Working remote in CA for NYC University then move to NYC, Residency and Tax Questions.

[ProudDad]

Dear Tax Experts,

My daughter worked in CA for local company until 2020 fall, she went back to a university in NYC for graduate school. As in pandemic, she stayed in CA until Sept. 2021. She has W2 as teaching assistant from school. As NY state consider all her W2 as NYS income, what about NYC income? Turbotax asked me about income during residence in NYC as part year city resident, should I put partial income as NYC income? What is CA tax law, does it consider the NYC school income as CA income while she lived in CA (8 months)? What about other incomes like interest and dividend, should I divide them by the two states? or it should all go to NYS/NYC? what is my daughter's residency in NY, part year or non resident?

Thanks a lot for your help!!!

I really appreciated it!!!

[ErnieS0]

New York City income tax only applies to NYC residents. She would not be a NYC resident if she was in NYC to attend school. 

Attending school is considered a temporary absence so your daughter remains a California resident unless she moved permanently to NY in September.

California residents pay taxes on income earned anywhere during their period of residency.

File a full year California resident return and a full year nonresident New York return. Report all income on the CA return and only NY income on the NY nonresident return.

You can claim a credit for tax paid to NY on the CA return.

[ProudDad]

Thank you so much for your reply.

Our home is in Virginia. Where is my daughter's permanent home if she chooses to be nonresident of NYC? I understand for 2021 she considers herself as full resident in CA (but Turbotax considers her as part year CA and part year NY). For 2022, where should she consider her permanent residence as she will be living in NYC full year?

In her 2021 W2, both NY and CA show the full amount she was paid for, i.e doubled income. Is that OK i use partial income for NY state, and no income for NYC as she is nonresident? I will use full amount for CA and then get credit from NY, right?

Thank you!

[ProudDad]

by the way, my daughter lived and worked in NYC for 7 years before moved to CA in 2019. She went back to school in NYC (remotely, still live in CA in 2020 and 2021 until Sept.).  Can she consider herself CA resident for 2021, nonresident of NY for 2021, then in 2022 consider herself as resident of NY?

Thank you!

[Vanessa A]

If your daughter lived and worked in NYC for 7 years, then she cannot choose to not be a NYC resident.  For the time she maintains a home in NYC, she is a resident there, whether it is part year or full year depends on if she maintains the home for 12 months or not. 

Same for CA, she can't just elect to be a resident or non resident of CA either.  If she maintains a home there, that is her home and that is where she will need to file a return.  Again, whether it's a part year resident of full year will depend on whether or not she lives in CA for the entire year or not. 

Sounds like your daughter is an adult and maintains her own home wherever she goes which means she is a resident of that place even if she is moving there for education. If she was a dependent or lived with you and simply left for a period of time for education, then her resident state would be VA.

  So, while she is living in CA and attending school remotely in NY, she is a CA resident.  If she picks up and sells her house in CA to attend school in NY and finds a house in NYC, then she would be a resident of NY.

[ProudDad]

thank you, Vanessa, for your reply.

yes, she is an adult. She lived in CA for 8 months, NY for 4 months for 2021. What is her residency status for each state? what is the amount of money in W2 i should allocate to? Her W2 has full amount for each CA and NY. What about other income like interest, divident? how should i allocate it?

Thank you again!

[LenaH]

In that case, your daughter should file a part-year resident return for California and a part-year resident return for New York. 

If she has a teaching assistant W-2 from a college in NYC, but telecommuted due to Covid, it would be fully taxable to New York. Per NYS, days worked at home are considered New York work days if the employee’s assigned or primary work location is at an established office or other bona fide place of business of the employer (a bona fide employer office) in New York State. If the employee’s assigned or primary work location is at an established office or other bona fide place of business of the employer outside New York State, then any normal work day worked at home would be treated as a day worked outside New York State. Since the NYC college would be established in NYS, then it is considered New York work days. 

Her income would also be taxable to California during the time she was a resident. For the 8 months of California residency, she would get a partial credit of taxes paid to New York so she is not double-taxed. 

Unearned income (interest and dividends) generally gets allocated based on where you are living when you receive the income. If it was equally earned throughout the year, you would allocate 8/12 months for California and 4/12 months for New York. 

NYS FAQ - Telecommuting

@ProudDad

[ProudDad]

Thank you very much Lena.

Just to confirm that for the 8 months in CA, her taxable amount is 8/12=0.67 multiply of her W2 amount, correct?

for the unearned income, do I do the 4/12=0.33 portion for NY state and NYC? or I should put all 100% for NY state and NYC?

She also had traditional IRA for 2021. Do I use the portion for each state (NY, CA) and NY city?

Thank you so much!

[DianeW777]

Yes, if your income was earned evenly throughout the year then you should use the number of months of residence divided by the full year to arrive at the percentage for each state.

You should also prorate your unearned income.  If you believe it was relatively even in 2021 you can use the same formula. If not, you can look at your quarterly (or monthly) statements to see actual earnings for each residency period.

As far as the IRA, when you go through the state returns there may be an ability to enter the deduction for each state, otherwise, depending on the state rules for each state there may be a calculation of taxable income against total federal taxable income after adjustments to income (IRA deduction).  Each state has their own way of calculating the part year resident taxable income.

[ProudDad]

Thank you very much Dianne!

As the W2 is from NY school only (including CA residency remotely working), for NY state tax, I should put the full amount as NY state claims all income sourced from NY even work remotely? What about CA, I should put the percent of CA residency of income from NY school, then claims NY tax credit, right?

Thank you again!

[DianeW777]

Yes, all income is included and taxed to New York (NY).

Yes, include the income on California (CA) earned during the residency and then claim a tax credit for the tax you paid to NY on the same income. This will require some calculation on your part.  You can take the full income, then divide it by the amount you are claiming in CA.  Once you have that percentage you can multiply that by the amount of tax liability for NY.  This will be the credit you are allowed on the CA return.

[ProudDad]

Thank you very much Dianne!

[ProudDad]

As I claim the NY state tax credit, it asked to send the NY tax return to CA as well. Is there a way that I can do it on e-filing to attach NY state return?

For the unearned income, NY state and city asked for the source of interest and dividend. How to determine the source of interest or dividend? is it determined by the address of the bank statement my daughter has?

Thank you!!

[DianeW777]

It depends.  Each state does have their own rules and in most cases they see another state return is filed.  To be safe you should mail a copy of the NY return with the CA tax return.

The source of the unearned income is her resident state.