Working Remote in OH for NY job - State Tax filing Questions

[Bellcoop2]

I worked and lived in NYC Jan-Mar 2020 and moved to OH in April 2020 to work remotely due to COVID.

I still work for my NYC employer to date and plan to move back to NYC this year.  My address with my employer was changed to OH in April 2020.

I received 2 W-2's from ER:  One for Jan-Mar 2020 in NYC showing NY/NYC taxes withheld. The other from Apr-Dec 2020 where my ER withheld OH/Local taxes and stopped withholding NY/NYC taxes.

A.  I understand I have to a file NY/NYC tax return as they consider working remotely in another state as days worked in the state. Do I use the Resident/Part-time/Non-Resident for NY? Do I file this form first, before Ohio? I know I will owe more in NY taxes.

B.  Am I considered a Resident or Non-Resident of Ohio? Will Ohio give credit for taxes paid in Ohio but for work in NY?

Thanks for any insight!

[Opus 17]

Basic concepts:

1.  If you are a resident of state A and working in state B, you owe income tax to state B on your income from state B as a non-resident, and income tax to state A (your permanent home) on all your world-wide income.
2. Your domicile is your permanent home.   You will generally owe a resident tax return for all your world-wide income to the state where you are domiciled.  There is no single factor that determines domicile, but some of the factors are where you actually live, where your significant social relationships are, where your children attend school, where your regular doctor and dentist are, and so on.  You can live in multiple places, but you only have one domicile at a time.  Just moving to another place does not automatically change your domicile, you also have to take active steps to give up your previous domicile.

In your case, it sounds like NYC has continuously been your domicile. That means you are considered an NY/NYC resident, and will file a resident tax return that reports and pays tax on all your world-wide income.  (We don't have to consider the "convenience of the employer rule" because you are an NY resident.  That rule affects non-residents who work for NY employers.)

You need to first prepare an Ohio non-resident return that reports and pays tax on your Ohio-sourced income (income paid to you while you lived in Ohio).  Then, you prepare a NY resident tax return that will report all your world-wide income for the year.  NY will give you a credit for the Ohio taxes that you paid, but since the NY taxes are probably higher, you will probably end up owing some money to NY.  In Turbotax, you will prepare the Ohio return first, so the credit populates the NY return properly.  Tell Turbotax you were a full-year resident of NY, and then it will ask if you earned money in any other state. 

[Bellcoop2]

Thank you for your response!

Just to clarify that I would be considered NY/NYC resident, even if I didn't have a "residence" in NYC at the end of 2020? My apt lease ended in Sept 2020. So I thought I was a Part Year/Non Resident and was using Form IT-203 and used the calculations of days working in NYS/NYC and days working outside NYS/NYC while receiving New York source income.

As you stated, all of my income is New York source, so I know I will owe more state taxes to them. I'm just confused as to where I get a "credit" New York or Ohio?  But I will go ahead and change my New York form to "resident" and see where that takes me, and file Ohio first as a non-resident. 

[Opus 17 · Accepted solution]

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@Bellcoop2 wrote:

Thank you for your response!

Just to clarify that I would be considered NY/NYC resident, even if I didn't have a "residence" in NYC at the end of 2020? My apt lease ended in Sept 2020. So I thought I was a Part Year/Non Resident and was using Form IT-203 and used the calculations of days working in NYS/NYC and days working outside NYS/NYC while receiving New York source income.

As you stated, all of my income is New York source, so I know I will owe more state taxes to them. I'm just confused as to where I get a "credit" New York or Ohio?  But I will go ahead and change my New York form to "resident" and see where that takes me, and file Ohio first as a non-resident. 

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We need to go back to the definition of "domicile."  You said you were planning to move back to NY, but you just added that you surrendered your lease.  That can be the active step that changes your domicile to Ohio.  You can only have one domicile at a time, although you can change it frequently, as long as each change is bona fide and not just for show.  Only you really know if you changed your domicile in September.

If you did change your domicile, then you are a part-year resident of Ohio and part-year resident of NY.  In that case, however, your Sept-December income will be NY-sourced income due to the convenience of the employer rule, although it will be non-resident income at that point.  Your Ohio return would still report your Ohio income before September as non-resident and all your income after September as resident income.

I haven't tried to fill out a tax return in Turbotax under these circumstances, and I can't tell how the credits work together.  It would be easier to file as an Ohio non-resident and NY full year resident. I can't tell you whether part-year NY/part-year Ohio resident or full year NY resident/Ohio non-resident will pay less overall tax.  You may want professional assistance this year.  

[Bellcoop2]

Thank you again for your response.  I was trying to figure the state tax filings myself, but kept getting caught up in the "resident/non-resident/part-year resident" for both NY and OH.  I believe I may just go see a tax preparer.

Thanks for your time!

[Opus 17]

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@Bellcoop2 wrote:

Thank you again for your response.  I was trying to figure the state tax filings myself, but kept getting caught up in the "resident/non-resident/part-year resident" for both NY and OH.  I believe I may just go see a tax preparer.

Thanks for your time!

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Full year NY resident/Ohio non-resident should be easy to do in Turbotax, although I have not prepared a return that way.

Part year Ohio/Part year NY would be easy to do if you did not have the "convenience" rule.  I moved from NY to Virginia 2 years ago but also changed employers, so I did not have the out-of-state income situation.  Adding the NY source income problem would make that a situation I would take to a professional. 

Only you can really decide if you changed your residency. 

[Hal_Al · Accepted solution]

I agree with Opus, only you can deicide it you changed residence, since you plan to move back to NY.  That said, I would file as a part year resident of both states. 

Taxwise, there's no difference.   NY State taxes telecommuters (I'm surprised your employer didn't continue to withhold NYS tax). You pay NYS tax on all your salary. Ohio will give you a credit (either a resident or non resident credit depending on what you call yourself).  The Ohio city has already taxed you thru withholding. If you are a resident, you have to file an OH city return.  If  a non resident, don't file a OH city return, but they keep the withholding.

I'm not fully familiar NYC income tax, but I think you don't owe since March since you didn't physically reside there.

[Bellcoop2]

Thank you for your comments. 

Yes, my employer stated I had to change my state tax withholding to Ohio when I moved in April, but has since stated that was not the right thing to do. I now have to pay NYS taxes owed from Apr-Dec 2020.

I believe I will take the approach to file as part year resident in both states.