Which state is the "source of income"?

[magimagss]

I work for a company headquartered in New York. The company has entities and offices in multiple states, including Texas. I used to live in New York and pay taxes to New York. Then I moved to New Jersey but still paid taxes to New York because the source of income was in New York. But then I moved to Texas and I am a resident of Texas now (permanent address in Texas). My company has a registered entity in Texas and a few offices but I work fully remotely from home in Texas. Since I moved to Texas, my company stopped deducting NY state tax from my pay check (Texas does not charge income tax).  Do I need to still file New York return for the period of time after I moved to Texas? How is the source of income determined? By the location of the HQ of the company or by the entity EIN number? (this move happened recently in 2022 so I am asking for next year's return). Will this be dependent whether I get two W2s - one from New York entity and one from Texas entity? 

[DawnC]

The state you were physically in when you earned the income.   It does not matter where your employer is headquartered.   You owe income tax to the state you were in while you earned the income.   See that link for info regarding out-of-state employers.   

Texas has no income tax, so no income tax returns get filed there. 😉  

You are a part-year resident of NJ and NY and NY, so you have 2 state returns (NY and NJ) to file in 2021.   The link has instructions for filing part-year returns.   You might think that part-year taxes are proportional to the amount of time spent in the state, but that's often not the case.

Most states divide the income earned in that state by the total annual income to come up with a percentage. That percentage is then applied to the state tax on the entire year's income—no matter where it was earned—to prorate the tax liability. TurboTax follows the rules for each state.

If you're a part-year resident of New York and want to enter different allocations for income earned inside or outside New York State, follow these instructions.

[magimagss]

What about the "Convenience of the Employer Rule" that New York state utilized during COVID? Does it no longer apply? It basically said that if you worked from home from a different state for an employer based in New York and you did that out of your own choice (not that the employer made you do so), you still owe taxes to New York - please see article below. This rule no longer applies?

Remote Workers May Owe New York Income Tax, Even If They Haven’t Set Foot in the State - Marks Panet...

[DanielV01 · Accepted solution]

New York is known for the convenience rule, yes.  And if you work both "within and without" New York in the year you could fall under convenience and be required to pay New York tax on the income.  However, if you work exclusively in Texas, and you do not have more than a "de minimis" connection to New York (very small amount), then you should not be taxed in New York even if they attempt to argue to the contrary.  Please note this conversation here that I had with Community member @kristinelbly on this subject.  While there's a bit of reading on the thread, you will also see that this position is based in New York tax case law and not conjecture.

Like everything in the tax world, keep documentation to prove your position if it is asked of you.

[magimagss]

Great! Thank you! I will sure read the thread and save it for next year's filing. Appreciated!