TurboTax software reporting NJ wages as NY taxable income

[greenbrother]

Hello, my wife and I have to file 2 state returns, one for NY where I work, and one for NJ where she works and we both live. In the wages section for the NY state return, we indicated that only my wages have been earned in NY, and explicitly answered no when asked if her wages have been earned in NY too; however the software used the sum of our wages as the NY taxable income, which is incorrect. Out of curiosity, I went back and changed our answers, selecting yes for both our wages being earned in NY. Unsurprisingly, the software still used the sum of our wages as the NY taxable income, and the resulting tax amount remained the same. Is this a bug or there is something else that would cause the software not to exclude my wife's wages, regardless of how we answer the question about our income? Thank you.

[ThomasM125 · Accepted solution]

No, there is not a bug in the program. New York will tax all of your income earned and then reduce the tax by a percentage representing the income earned in another state. So, you will see all of your New Jersey income included in the taxable income for New York, but the tax then calculated will be reduced by a percentage to compensate for the income not earned in New York. You will see a question on the New York return regarding how much of your total income belongs in New York, you need to answer that question accurately.  It will effect your tax, but not your taxable income in New York.