Primary Office to determine whether 100% sourced wages for State filing

[AC_ROD]

I have an agreement with my employer to work 60% at Home (New Jersey) and 40% at office (New York). Since 60% in NJ (>50%), my employer said it is a requirement now to withhold income tax from my payroll for NJ, and prorate my total Withholding tax between NY and NJ, based on the number of days or % worked in each location.  To enable withholding tax for NJ, the location of my employer has been changed to NJ address (since employer has an office in NJ, but I don’t work in that NJ office) in my earnings statement, however in W-2, my employer address is still showing NY address.

Questions: a) Is my primary or assigned office in NY or NJ? b) Am I subject to the NY’s Convenience of the Employer test? c) Is my 60% work from home in NJ considered telecommuting so should be counted as NY sourced income?

[Vanessa A]

Since you are working out of the NY office when you do work on location, it would seem that you would not meet the convenience of the employer rule and all of your income would be subject to NY state taxes.

In order to meet the convenience of the employer rule it would need to contain or be near specialized facilities that cannot be made available at the employers place of business or four of the following;

• Home office is a requirement of employment
• employer has a bona fide business purpose for your home office location
• You perform some of the core duties of your employment at your home office
• You meet or deal with clients regularly at your home office
• Your employer did not provide you with a designated office space
• Your employer reimbursed your home office expenses

AND three of the following:

• The employer maintains a separate telephone line and listing for the home office. 
• The employee’s home office address and phone number is listed on the business letterhead and/or business cards of the employer. 
• 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.
• 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. 
• Business records of the employer are stored at the employee’s home office. 
• The home office location has a sign indicating a place of business of the employer. 
• Advertising for the employer shows the employee’s home office as one of the employer’s places of business. 
• The home office is covered by a business insurance policy or by a business rider to the employee’s homeowner insurance policy.
• The employee is entitled to and actually claims a deduction for home office expenses for federal income tax purposes.
• The employee is not an officer of the company.

If you do NOT meet the above criteria, then your full income from NY should be included on your Non Resident return.

[AC_ROD]

Thank you. If my wages should be treated as 100% sourced from NY, per your response, is my employer still required to withhold tax for NJ from my payroll?

If the answer is Yes, then it will result in too much tax being withheld for NJ and too little for NY (penalty and interest implications for my year end tax returns) even with 50/50 split between 2 states. If there any other way to get around this situation?

Thanks

[Vanessa A]

No, if your wages are taxed 100% by NY, you would not need to have NJ taxes withheld.  You would get a credit on your NJ return for taxes paid to NY. 

You would have to speak to your employer.  If for some reason they have you working in the NJ office when you are working remotely within the state however, since your actual physical location takes you to the NY office, it would seem as though your primary work location would be NY, not NJ. 

[AC_ROD]

Hi

As a follow up on my 1st and original question, my employer has intentionally specified my State of Employment on ADP records (NJ) to to match up with my Home State of remote location (NJ). So for the 40% days worked in NY office, can you explain the reason (helpful if you can provide the relevant tax law passage) why I can't look to NJ as my source of wages? I just want to better understand this, as there must be a regulatory/tax compliance reason for my employer to want to match the State to NJ. Thank you

[AC_ROD]

I apologize on a typo earlier, please see my revised question. Thanks.

Hi

As a follow up on my 1st and original question, my employer has intentionally specified my State of Employment on ADP records (NJ) to to match up with my Home State of remote location (NJ). So for the 60% days worked in NJ (remotely at home in NJ), can you explain the reason (helpful if you can provide the relevant tax law passage) why I can't look to NJ as my source of wages, and it has to be NY? I just want to better understand this, as there must be a regulatory/tax compliance reason for my employer to want to match the State to NJ. Thank you

[AC_ROD]

Hi Vanessa, is this something you can respond to? Let me know if question is not clear. Thanks

[Vanessa A]

So for the 60% days worked in NJ (remotely at home in NJ), can you explain the reason (helpful if you can provide the relevant tax law passage) why I can't look to NJ as my source of wages, and it has to be NY? 

If your employer has matched your work state with your home state so everything is in NJ, then it would be NJ source income. If you are working remotely out of the NJ office then NY has nothing to do with that part of your income. 

So for the 40% days worked in NY office, can you explain the reason (helpful if you can provide the relevant tax law passage) why I can't look to NJ as my source of wages? If you are physically working in the NY office, then all states consider income earned while physically present in their state as that state sourced income. 

"New York source income includes income derived from or connected with a business, trade, profession, or occupation carried on in New York State. " When you are in the NY office, you are carrying on in NYS.

[AC_ROD]

Vanessa,

Thank you for responding to my questions. I would just like to clarify one thing – even though I am working remotely from my home in NJ, I am not connected in any way to my firm’s NJ office. I do not visit the NJ office or conduct any business there -- i.e. I am not working out of that office. Does this still allow me to source my income from NJ for the amount of time (60%) that I am working remotely from my home in NJ?

[AC_ROD]

Hi Vanessa, 

Sorry to bother you. Just checking to see whether you have any thoughts on my last clarification question? Many thanks.

[AC_ROD]

Hi Vanessa,

I am hoping to obtain the clarification from you on my question posted on Thursday March 31, in order to know what to do for my 2021 tax filing. Appreciate it if you can respond and clarify, many thanks.

[Vanessa A]

Technically, if you have absolutely NOTHING to do with the NJ office, and are strictly an employee of the NY office, then you should actually be paying taxes in NY.

This is actually one of those things that would be a toss up and could go either way with having NJ as your home office. This is a bit of a loophole, since they have a NJ office, they can make the argument that you are an employee of NJ, however since you have no connection at all to NJ office, it really should be NY it would seem.

With the above, NY would have every right to say that all of your income is earned in their state.  

I would suggest going back and talk to your employer and bring up the fact that you have zero connection to NJ.  Even if they don't change it, you can report all of your income to NY and NJ, which is probably the safest way to go. 

It will not affect your NJ return as far as reportable income as all income is reportable to NJ since you live there.  It will affect your NY wages and it would give you a bigger tax credit in NJ since you will pay more taxes in NY. 

[AC_ROD]

Thank you very much, Vanessa.

I think you are suggesting me to report 100% wages to NY as the safest way to go, in this part of your response.  If I have misunderstood, kindly let me know. Otherwise, I believe I am clear. Thanks again 

"I would suggest going back and talk to your employer and bring up the fact that you have zero connection to NJ.  Even if they don't change it, you can report all of your income to NY and NJ, which is probably the safest way to go. "

[Vanessa A]

Yes, that is exactly what I am suggesting. Report 100% to NY.