State Tax remote worker NY company living in MN

[bog52]

Hi!

I live in MN and work remote for a company based in NYC. Have lived in MN all year, and only worked from home. Their payroll system did not have the option to include MN state taxes, so they witheld NY state taxes instead.. Do I fill out two state tax returns, one for MN and one for NY? If so, I'm confused about this question in the NY state tax return: "Were all of your wages and/or your self-employment income earned in New York State?"

This is my first time doing taxes, and I made under 10k last year.

Thanks!

[ErnieS0 · Accepted solution]

New York follows what's call the "convenience of the employer" rule meaning many telecommuters must pay NY income tax if their employer considers their "office" to be the company's NY location, even if you step foot in the building.

NY says, "If you do not meet the requirements to be a resident, you may still owe New York tax as a nonresident if you have income from New York sources."

If you are positive you are not supposed to pay NY income tax, then say NO to "Were all of your wages and/or your self-employment income earned in New York State?" 

Click Edit next to your W-2 on Your Form W-2 Summary.

Select "Allocate by Percentage."

The New York State Percentage will be 0.

Consider filing NY by mail with a note explaining that your employer withheld NY tax in error. Enclose a copy of your MN return showing all your income was reported to MN.

Speak to your employer. Perhaps they made to able to withhold no state tax and you can make quarterly estimated payments. Otherwise you will have to file a NY return every year.

If you are supposed to be paying NY tax, you can claim a credit on your MN return for double taxed income and tax paid to NY.

Related Resource:

• Frequently Asked Questions about Filing Requirements, Residency, and Telecommuting for New York Stat...

[bog52]

Hi @ErnieS0 ,

Thank you so much for your answer! I have spoken to my employer, and they have updated the payroll system so for next tax year they will withhold MN state tax instead!

One more question: how should I answer this question in my MN state tax return: "did you pay taxes to Minnesota and to another state or to a Canadian providence on the same income?" 

I have allocated my NY state tax by percentage, and have selected 0% in my NY tax return already.

Thanks again, you are a life saver! 🙂

[ErnieS0]

@bog52 Skip that section about paying tax to another state or Canadian province if you allocated 0% of your income to NY. MN will only give you a credit for tax paid to NY if you paid tax. If you are claiming all your income as MN, there is no tax credit.

One more thing, since your employer is cooperative, see if they are willing to give you a letter stating that NY tax was withheld by mistake and/or your work location for 2020 was MN. That would be handy in case NY audits you.

[bog52]

@ErnieS0 i see what you mean now; I was ready to file but I cannot e-file for NY because I allocated 0% and it gives an error. Can I file my federal and MN state through e-file and only send in NY state by mail? I got a letter from my employer stating I paid NY tax because MN wasn't in their payroll system, so I can add that to the file. Thanks again!

[ErnieS0]

Hi @bog52. Yes. You can e-file federal and Minnesota and mail NY. Make sure you enclose an unsigned copy of you MN return to NY along with the employer letter. You should be fine.

[zmartindale]

Hi, I am in the same position for 2020 but only spent part of the year (70 days) working for a NY company that withheld taxes to NY the entire year. I talked to the MN Department of Revenue and they said because we spent less than 180 days the M1CR form doesn't apply so we have to pay MN taxes for the time we were there despite already paying NY taxes. Is this correct? Do I go back to NY and ask for money back?