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How to report 1099-misc income in the state tax?

Initially working as volunteer for a non profit organization, a got an opportunity to be paid for a few hours per week in the same organization and I ended up getting a 1099-misc form. I know I need to report as self-employed. But how does it work for the state tax? I live in New Jersey but the non profit organization is located in New York.

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1 Best answer

Accepted Solutions
rjs
Level 15
Level 15

How to report 1099-misc income in the state tax?

It doesn't matter where the organization is located. What matters is where you did the work. Did you do the paid work in New Jersey or in New York?

All your income is subject to tax by the state that you live in, no matter where you earned the income. If you work in another state, the income is subject to tax by the state that you worked in, but you will get a credit on your resident state tax return for part or all of the tax that you pay to the other state.

If all the work was done in New Jersey, you just report all the income on your New Jersey tax return. You don't have to file a New York tax return.

If you got paid for work that you did in New York, you have to file a New York nonresident tax return in addition to your New Jersey resident tax return. Prepare the New York nonresident return first, then the New Jersey resident return, so it can calculate the credit for the tax you paid to New York.

In either case, TurboTax will carry the information about your self-employment income from your federal tax return to the state tax return(s). If you have to file a New York return, it will ask you to identify what income was earned in New York.

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6 Replies
rjs
Level 15
Level 15

How to report 1099-misc income in the state tax?

It doesn't matter where the organization is located. What matters is where you did the work. Did you do the paid work in New Jersey or in New York?

All your income is subject to tax by the state that you live in, no matter where you earned the income. If you work in another state, the income is subject to tax by the state that you worked in, but you will get a credit on your resident state tax return for part or all of the tax that you pay to the other state.

If all the work was done in New Jersey, you just report all the income on your New Jersey tax return. You don't have to file a New York tax return.

If you got paid for work that you did in New York, you have to file a New York nonresident tax return in addition to your New Jersey resident tax return. Prepare the New York nonresident return first, then the New Jersey resident return, so it can calculate the credit for the tax you paid to New York.

In either case, TurboTax will carry the information about your self-employment income from your federal tax return to the state tax return(s). If you have to file a New York return, it will ask you to identify what income was earned in New York.

How to report 1099-misc income in the state tax?

The income was indeed earned in New York, but I had no withholding tax. I am filling the New York tax now.

How to report 1099-misc income in the state tax?

So, I live in NJ, I work in NY, my income comes all from the NY job and I had withholding tax in NY. How does the tax credit work? Do I receive a check (money back) of all the tax paid from NY and need to pay in NJ. Or there is not money exchange and NY pays directly to NJ in my behalf?
rjs
Level 15
Level 15

How to report 1099-misc income in the state tax?

You don't get a check, you don't pay New Jersey, there is no exchange of money, and New York does not pay New Jersey. Basically New York gets the tax on the income you earned in New York. On your New Jersey tax return the New York income will be included in your taxable income. But you will get a credit towards your New Jersey tax for part or all of the tax that you paid to New York. The credit is subtracted from your New Jersey tax so you are effectively not paying New Jersey tax on your New York income. The credit is called the Credit For Income Taxes Paid to Other Jurisdictions. It's on line 42 of Form NJ-1040.

How to report 1099-misc income in the state tax?

Thanks. One last question. What happens if the total tax dollar amount I paid in NY is higher than what I owe to NJ (because for instance the tax brackets are different - higher in NY than in NJ). Do I lose this extra tax credit?
rjs
Level 15
Level 15

How to report 1099-misc income in the state tax?

The credit will probably not be equal to your total NY tax. That's why I always say that you get credit for "part or all" of the tax that you pay to New York. The credit is actually the amount of NJ tax that you would have paid on the income if it had been NJ income instead of NY income.

The following is from New Jersey Bulletin GIT-3W (page 2).

"[The] credit reduces the taxpayer’s New Jersey Income Tax; it does not necessarily entitle the taxpayer to a dollar-for-dollar credit for the total amount of taxes paid to the other jurisdiction. The credit represents the amount of New Jersey Income Tax that would have been imposed if the income earned in the other jurisdiction had been earned in New Jersey, or the amount of tax actually paid to the other jurisdiction, whichever is less."

For more details about the credit, you can download Bulletin GIT-3W from the following link.

<a rel="nofollow" target="_blank" href="http://www.state.nj.us/treasury/taxation/pdf/pubs/tgi-ee/git3w.pdf">http://www.state.nj.us/treasury/...>
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