Worked all year for NY company, part year NJ resident then moved to NY for rest of the year

[Curious101]

Hello ,

I lived in NJ for a few years, for Tax year 2022, I lived in NJ from Jan 1, 2022 till Apr 15, 2022 and then I moved to Long Island, NY. No county or local income taxes in either place.

My wife and I were continuously employed all of 2022 i.e. we did not switch jobs. She was employed by Employer A and I was employed by employer B. Both employers had office in NYC. We worked remotely most of the year. Wife's employed switch to hybrid schedule in the latter half of 2022, requiring her to come in to NYC office. 
In W2 box 1 "Wages, tips and other comp." I have $150,780, box 12b has code D with amount $20,400. Adding these two matches the amount for Gross pay on W2, i.e. $171,180.
The W2 from employer for NJ state reports NJ Wages. as $46,186 but nothing under state income taxes.
The W2 from employer for NY state reports NY Wages as $150,780 (i.e. all income) and $9185 under state income taxes.
I looked at the first few paystubs of Jan, Feb and mar 2022 and all of them say "NY withholding Tax" , even though it also notes "State of Residence" is NJ , "Your work state" is NY, "Your work location" is New York.
I can retrieve and look through. paystubs for the. rest of the year as well, but I'm pretty sure they all say the same thing except that the "state of residence" will change to NY after my move.

I filed taxes last month and I made a couple of mistakes that I now need to correct. I assumed that I can deduct NJ reported income (46,186). from the total taxable wages (150,780) and report it as NY income. i.e. 104,594. 

I also assumed that the taxes were all withheld by NJ , but now it looks like it may have been withheld by NY instead.

I received a notice from NJ wanting to verify details as the refund amount is unusually high. 

Can some one please advice on how to allocate income to NJ and NY respectively and also how to determine if the taxes reported in W2 actually went to NY or NJ ?

Basically, I am looking at filing an amended return.

Thanks,
Pankaj

[Anonymous_]

@Mike9241 

[TomD8]

Did you have the same employer all year?  In what state(s) did you actually (physically) work?  We need to know these things in order to determine your state tax obligations.

[Curious101]

Thanks for the response.
Yes, we both had the same employer all year long. Both of our Employers had offices in NYC. In 2022, employers rarely asked employees to come on site so it was WFH all the time. My wife and I worked from NJ for first few months, then we moved to NY for the rest of the year and still live in NY.  Our kids used to go to pre-school in NJ, but that stopped after COVID.

As I mentioned in first message, our  our primary permanent residence (rental) in NJ from Jan 1, 2022 to Apr 15, 2022. After that we moved to Long Island, NY and worked from there. I continued to work from home all year, my wife's employer expected Hybrid schedule, i.e. go in 2-3 a week to the NY office.

Please feel free to ask any thing else you need me to share.

[TomD8]

When you were living in New Jersey, was your work (and your wife's) performed 100% from a New Jersey location, or were there days when you worked in New York?

[Curious101]

I worked remotely while at NJ 100% (and the rest of the year while at NY). My. Wife went to office in New York a few times, like once or twice a week while we lived in NJ.

[TomD8 · Accepted solution]

OK.  Since you never actually worked in New York when you were a New Jersey resident, your work income during that time is taxable only by NJ.

However, since your wife worked partially within New York when she was an NJ resident, her income during that time is taxable by both states.  This is due to New York's "convenience of the employer" rule, which states that a non-resident's remote income is taxable by New York if the employee works remotely for their own convenience, rather than that of their employer.  NY's rule is explained in detail here:

https://www.tax.ny.gov/pdf/memos/income/m06_5i.pdf

NY's "convenience of the employer" rule applies to NY non-residents or part-year residents whose assigned or primary work location is in New York, but who work both within and without New York during the tax year.

Bottom line: your income as an NJ resident is taxable only by NJ.  Your income as an NY resident is taxable only by NY.  But your wife's income as an NJ resident is taxable by both NJ and NY.  Both your incomes after becoming NY residents are taxable only by NY. 

You will be able to claim a credit on your NJ tax return for the taxes paid to NY on the income that is taxed by both states, so the same dollars won't be double-taxed.

[Curious101]

Thank you! I appreciate you laying it out so clearly. This helps a lot !

One additional question - I withdrew $90K from my 401K as  Qualified Disaster Distribution from my 401K after COVID, in 2020. I chose to split it in 3 years so the last $30K shows up in 2022 return. (Lived in NJ for 4 years)

Does that $30K gets allocated 100% to NJ or it gets split between NJ and NY based on the no. of days I stayed in NJ compared to NY ?

[TomD8]

A distribution from a 401K is taxable by the recipient's State of Residence at the time the distribution is received.