Your employer correctly withheld New York taxes so you do not have to resolve it with them. In general, tax withholding applies to the state where the work is performed (unless there is a reciprocity agreement in place). You will have to file a nonresident New York state tax return to report the income and pay the tax. Then you will file a Resident New Jersey return. You will report all your income, but TurboTax will apply a credit for the taxes you paid to New York so that you are not double-taxed.