NY Resident - CT Company - NY Work

[kc92]

Hello,

I'm trying to figure out if I'm going to be double taxed which it seems like I am. 

I live in NYC and will be working for a CT-headquartered company in Connecticut ~1 day per week. 

Will i have to pay NY state tax, and CT state tax? Any city tax implications?

Should i include both jurisdictions in my withholdings, or select one and fill out a form later?

[Bsch4477]

When you do your returns do your non resident state first.  NYS and Ct have a reciprocal agreement so you will not be double taxed.  Only working one day a week you probably don’t have to withhold for CT unless you are a high earner. 

[rjs]

NY and CT do not have a reciprocal agreement. (Neither NY nor CT has any reciprocal agreements with any other states.)

I'm not sure what the meaning is of "NY Work" in your question. Are you saying that you will be working in CT about one day a week, and on the other days you will be working in NY? If that's the case, you run into the "convenience" rule, which means that it matters why you are working in NY.

The income you earn when you work in CT is clearly CT source income. The income you earn when you work in NY is clearly NY source income. However, depending on the reason you are working in NY, CT might also consider it CT source income. If the nature of the work requires it to be done in NY, then it is not CT source income. For example, if you are supporting or selling to customers in NY, or running a NY store or office, then you are in NY for the convenience of your employer, and your earnings for working in NY are not CT source income, even though you are working for a company that has its headquarters in CT. But if you are working in NY, and telecommuting to the CT office, because you want to avoid commuting, or prefer to work from your home, that is for your own convenience. In that case, CT will consider all of your earnings to be CT source income. They will treat it the same as if you were actually working in CT. But NY will still treat it as NY source income, because you are actually working in NY. That is where you end up being double taxed.

If you are working from home because of the Covid-19 pandemic, that could possibly change the convenience equation. However, as far as I know, neither NY nor CT has issued any special rules for that situation. (Some other states have.) So you would still be in a double-tax situation.

[Bsch4477]

@rjrs is correct. I should not have used the term reciprocal agreement.  But CT will, for example, give a CT resident credit for tax paid to NYS. 

[kc92]

Thanks. I suppose in that case it would make most sense for my withholdings to be CT based 

[rjs]

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@kc92 wrote:

I suppose in that case it would make most sense for my withholdings to be CT based 

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I would not make that conclusion. You are going to have to pay some New York tax, probably a lot if you are working in New York most of the time. New York will give you credit for part or all of the CT tax that you pay on the income you earn when you work in the CT office. I don't think they will give you credit for CT tax on the income you earn while working in NY, because it is NY source income. So the credit is not going to come anywhere close to wiping out your New York tax.

Also, if your CT employer has no operations in New York, they might not be able to withhold New York tax. You might have to make estimated tax payments to New York.

I suggest that you look for a tax professional who is familiar with the convenience rules in both states. You can discuss all the details of your situation with the tax pro and he or she can advise you on how to handle it.

[TomD8 · Accepted solution]

Since you're an NY resident, ALL your income - including your earnings in CT - is taxable by NY.

Additionally, CT can tax you as a non-resident on your earnings from work actually (physically) performed in CT.

Therefore you'll file two state tax returns - a non-resident CT tax return, plus your home state NY resident return.

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

Since you'll only be working in CT one day a week, your employer should at a minimum withhold NY taxes.  If they will also withhold CT taxes for your work in CT, so much the better.

When you do your returns in TT, be sure to complete the non-resident CT return first, before you do your home state NY return, so that the credit is calculated and applied correctly.