Remote worker in TX/ Marital tax status questions

[Ericaandchris2023]

Hello, 

I am a remote worker who lives in Texas working for a New York based company. I am a Texas resident and my wife is a Texas resident as well. Since my company is based in NY, I still get NYS taxes taken out. My question is about filing status as I was married last year. Do I change married filing status to both federal and state returns? We are planning on filing together. If filing as married, would NY state expect a tax return from my wife, who isn’t a NY resident, would they tax her non NY income? Is it better to leave single for New York State tax purposes? Thank you

[DMarkM1]

According to the NY form 203 intructions here, you must file a joint NY state return if you file a joint federal return.  You will only be taxed by NY on the NY source income.  It is usually better overall to file jointly (FED and state) than separately.   

In the NY state interview you will allocate to NY only your NY income.  NY will use a ratio of your NY source income to your total income.  That ratio is applied to the NY state tax as if both of you are resident to arrive at the tax on NY source income. TurboTax will make those calculations on the forms automatically based on your allocation inputs. 

If you wish you can prepare returns both ways, joint and separate, to figure out which yields the better overall tax result. This is easiest using a TurboTax desktop product where you can prepare several returns.   

[TomD8]

@Ericaandchris2023 --

If you as a non-resident of NY never physically work within New York State, then your income is not New York-sourced and is not taxable by New York.  You should file NY Form 2104.1 with your NY employer ASAP in order to get them to cease withholding NY taxes.  Here's a link to that form:

https://www.tax.ny.gov/pdf/current_forms/it/it2104_1_fill_in.pdf

Unfortunately, since NY taxes were incorrectly withheld from your pay you'll have to file a non-resident NY tax return.  On that tax return you should show the NY withholding but allocate zero income to NY.  This should result in your receiving a full refund.

From the NY Employers Withholding Guide:

"New York State personal income tax must be deducted and withheld on wages paid to New York State nonresident employees for services performed in New York State."  (page 44)

"If a New York State nonresident employee performs services partly in the state, only wages for services inside the state are subject to withholding of New York State personal income tax."  (page 45)

https://www.tax.ny.gov/pdf/publications/withholding/nys50_1223.pdf

FYI, this issue was decided in tax court years ago:

"Per Hayes v. State Tax Commissioner, 401 N.Y.S. 2d 876, “A nonresident who works in another State but who performs no work in New York is not subject to New York State tax liability no matter for whose convenience or necessity he performs the work.”

Hayes v. State Tax Comm, 61 A.D.2d 62 | Casetext Search + Citator