Should I use my NJ W-2 form for my NJ tax return or my NY W-2 form so that taxes paid to another jurisdiction can be counted?

[gregwyka]

In the past Turbo Tax directed me to file NY first then NJ and only use my NY W-2 and remove the NJ W-2. However, this year the NJ Tax Department told me I owe back taxes for 2021 because the wages on my NJ return did not match by NJ W-2.

[rjs]

You have to enter your W-2 in the federal section of TurboTax. TurboTax then transfers the information to both state tax returns. You cannot enter a W-2 in the state tax return. Enter your W-2 as if it's one W-2 with two rows of state information, one row for NY and one row for NJ. Do not enter it as two separate W-2 forms.

[TomD8]

@gregwyka --

In TurboTax, be sure to complete your non-resident state return first, before you do your home state return.  This will result in your resident state giving you credit for the taxes paid to the non-resident state.

[gregwyka]

Thank you. However, the state wages are different on each form. NJ wages are higher than NY ages. When you go to file your state returns, you are given the option of which W-2 wages to use for your NJ return. In the past I used NY wages because that is what TurboTax recommended; however, I received a tax bill from NJ for CY 2021 and their calculation used the NJ wages not the NY wages. 

[gregwyka]

Hi Tom, yes, thank you. I always do this.

[TomD8]

In which state do you live? work?

[gregwyka]

Work in NY, but live in NJ

[TomD8]

Your home state of NJ can tax all your income, regardless of where you earn it.  Your work state of NY can tax the income you earn from the work you physically perform within NY, and from any work you perform remotely from home, if you work remotely for your own convenience rather than because your employer requires it.

NJ will grant you a credit for the taxes paid to NY, so you won't be double taxed.

[rjs]

@gregwyka 

You have to use the NJ wages on the NJ tax return.

It's not clear why your W-2 has any NJ wages at all. If you worked only in NY you did not have any NJ wages. Your employer might be reporting it incorrectly. Is there any state tax withheld in box 17 on the NJ line? Or did you work part of the time in NJ?

[gregwyka]

Yes understand that about your home state. Thank you. 

[gregwyka]

There is nothing in Box 17 on the NJ W-2. I work in NYC (my home office) and at times remotely from home in NJ.  Yes, I think that is what I need to start doing. NJ is reviewing 2021 returns and I underpaid by about $300-$500 at the time and they added in penalties/interest. 

[TomD8]

First, since you're a resident of NJ, all your wages (Box 1 of your W-2) are NJ wages.

Second, since you work both within NY and remotely from your home in NJ, you are subject to NY's "convenience of the employer" rule.  This rule states that your remotely earned wages are taxable by NY unless you are working remotely 1) at a bona-fide office of your employer, and 2) because you're assigned or required to work remotely by your employer.  This New York tax memorandum explains the rule in detail:

https://www.tax.ny.gov/pdf/memos/income/m06_5i.pdf