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facts
Level 2

new jersey resident work new york bonus allocation

live in nj and was moved to n.y. office last year. last year's bonus earned in both states (say $10m) was paid this year. it was reported on w2 as $10m ny wages and $4m nj wages. how do i include on tax return?

5 Replies
MaryK1101
Expert Alumni

new jersey resident work new york bonus allocation

You will have to file a New York nonresident tax return and report the New York income.  Because you are a New Jersey resident, all of the income will be on your NJ resident tax return, but you will then receive a credit for the taxes you paid to New York on the income so you will not get double-taxed.  

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facts
Level 2

new jersey resident work new york bonus allocation

thanks for response. 

a few points if i do this:

1) in my example ny will receive taxes on $10m VS the $6m earned last year while working in new york.

2) nj will provide a tax credit for new york taxes paid on $10m of bonus vs the $6000. will they object?

3) on turbo tax with $10m on my ny w2 and $4m on my nj w2 my total wages in nj is showing up at $14m. how would i reduce this to $10m in total?

 

 

MaryK1101
Expert Alumni

new jersey resident work new york bonus allocation

To summarize: State residents report/pay tax on all income.  Nonresident report/pay tax on state-source income.

State source income is income with ties to that state. 

 

Applied to your example (and the state tax is not 10% I used that number to make the math easy but NY and NJ are very close in tax rates.)

 

1) NY NR $10m(NY) --> Tax @ 10% = $1m

2) NJ Resident= $4m(NJ) + $10m(NY)= $14m --> Tax @10% = $1.4m minus $1m paid to NY (credit) = NJ Tax $.4

     Total Taxpaid $1.4m

 

New Jersey will not object, it happens a lot between NY and NJ. 

 

Overall, for the states, the tax they collect probably is pretty even at the end. (Not sure why they chose for NR state to tax, most likely because people who live in states with no income tax would not get taxed at all.  Also a state has more control over their own state employers to take the tax withholding out). 

 

You will see in TurboTax Credit for Taxes paid to another state.

 

3) New Jersey income = $14m because residents must report tax regardless of where it was earned.

 

@facts

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facts
Level 2

new jersey resident work new york bonus allocation

thanks for response.

a few points:

total bonus paid was $10m

for federal pay tax on $10m

for ny pay tax on $10m

for nj pay tax on $14M and get credit for  tax paid to ny

 

--this results in paying total net tax on the state level on $14m vs $10m ?????

 

turbotax in the nj step by step appears  to allow me to remove duplicate wages from the total wages worksheet but says "typically nj wages should not be excluded". the worksheet shows ny at $10m and nj at     $ 4m. it also appears to only allow the elimination of the full amount in nj or in ny. therefore to get to the total of $10m on the nj return i'd have to eliminate the nj $4m.

 

sorry this is so convoluted but i really appreciate all your help on this.

AmyC
Expert Alumni

new jersey resident work new york bonus allocation

The forms are for the company to report to the state and federal what they believe to be true. This is your chance to get it right. You will have paystubs with dates. A bonus or multiple bonuses can be different. Perhaps you had $4m in bonuses while working in NJ and the rest while working in NY?

The total of the bonuses needs to add to the correct number. 

  • If the bonus was $4 NJ  + $6 NY then the state lines need to be corrected so your W2 state boxes can correctly reflect it.
  • If the bonus was actually $10 NY only, then NJ should not have a number in your W2 forms since NJ is your resident state and will tax it all anyway. The NJ state line can be left blank.

Federal tax on $10M, yes.

NY taxes on what was actually received in NY, if $10M, yes

NJ taxes on $10M since that was the total bonus

NJ gives credit for lower of NJ or NY on the income.

 

See  State of NJ - Department of the Treasury - Division of Taxation ...

 

Your resident state taxes all income but gives a credit for income taxed by another state.  Please carefully follow these directions.

You will need to prepare the states in a special order. You may need to delete both states and begin again.

 

  1. First, prepare your non-resident NY return. This creates your tax liability for the non-resident state. How do I file a nonresident state return?
  2. THEN prepare your resident state NJ return and it will generate a credit for your income already being taxed in the non-resident state.
  3. The credit will be the lower of the state tax liabilities on the same income. You may owe your resident state.

It isn't possible for the program to create a credit before it knows the liability. Your returns may be wrong if you do not prepare the states in this order.

 

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