Married but spouse and I live in different states

[nb91093]

What is the correct way to file for the following scenario?

I live in NJ and all my income 100k comes from NY (I work in NYC). My paychecks have NY State tax withdrawn from them and no NYC tax because I live in NJ. 

My spouse's living address is in NYC. All of her income 160k comes from working in NYC. Her paychecks have NY State tax and also NY City tax withdrawn from them. 

-when I file Married Filing Jointly with my name as the taxpayer and my wife as the spouse, my NY state tax file says that I will get a very large refund back...I think this is because it assumes we as a married couple shouldn't have paid so much taxes to NY State. But this excess money was coming from my wife having NYC tax taken out of her paycheck all year though being as she lives in NYC and I live in NJ.

And when she files as Married Filing Jointly as the taxpayer and puts me as the spouse, the NY state file says we owe some money in taxes...presumably some missing NYC tax that I never had taken out being as my address is in NJ....

Any advice?

[AliciaP1]

While you can easily file married filing jointly for federal purposes, it looks like you should file separate state tax returns.  You can do this in TurboTax, but you may want to research any free file options on your respective state tax websites.

The following steps will allow you to file jointly on your federal return and file separately on your state return.  This procedure will work but you should consider if it is cost effective.

You and your spouse will prepare a federal return with filing status married filing joint, including both spouses’ information. File this federal return.

You will prepare a federal return with filing status married filing separate, including only your information. (Do not file this federal return.) Attach a state return to this federal return so your information will flow to the state return. File this state return.

You will prepare your spouse’s federal return with filing status married filing separate, including only your spouse's information. (Do not file this federal return.) Attach a state return to this federal return so spouse B’s information will flow to the state return. File this state return.

[nb91093]

Thanks for the message! helpful to know how to file federal together and states separately. I still don't get why there is such a large difference in the state refund if I file NY state jointly versus if she files NY state for us jointly.

......

When either her or I file the federal tax jointly, it says we owe ~500$, if we file separately it nets to around the same amount.

When I file NY State jointly as the taxpayer and her as my spouse, our refund is $5000.  

When she files NY state jointly as the taxpayer and myself as the spouse, we owe NYState $100.

If we each file NY state separately, she gets a 500$ refund and I owe $100.

I just don't understand why there's such a big difference? Are we technically not allowed to file jointly since we live in different states?  below it says we can file jointly if one is a nonresident (me) and other is new york state resident.

From tax.ny.gov

"The only exceptions to this rule (state filing status has to be the same as federal filing status) apply to married individuals who file a joint federal return and:

• one spouse is a New York State resident and the other is a nonresident or part-year resident. In this case you must either:
  • file separate New York State returns using filing status married filing separately; or
  • file jointly, as if you both were New York State residents, using filing status married filing jointly."

[ErnieS0]

Your refund differences may be related to the NYC living quarters question.

On the screen “Your City Residency Information,” you should be a New York City nonresident and your wife will be a New York City resident. TurboTax may be defaulting to making you both residents if your wife is the primary taxpayer. Make sure you are listed as a NYC nonresident.

Be aware New York and New York City are very aggressive about residency.

The state and city have a rule stating that if you spend more 184 days or more in New York state or City, and maintain a permanent place of abode, you can be a statutory resident.

A permanent place of abode is a building or structure where a person can live that you permanently maintain and is suitable for year-round use. It does not matter whether you own it or not.

As you have access to your wife’s home, and can presumably stay there whenever you want, this may create statutory residency meaning you could potentially owe NYC tax.

“Thus, the sheer ability to access and use a dwelling is not enough to establish a residential interest if the taxpayer does not actually do so. It, however, remains possible that a residential interest might be established by virtue of the ability to use a dwelling that is primarily utilized by a family member. Under the guidelines, determination of whether an individual’s use of a residence rises to the requisite level is based—in part—on the size of the dwelling, whether the individual’s personal items are kept there, and the extent of the individual’s use,” wrote lawyers Jennifer S. White, Esq., and Jason Feingertz, Esq., CPA in “Statutory Residency in New York: What Qualifies as a Permanent Place of Abode?”