We are a PA based company who does work in NY & PA. On the W-2, should the state wages for NY be the same amount as federal wages in box 1 like the NY instructions state?

[ChristinaS · Accepted solution]

Yes- they should be the same as federal. NY law requires the employee to allocate their actual NY source income on their own personal NY tax return. The employer is required to put the NY wages on an employee's W2 as 100% of federal wages, even if the employee barely worked in NY.

While the wages need to equal the federal, the employer should withhold NY taxes according to more realistic allocable wages. In other words, the New York Wages could be $80,000 on the W2, and the NYS withholding could represent just $15,000 of income.