I work in NYC, and moved from NYC to NJ during the year. At some point during each state form, it asks me to complete the other state's return first. What do I do?

[worden12]

If I go through the NJ forms, there's a section about credit for taxes paid to another state, and it says I can do it right away if I've already completed my nonresident return, but that otherwise I should skip it and come back later. (Technically I don't have a nonresident NY return, I have a part-year resident return, so maybe that's part of the problem.) However, the NY return also has a section for credits for taxes paid to another state, and it says I should complete the other state's first and come back.

I have no idea which order to actually do them in, or how to handle the section for other state tax credits in the one I do first. I don't really know how NY and NJ's tax credits are supposed to work (i.e., I don't have a sense of how much money is supposed to go to each state, or how local NYC taxes factor into this), so I'm having trouble guessing about how it's supposed to work.

Any advice would be much appreciated, thanks!

[JosephF8]

You will need to fill out the NY part-year first. You will also need to know how much you made during the time that you lived in NJ. If you told your payroll department about the move when it happened you should have a NJ line in the state section of your W-2. At that point (unless you are a city employee) the NYC tax should have stopped. You would then get a credit on your NJ return for taxes paid to NY for income taxed by both states.

[worden12]

Thanks Joseph. I've now completed the NY return, but TurboTax doesn't pull in the relevant information to my NJ return. On my NJ return, it still asks me for the amount of double-taxed income and tax paid to NY, with this note: "Do not enter the income amount and taxes withheld from your W-2. We need the actual numbers from your other state's tax return." I can't find anywhere where I can get that information for my NY return even though I've completed the NY forms.

[JosephF8]

You will be able to use the NJ W-2 income for the income taxed by both. You will then divide that by the NY taxable income. Finally you will take that decimal amount and multiply by NY tax to get the tax paid on the NJ amount.

[worden12]

Thanks, but my issue isn't really with how to do the arithmetic, it's with where to get that original NY tax amount. (If it was asking for the NY taxes withheld as shown on my W-2 that'd be no problem, but it specifically says it's not asking for that, it's asking for the actual amount from the return.)

[JosephF8]

Go to the end of the NY return. You are looking for the page below.

[Mac1287]

I'm having a similar issue as @worden12  of this thread and was wondering if you @JosephF8  could help clarify some additional questions I had:

1. Do I not need to prepare a Nonresident NY form first prior to the Part-year resident NY and Part-year resident NJ forms? In other sections of this forum, it seems to imply that that should be the case (see Scenario 3 of this post: https://ttlc.intuit.com/community/filing-and-paying-taxes/help/how-do-i-file-if-i-moved-to-a-differe...). However, when I initially set up my account and TT asked me about my move from NY to NJ, it only automatically generated the Part-year resident forms for NY and NJ (no Nonresident NY form was generated). I'm also aware that IT-203.1 is used for both nonresident and part-year resident so it wouldn't really make sense to file 2 versions of the same form. But I would appreciate if you clarify this as it might be what is causing the issue I'm asking on Question #2.

2. As TT also doesn't automatically pull the NYS Income and taxes paid to other state (with the same warning message as @worden12 mentioned) in my NJ forms for the credit, I'm resorting to doing the calculations manually. I understand the end of the NYS form shows the actual Taxable Income and actual Taxes Owed to NY. However, are the NY taxes paid for the NJ portion of the W2 (which doesn't show any state income tax withheld -- only the NY W2 wages show that) really just calculated by this equation:

(NJ W2 Wage / NYS Taxable Income as calculated by TT) * (NYS Tax Owed as calculated by TT)

Wouldn't it make more sense to calculate the taxes on that NJ W2 amount by treating it as an isolated income subject to the initially lower tax brackets shown in the schedules of the IT-203.1 form? If this income had, in fact, been earned within NJ, would it not be subjected to the bracketed tax percentages of that state? 

(**You could also argue that the taxes paid on it should be the highest bracket, instead of lowest, percentages based on total NY Taxable Income but the first method is more conservative.**)

3. Does TT automatically fill in Form IT-360.1 based on my answers about moving out of NYC? I can't seem to find this information anywhere and am wondering how I would go about filling in that form if TT doesn't automatically generate it for me.

Thank you very much for your help.

[MarilynG1]

@Mac1287 If your W-2 clearly shows the amount of New York Income and New York Tax Paid, and New Jersey Income and New Jersey Tax Paid, TurboTax will pick up these amounts for your Part-Year Resident Returns (no, you don't need to also file a Non-Resident return, as that does not apply).

However, many employers don't split it nicely and accurately for you on the W-2, which is where you may need to do some calculations of your own.

You can take your Total Income, divide by 12 and multiply by the months lived in each state.

Most states start with the Federal AGI, then make 'adjustments' to determine what portion of that income is taxable to that state if it is not clearly divided on the W-2. 

Some states use the Federal AGI, but apply the 'adjustment' to the amount of State Tax instead of income. 

Some states will make the adjustment for you, based on time you indicated you lived there, but not all, so you should do your own calculations to make sure it is being split properly.

Some people opt to make the income split on their W-2 entry, once they have calculated the split, so TurboTax picks it up automatically for each state.

You still may need to make adjustments for Unearned Income. 

Since you worked in NYC all year, your total income should be used to calculate NYC tax. 

Click this link for more info on How to Allocate Income for a Part Year Resident . 

[Mac1287]

@MarilynG1 Thank you for your response. It's helpful but I think I need some further clarification.

The split calculations you mentioned I believe applies only if I worked and lived in the same state during the same period of time. So it would make sense to allocate a percentage to one state and the balance to another state, where the added incomes equate to 100% of the Federal AGI.

In my case, since I worked in NY for the WHOLE year, my TOTAL W2 Income for the year is subject to NY state taxes. And the NJ W2 wage reported since I moved to NJ (which does equate proportionally to the [months lived there]/12 months * TOTAL W2 Income) is what is subject to "double taxation". My W2 does not report any NJ income taxes withheld for that portion of the income since it is assumed that NJ will give me credit for the NY state taxes I already paid on said portion of the income. This is where my previous question #2 came from:

-Since TT does not pull the calculated NYS taxes I already paid to the NJ W2 wage, I am resorting to manually calculating the exact amount of taxes paid as a portion of the total NYS taxes per this equation (as answered by @JosephF8 in his previous response)

(NJ W2 Wage / NYS Taxable Income as calculated by TT) * (NYS Tax Owed as calculated by TT) = NJ Credit for taxes paid to NYS

However, this calculation seems too simplistic as there are different NYS income tax brackets and the equation above seems to account for the effective tax rate paid on the ENTIRE NYS income. Hypothetically speaking, if NJ is treating the wages as earned from NJ sources, wouldn't it make sense that it should only be taxed using the lower applicable tax bracket? For example, let's say the total year income is ~90K and the income earned for that period living in NJ is ~10K (with a hypothetical tax rate of 3% for the bracket between 0K and 50K and another tax rate of 15% for 50K to 100K). The taxes paid on that 10K would be $300 if treated as a sole income ($10,000 * 3%), but would be $833 if calculated as a proportion of the total taxes paid on the whole 90K ([$50,000*3% + $40,000*15%] * [$10,000/$90,000]). These rates are obviously exaggerated and don't reflect actual rates but it is to illustrate how the approaches in calculation can vary immensely. 

Lastly, regarding the NYC taxes, even though I worked in NYC for the whole year, only income that I earned while living in NYC should be subject to NYC local taxes (https://tax.custhelp.com/app/answers/detail/a_id/571/~/i-don%E2%80%99t-live-in-new-york-city%2C-but-...)

[Mac1287]

@MarilynG1 & @JosephF8 

Any update on my follow-up questions?

[DanielV01]

@Mac1287  You are mostly correct.  Hopefully I can clear up the guidance for you.  Here's what you'll need to do:

New York.  You file a part-year return.  However, the program interview will ask you about New York income you earned during your nonresidency period.  This will be the double-taxed income for your New Jersey return.  

Later on, you are interviewed on your NYC residency.  Make sure you mark your NYC residency dates also.  This should allow the program to prorate your NYC-taxable income as well, because you are correct that NYC only taxes residents of NYC.  Your refund for New York should increase by the amount of NYC tax withheld on income that should not be taxable there.

New Jersey.  First make sure you mark the New York income as not taxed in New Jersey when you get to the screen About this income.  You will get this screen if you have amounts listed on your W2 for both NJ and NY, because New Jersey requires both lines to report on the return, causing a double-up of income.  Then, when you get to the Income taxed by another state screen, you will calculate out the New York tax on the double-taxed income as you suggest (NJ gross income divided by NY gross income, multiplied by NY tax).  

You do not need to worry about tax brackets when it comes to this credit.  That is already factored into the equation.  New Jersey's credit is the lower of what New York taxes the double-taxed income, or what New Jersey taxes the double-taxed income.  And the New York income is actually subject to New Jersey tax brackets.  What New Jersey does (and many other states, including New York) is pretend that all income is taxable in New Jersey, so they can apply the tax brackets.  Then the figure is prorated to the amount of income earned in New Jersey.  But since New York's tax rate is still higher than New Jersey's (in general), it is likely that the end result is $0 tax for New Jersey.  

Feel free to ask any additional clarifying questions.

[Mac1287]

Thank you, @DanielV01. That really cleared it up. It's unfortunate that TurboTax was unable to automatically generate the prorates for me, even though I did follow the recommendations of completing the NY non-residency return prior to the NJ residency return (perhaps it's a bug since they were technically part-year filings instead of a black & white residency/non-residency situation) so your clarifications were very helpful. Thanks again.