Work in PA remotely for NY - Withholding Question

[FR38]

I work remotely in PA, live in PA but the company is located in NY.  My employer recently made an erroneous change listing me as flex-NY yesterday, while they corrected the status back to Flex PA  now my W-2 now shows NY state taxes slated to be taken out.

So 2 questions instantly arose for me:

1) should I have been paying NY state tax along with PA state and of course my Federal (my employer has not been with holding anything for NY since I started 5 months ago?) 

or 2) should this be reverted back to just PA and FED?

My employer was unable to point me in the right direction, so I'm worried. My employer told me I should seek a tax advisor to provide insight...

If I owe taxes due to the lack of employer withholding is there anyway I can get these caught up? I'm worried about the financial impact due to the oversight of my employer...

Thank you!

[AbrahamT]

Generally, the taxes withheld in a situation like yours would typically be to withhold the taxes from PA, not NY. However, NY is from the few states that fall under the category of "convenience of employer rules" and as such taxes would have been withheld from NY rather than PA. As such is the case in your situation, yes, NY taxes should have been taken out. When you prepare your NY nonresident IT203 at the end of the year, you will deduct your NY taxes withheld for the remaining 7 months from that IT 203 tax liability . Whatever tax liability you will have leftover on those NY taxes will consequently go as a credit to your PA return. Obviously, the 5 months tax that was withheld in PA which is your resident return with appear as a deduction from the amount you owe on that PA return as well.  

I guess if an underpayment penalty gets calculated at the end of the year due to underwithholding for those 5 months, you will bring it to your employer's attention to reimburse you for that.

I wish you all the best.

[TomD8]

New York's "convenience of the employer" rule applies only to non-resident employees who work both within and without New York.  Here is a link to the relevant New York statute:

N.Y. Comp. Codes R. & Regs. Tit. 20 § 132.18 - Earnings of nonresident employees and officers | Stat...

A non-resident employee who performs no services within New York State is not subject to the "convenience" doctrine, and the work income of such an employee is not subject to New York income tax.