NY Part-Year Resident form and bonuses (IT-203)

[ObjectiveOriginal]

Hi,

We left NYC August 31 2023, also part of the year I worked in CT office as a non resident. My employer withheld some tax for CT. Could you please help me how to calculate income that I need to enter as NY wages.

Timeline:

Jan-Aug 2023 - lived and worked in NYC, periodically visited CT office;

March 2023 - received bonus for work done in 2022;

Aug 2023 - last month of NY residency (moved to another state);

Dec 2023 - received part of the 2023 bonus (employer withheld NY tax);

How to calculate NY wages?

What portion of Dec 2023 bonus payment should be included in NY wages?

Since I worked in CT I will fill their form and as I understand I can deduct tax paid to CT from NY tax. What portion? All CT non resident tax or part of it proportionally days I was NY resident?

Thank you!

[DMarkM1]

All of the wages and most of the bonuses you have mentioned appear to have a NY nexus and therefore are NY sourced and NY taxable (see breakdown below). 

You would be able to claim a credit on your NY taxes to mitigate the double taxation on the CT nonresident income for days actually worked in CT.  You should work the CT nonresident return before the NY return.  Allocate to CT by using days worked in CT divided by total working days for the employer.  Take note of the income taxed and the CT tax liability as those will be used to calculate the NY credit for taxes paid to another state. 

Note: If another state taxed the bonus received in Mar for working in that state in 2022, work that nonresident state return before NY as well.  You will include that income taxed and tax liability in the calculation for the credit for taxes paid to another state.  

Jan - 31 Aug - Lived and worked in NY (NY resident all wages no matter where earned) Credit for taxes paid to CT for CT days

Mar               - Bonus received (Resident NY)   

Dec               -  Only the part of bonus derived from the working days in NY divided by total working days for the employer (nonresident NY sourced)        

[ObjectiveOriginal]

Thanks a lot for your response!!! I didn't quite understand about the "Jan - 31 Aug - Lived and worked in NY". Did you mean all 2023 monthly wages or only in those first 8 months?

I have one more question regarding 401k. I made all 2023 planned contributions while I was NY resident because someone told me that if I'm planning to move to a state with less tax - it's better to do all pre-tax contributions while I'm in a higher tax state. Is it correct? If yes - how to allocate wages in this case? Thank you!

[DMarkM1]

Yes.  In the break out of the income, the "Jan - 31 Aug - Lived and worked in NY" period means all the income received during those 8 months are NY taxable.   

On the 401K question.  That is all handled on your W2s.  Boxes 1 and 16 are already reduced by the pre-tax contributions. Once you have figured the proportion of time working in a state, you will multiply the taxable wage amount from your W2 (already reduced for pre-tax contributions) by the proportion to arrive at the portion that belongs in that state.    

Yes, it's better to do all pre-tax contributions while you're in a higher tax state.  That means you will save money on future taxes.   

Here's an example to illustrate. You earned $1000 income in NY that would have been taxed at 6% ($60 tax) but instead you contribute to your 401K so it is not taxed ($60 in your virtual pocket).  If you had earned that same $1000 in VA at 5% tax rate, that would have been a ($50 tax); $50 in your virtual pocket.   

Now in retirement you live back in a state with a 6% tax so the 1000 distribution will be taxed $60 and if the contribution was in NY you'd have $60 in your pocket to pay it.  However, if the contribution was in VA you'd only have $50 in your pocket to pay it.  

@ObjectiveOriginal