Live and work in NJ but have NY W2 due to bonus and restricted stock awards. How to do NJ and NY state taxes in TurboTax?

[mzhu]

Hi,

For 2019 and 2020, I live in NJ. For the entire 2020, I work in NJ and have my NJ W2. However, a small portion of 2020 compensation consists of 2019 bonus and restricted stock awards. This part was taxed in NY, as I worked until May 2019 in NYC (after May 2019, relocated to NJ within the same company). So I have NY W2.

On the NY W2, box 1-6 are all empty. Box 16 reports total wage (this number is slightly smaller than that on the NJ W2), and box 17 reports only a small amount of taxes that were due to 2019 bonus and restricted stock awards paid in NY.

I am wondering if someone can advise how I should complete the NJ and NY state taxes in TurboTax. Obviously, I can't choose the option of working in NY but living in NJ for 2020. 

Thank you so much!

[DanielV01 · Accepted solution]

It's complicated, but not impossible.  There are two distinct steps that must be taken.  First, you must determine the amount of income that is taxable to New York through New York allocation methods.  This will allow the correct amount of NY tax to be calculated and reconciled against the NY withholdings.  The second step will be to claim a credit on your NJ return for taxes paid to NY on the New York allocated income.

New York Return

First, start with declaring the New York income through allocation.  On the W2 entry screen in TurboTax, treat the "NY" and "NJ" Forms W2 as if they are one, because they are.  The second page is additional breakdown of the income reported to New York, but it is part of the same W2.  On the W2 screen, for lines 15-17, enter the NJ information as it appears on your W2,  Your income and the withheld taxes will be transferred to each state's return.

The New York return should be prepared first.  Shortly into the return, you will see a screen entitled New York Allocation.  You will click on No, that not all of your wages were earned in New York State.  The next screen says Your Form W-2 Summary.  Click the Edit link next to your W2 that lists all Federal income as NY income (this is a NY reporting requirement for W-2 wages).  Because the income that must be allocated are vested stock options, New York considers the portion of the stock option obtained during New York-eligible periods during which period the stock options vested.  This is calculated by determining the percentage of work that was taxable to New York between the date on which the options were granted and the date on which the options vested.  The official form used by New York for this Allocation Method (called a Multi-Year Allocation) is Form IT-203-F.

To generate this form, proceed as follows (hit Continue after each step):

1. On the screen Allocate Wages to New York, select the Allocation Method Allocate by Percentage
2. For the next screen, Allocate Wages by Percent, you will enter the percentage of New York income determined by NY Form IT-203-F (click on link for access to the form, which you will fill out manually.  Use Schedule B on page 2 of the form to determine how much of the vested RSU over the vesting period must be taxed by New York.  Then divide that final amount by the NY income reported on the W2 for a percentage, and enter the percentage as 10.00  for 10%, for example.  This step must be done this way to force TurboTax to calculate out the correct income to be taxed.  Save the filled-out form in PDF format)
3. On the screen Your Form W-2 Summary (again) and select Done
4. The next screen asks Did you use Form 203-F to allocate your wages between multiple years?  Select Yes
5. Answer no on the next two screens, and complete the remaining NY interview.
6. Towards the very end of the NY interview, you will be told Looks like you need to attach a PDF.  Click on Edit
7. On the next screen, Upload your PDF, drag and drop the PDF file, or click the Browse Button to find and attach it.  Then click Continue, and Continue again on the repeat of Looks like you need to attach a PDF.

With the proper allocation amounts, the tax withheld should cover the necessary tax (or at least be very close).  Unfortunately, TurboTax does not support calculating IT-203-F, you must do so yourself.

New Jersey Return

You then must make some adjustments on the New Jersey return.  (Note:  New Jersey includes income as taxable that is excluded for Federal and New York income.  Examples include 403(b) retirement deferrals and Section 125 Cafeteria plan deductions).   Eventually you will get to a screen entitled About Your W-2 State Wage Information.  Hit Continue on this screen.  On the following screen, you'll see State ID State Wage Amount (box 16) Remove These Wages.  Click on the NY box to remove those wages.  This is because NJ programming requires software to include all income and allow user to exclude the double-reported income.  It does not allow the software to assume that the income should be excluded.  

Eventually you reach a screen entitled Summary of Taxes Paid to Other States.  If you have filled out the New York return correctly, you should see a credit already calculated here.  If so, you can click Done and complete the New Jersey return as appropriate.  If not, then you can click on Edit, and then enter the amount of income taxed by New York in the box Double-taxed income, and then the amount of net tax you pay to New York on the income (withholdings minus refund reported or in addition to additional tax you must pay on the income to New York).  New Jersey will give you a credit on the lesser of what New York taxes the income or what New Jersey taxes the same income.

This is involved, but it's how to enter this into TurboTax.

[mzhu]

Hi Daniel,

Thank you so much for the detailed response. The portion of my 2020 wages taxed by NY consists of cash bonus for 2019 and vested stocks (still being held). In this case, does your method (you mentioned stock option below) still work? 

Thank you very much, 

[DanielV01]

Yes, it should.   I worked up a mock return to walk through the steps of how to get the right input into TurboTax.  The percentage method is the only way to get the right income into the system.  There's no direct entry method.  And you do have to work up the IT-203-F form manually. (I attached a link that can produce a downloadable and fillable PDF which you can attach). TurboTax cannot otherwise assist with how to fill out that form.  The general idea, though, is to determine how much of the vested RSU is New York income.  For instance, let's say the RSU option's value was $5000.  Now, if the option was granted on July 1, 2019 and vested on July 1, 2020, but your physical work location (not via telecommuting, but your actual office location) moved to New Jersey on January 1, 2020, then 50% of the RSU is New York income, and 50% is New Jersey income.  However, it is all reported as taxable wages (even if you didn't cash them out) as of July 1, 2020, because that is when you now have access to the compensation.  The IT-203-F form, filled out properly over the multi-year period of 2019 and 2020, should reflect $2500 as taxable to New York.

That is the stock portion.  However, as far as your cash bonus is concerned, only cash payouts received as bonus in 2020 could count as New York income for 2020 (if the bonus was calculated off of work performed within New York State even if that work was performed in 2019), but not amounts received in 2019 (which would have been reported as taxable in 2019).  If there is a split, portion A of the same IT-203-F form can assist in calculating the portion of the bonus issued that would also be considered "New York source" income.  In this case, take the final result of both sides of the form, divide that by the amount of "NY Income" reported on the W2, and that is your percentage allocation.  For instance, if the bonus allocation plus the RSU allocation equals $7500, and your NY income on Form W2 says that you have $100,000 of NY Income, then you divide the $7500 by $100000 to get a decimal:  .0750, which is 7.5%.  Enter this in the proper TurboTax box as 7.500.  Save your filled-out IT-203-F as a PDF on your computer, and attach a copy to your return as prompted above.  Keep everything documented for your records in case NY State asks for proof of your method.  But this is the technique on how to enter it all into TurboTax, yes.

[mzhu]

Thank you so much! Following your advice, I have completed the tax filling! 

[mzhu]

Hi Daniel,

To file the 2021 tax return, I encountered a similar problem as last year.  I asked the question in the link below

Live and work in NJ but have NY W2 due to RSU and accrued dividends. How to do NJ and NY state taxes... 

After revisiting the detailed explanation you gave, I think what you said is still applicable this year. Could you please take a look and confirm if my understanding is correct? Thank you so much!

[hgshah]

For 2021 Tax year, Turbo Tax does not have function to upload 203F.  I have allocated wages by percentage, filled out 203F (four of them).   I have PDF versions of the forms saved.  HELP!

[GeorgeM777]

You can prepare your NY return and NJ return in TurboTax.  You can also make the necessary income allocations.   Which version of TurboTax are you using?  

When you are preparing your return, start with the Federal section and when you enter your personal information, make sure that you indicate that you have earned money in other states, in your case that would be NY.  

When you get to the state section prepare your non-resident state first.  You will have to indicate what portion of your income came from a NY source.  Your resident state, NJ, will give you a credit for having paid tax to NY on the money that NJ will want to tax.  That is why you need to complete your non-resident state before completing your resident state return.  

@hgshah

[mkkhawaja]

I have a similar question on RSUs and moving states. I officially moved my job from NY to NJ in June. I know I have to file NY taxes as a non-resident , including the multi-year allocation form IT-203-F for any income from RSUs granted when I was a NY employee but vested after I moved to NJ. When I use my stock statement to figure out the RSU income (for NY), I am getting confused on which income for each vest event to report.  There is "Total Income of RSUs at Vest" and then there is "Prorated Income" (which is the same as the Payroll reportable amount and Amount subject to Tax withholding columns). It seems like the "Prorated Income" is calculated based on the "Percentage of Income Subject to Withholding" column. Should I be reporting the total RSU vested and Total income on my NY IT-203-F form, or the prorated income ? (and RSU's corresponding to the prorated income).