flags that gives the taxation department plenty of returns that they can use to question individuals on whether there situation can or cannot be judged under convenience.  Thus, New York's reputation to be so aggressive with these cases.

[TomD8]

@kristinelbly @DanielV01 

@kristinelbly wrote: "So we know that a taxpayer who works no days in New York cannot be taxed."  

So are we saying that (for example) a Pennsylvania resident with a New York employer, who works entirely remotely from his home in PA, is not subject to NY income tax, even if he works from home solely for his own convenience?   As long as he never works a single day in NY?

[DaveF1006]

@TomD8  Yes, if the resident worked entirely in his home and does not set foot in NY, he/she are not subject to NY income tax under New York Code 132.18(a), The real issue is if they set foot in NY for one day. This is when the issue gets cloudy.

[ Edited 01/06/22|08:16 PM PST]

[PANYtax]

So does this mean - If I lived in PA all year, but went to NY for one day, I have to pay full NY state AND PA state (and local) taxes for the year? Or is there some sort of credit I could get from one of the states. Thank you.

Also, for what it's worth. I have heard in order to file electronically you must put down "1" day of NY residency. Not sure if related.

@kristinelbly 

@DanielV01