Bonus Taxation New York vs New Jersey

[Sourscot]

I have always lived in NJ. For the last few years I have worked in New York. All income was tax as NY source and NJ gave me credit for tax paid to NY. So far so good. In Dec 2023 my job transferred to NJ. For last couple of months I have paid only NJ tax as expected. Today (Feb 29th) I got my bonus and it was taxed in New York even though it is now 2024. Is there some special rule that allows for this. I thought I was done with filing in NY for good.  Generally I thought income is taxed when received, not when it is “applied to”.  This is essentially my 2023 bonus - my company pays later than most.

[LenaH]

Your employer was correct in withholding New York State tax from your bonus. Although you received your bonus in 2024, it was based upon your 2023 performance when your income from your employment was New York State sourced. Therefore, your bonus for that performance is considered New York State sourced income. 

Depending on when in December the company moved to New Jersey, you may need to calculate an allocation percentage for your 2024 nonresident NYS tax return. This would apply if your company moved on December 1st or earlier in the month, but would not apply if your company moved the last day of the year. Rather, if your company moved at the end of the year, then the full bonus is New York State sourced income. 

If the company moved in early December, you would have to base your allocation upon 2023 income. The numerator of this percentage would be your 2023 NYS source income prior to the move. The denominator would be the total amount of compensation received in 2023 from this employment.  

From there, you would multiply this fraction by the amount of your bonus. The result is the portion of your bonus that must be included in your New York source income for 2024.

For more information, please see Income Received by a Nonresident Related to a Business, Trade, Profession, or Occupation Previously....