Should I change my tax location to NJ because of the pandemic?

[newbis7]

I've been working from an office in NY, but since the pandemic, I've been working from home in NJ.  I use a company laptop and connect to a network via VPN.  Every year, in my NJ taxes, I take a tax credit for taxes paid to NY.  For 2020, do I still owe my taxes in NY, or is my income for most of the year really owed to NJ?

Would NJ consider that my tax really belongs to NJ (not NY)?  And would NY still consider that my tax really belongs to NY (because the office is in NY, and I hear they tend to be strict about that)?

What about for 2021?  If I expect to work from home from now on, with only occasional trips to the office, should my withholding be for NY or NJ?  If they make it NJ and they decide that we should return to the office, will that cause a problem? What if they return to the office but allow me to continue to wfh at my convenience?  Would it then be legally considered NY income because I'm still associated with that office?

[SteamTrain]

Too many extensive "IF's" and What-If's" with all of that.

BUT

From what you describe, and unless NY issues some significant telecommuter tax adjustments due to COVID working issues, you would still be subject to the NY telecommuter tax, and nothing would change from what you've done in prior years.  The NY company could still be required to withhold NY taxes, you would file a NY nonresident tax return for the year's wages at the NY company, and a NJ tax return for ALL your income from everywhere for the year, and take a NJ credit for the taxes paid to NY.

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Working from home (WFH) again for 2021...probably the same thing.  Again, Unless NY changes their telecommuting rules some, due to COVID forcing people to work from home in a state other than NY.

But there are a couple recent articles about NY not changing their stance for 2020 taxes, even if telecommuting due to COVID:

https://www.natlawreview.com/article/new-york-issues-tax-guidance-covid-19-telecommuters

https://www.twrblog.com/2020/10/bad-news-for-new-york-nonresident-telecommuters-new-york-issues-covi...

https://www.tax.ny.gov/pit/file/nonresident-faqs.htm#telecommuting

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Potential Complications:  Things might change though in other states .....some  states (as I recall, notably CA, MA  and SC have issued some new guidance about taxation and telecommuting,  and other states may also be considering telecommuter tax changes), Thus other  states may be reviewing their tax laws about telecommuting and where and how state taxes may be required, due to the WFH issue and whether the employee working from home in that state, or a different state is a "convenience", or may now be a "requirement" due to COVID reasons.  Navigating those issues may become  a problem, but but too soon to know yet. 

BUT again, as noted in the reference articles, for NY, things don't seem to be changing.

[rjs]

As long as the pandemic is the reason that you are working from home you are okay. New Jersey has announced that they will accept New York's position that it is New York source income. So as SteamTrain said, you file the same way you have in the past, the same as if you were actually working in New York. And you continue to have New York tax withheld. So at least for 2020 you have no problem.

Where you might have a problem later on is when the pandemic is no longer a factor and you are working from home for your own convenience. New Jersey's policy of accepting it as New York income is only temporary, specifically for the pandemic. You asked "Would it then be legally considered NY income?" The problem is that New York and New Jersey have conflicting laws. According to New York law it is legally New York income. According to New Jersey law it is legally New Jersey income. Where this makes a difference is in being able to claim the Credit For Income Taxes Paid to Other Jurisdictions on your New Jersey tax return. One of New Jersey's requirements for the credit is that "The income must have been properly taxed by the other jurisdiction." But since the income is for work performed in New Jersey, they do not consider it properly taxed by New York. That would mean that you can't claim the credit, so you would have to pay both full New York tax and full New Jersey tax on the same income. I don't have a good answer for a legal way to handle this.

Working from home for your own convenience will also cause a problem for your employer if they do not already have any presence in New Jersey. Having you working in New Jersey, regardless of whose convenience it's for, would make them a New Jersey employer. They would not only have to withhold New Jersey tax from your pay, but they would also be subject to New Jersey tax on part of the company's income. Because of this, they probably would not allow you to do it. You might not be happy about that, but it would eliminate your double taxation problem. On the other hand, if the company does already have a presence in New Jersey, they could probably assign you to their New Jersey location. Then you would no longer be a New York employee. You would be a New Jersey employee, they would withhold New Jersey tax, and not New York tax, and all the problems would be eliminated.

From what I can see, there is essentially no chance that New York will change their position on telecommuting unless they are forced to by the courts or by a federal law that overrides the state law. Neither of those appear to be on the horizon.