NY nonresident income tax for full-time telework position

[dcwatsonjr]

Good afternoon,

My sister-in-law moved to FL in September 2021. After she moved, she changed jobs. Her new job is 100% telework from home with a company headquartered in New York. She does not have a physical office space in NY. Her company also did not ask her to withhold NY income tax when she started. Does she owe NY state income tax as a nonresident?

Thanks,

Don W.

[Opus 17]

That depends on whether she is working remotely for her own convenience or for the convenience of the company.  Does the company have office space for her?  Or do they have a policy of asking everyone to work remotely?

This is the NYS tax memo that sets out the requirements and expectations.

https://www.tax.ny.gov/pdf/memos/income/m06_5i.pdf

[DianeW777]

It depends. It appears you meet the NY convenience of the employer rule.  

New York State nonresidents and part-year residents - Remote workers

Note: Under this rule, days worked at home are considered New York work days only if the
employee’s assigned or primary work location is at an established office or other bona fide place
of business of the employer (hereinafter, a bona fide employer office) in New York State. If the
employee’s assigned or primary work location is at an established office or other bona fide place
of business of the employer outside New York State, then any normal work day worked at home
would be treated as a day worked outside New York State.

Since your employer does not require you to work at their location, your work seems to be for their convenience. In this case you would not be required to file a NY return.

You must file Form IT‑203 if you meet any of the following conditions:

• • You have income from a New York source (see source below)

Nonresidents – New York source income

For nonresidents New York source income is the sum (with adjustments for special accruals as defined on page 48) of income, gain, loss, and deduction from:

• services performed in New York State or for a company situated in NY; (For other items on the list click this link for NY NR Instructions see page 5)

@dcwatsonjr 

[Edited: 04/07/2022 | 5:33a PST]

[dcwatsonjr]

Her company got rid of their shared office space in NY after the pandemic started. They no longer provide office space for their employees. All employees work 100% from home. However, her W2 still lists a NY address for her employer.

[Opus 17 · Accepted solution]

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@dcwatsonjr wrote:

Her company got rid of their shared office space in NY after the pandemic started. They no longer provide office space for their employees. All employees work 100% from home. However, her W2 still lists a NY address for her employer.

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I am not your SIL's paid tax professional and I will not represent her at audit.  However, it seems likely that if the company has closed their offices, then she is working remotely for the convenience of the employer and her income is not taxable to NY.  Review the memo to make sure. 

[rjs]

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@dcwatsonjr wrote:

her W2 still lists a NY address for her employer.

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The employer's address doesn't matter. It doesn't mean that that's where the employee works. Lot's of companies have employees that work somewhere other than the company headquarters. If there's no state information in boxes 15, 16, and 17 of the W-2, then the employer is not reporting the income as New York income. That's additional support for Opus 17's conclusion that the income is not taxable by New York.

[dcwatsonjr]

Thanks! Those field are blank on her W2, so her employer didn't report it as NY income.

[Opus 17]

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@rjs wrote:

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@dcwatsonjr wrote:

her W2 still lists a NY address for her employer.

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The employer's address doesn't matter. It doesn't mean that that's where the employee works. Lot's of companies have employees that work somewhere other than the company headquarters. If there's no state information in boxes 15, 16, and 17 of the W-2, then the employer is not reporting the income as New York income. That's additional support for Opus 17's conclusion that the income is not taxable by New York.

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Yes, but the withholding by itself is not definitive.  New York is one of 6 or 7 states that will tax income earned for working for a NY-based company even if the employee both lives and works out of state.  When the employee lives and works out of state for an NY company, you use the convenience of the employer test to determine if NY income tax is owed.  If tax is owed per the test, lack of withholding does not negate the tax requirement.

Incidentally, if your SIL does work inside NY for even a few days (such as she travels to NY one day a month for an in-person conference, or has 2 weeks of training in NY) that portion of her income will be considered NY state income even she generally passes the convenience test, because that portion was earned while actually living or working in NY, even if it is temporary. 

[rjs]

What I'm saying is that the fact that the employer does not withhold NY tax indicates that they recognize that it's for the convenience of the employer. Otherwise they would be required to withhold NY tax.

[Opus 17]

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@rjs wrote:

What I'm saying is that the fact that the employer does not withhold NY tax indicates that they recognize that it's for the convenience of the employer. Otherwise they would be required to withhold NY tax.

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OK, I get your argument, but I still suggest the employee make their own determination.  If NY comes to them with a tax assessment, lack of withholding will not, by itself, be proof that the work was done remotely for the employer's convenience.