figuring out double taxed income

[yikeshelp]

Hi, my spouse and I have multiple w-2s and 1099s in 5 diff states, and were part year residents in NY and MD.

MD asks for the amount that we were double taxed--how do we figure that out? It seems like New York state taxed us not just on income earned while a resident, but also on NY source income while not a resident (including when we were residents in MD)...does that mean NY source income that was received in MD is included in this double-taxed category?

Also, if that's the case, how do we figure out what the tax amount for that sum since it's not broken up into those categories on the NY return?

[JohnB5677]

This is going to require some math.

To start with.  The 3 states you did not live in should show the amount that you earned in each respective state.  Post these as the appear on the W-2.

Both MD and NY are now Part Year - Non Resident states.  If you worked in either state the full amount should be taxed in that work state.

So now everything is included in the "work states".

Now we must allocate to the "home states".  If it's not indicated on the W-2 the interview process will lead you through it.

You will allocate all of the income for all of the states between MD and NY.  If you worked all of the jobs all year you could allocate based on a percentage of day.

Included in the interview will be "did you pay taxes in other states".  You will respond yes and allocate each state based on the same percentage as the income.

[yikeshelp1]

Thanks so much for your help. (For some reason this made me re-register with another username but this is the original poster). 

This all makes sense to me except the final step...

I allocated the income into resident and nonresident income for my NY return (the interview questions prompted this) and used the percentage of non-resident income out of the total income, times my new york state taxes (ny city doesn't tax nonresident income) to fill in the "double taxed" field in my Maryland return. That made sense, and I confirmed with the cpa on "live" confirmed this was the way to go.

The thing I'm still confused about is the interview portion of the NY form that asks for taxes paid to other states--it asks how much I paid in MD taxes, so I entered the amount of maryland taxes I paid, based on the MD return I completed. But doesn't that mean that I am being credited twice, once from NY for MD, and once from MD to NY? 

I spent a good chunk of time today with a diff "live" rep who seemed to confirm that what I did was correct, but wasn't entirely sure... reading this response makes me wonder again. :( Do I need to do some sort of apportionment of the MD taxes I enter into the NY form, even though the interview question seems to only ask for the full amount of taxes paid in MD, or is it actually correct to just enter the full amount I paid in MD taxes as prompted?

[AmyC]

The MD and NY forms should add together to show your full income. Each state should only show credits for the other 3 states worked in, not NY and MD.

For example:

Lived in MD, worked in state A and state B

Lived in NY, worked in state C

MD return would show MD income, state A and state B income. MD would have a credit for state A and B income tax paid.

NY return would show NY income and state C income. NY would have credit for state tax paid to state C.

[yikeshelp1]

Hi,

Thanks for this. Unfortunately it seems a bit more complicated because it look likes New York taxes all NY *source* income as well as income earned while a resident. The NY summary under "tax tools" in turbotax lists an AGI equal to the entire federal AGI, while the MD one lists a portion--we accurately answered interview questions about the nonresident vs resident income so not sure why NY taxing the entire amount of w-2 earnings plus self-employment earnings (which are 88% from MD).

For w-2 earnings, the specific breakdown is:

(1) worked job A (NY employer) while living in new york and for 1 month after relocating to MD, NY taxes withheld

(2) got laid off and received one month unemployment from NY after relocating to MD

(3) started job B (also NY employer) while in MD, MD taxes withheld

Maybe a simpler way to ask this question is--what is the best way to determine what is "NY income" vs "Maryland income" given that we moved to MD during a NY employer job, then continued to receive income from a NY employer?  And we thought we had the self-employment income figured out and correctly apportioned, but not sure why NY is still trying to tax all of it.

[DMarkM1]

Below is an extract from the NY Department of Taxation.  Bottom line is only income for services performed in NY as a non-resident is NY income.  You should allocate only that portion of your income to NY. 

One caveat to that during this pandemic period is, if you worked at home in MD for the NY company because of necessity (COVID required the NY employer to send you home to work), then those days are NY income days as well. 

When completing your NY interview:

1. Be sure you have selected "Part-Year resident returns".  
2. Once you have get through the county and school district pages you will arrive at "Date of last move" 
3. Enter the date you left NY.
4. Select the button "On Dec 31st, you did not live in NY and did not receive NY source income while a non-resident"
5. This will lead you to the pages to allocate first your wages and then your self-employment income to NY.
6. Percentage allocation is normally the easiest. 

If you are a nonresident, your New York source income is the sum of your income, gains, losses, and deductions from:

• real or tangible personal property located in New York State, (including certain gains or losses from the sale or exchange of an interest in an entity that owns real property in New York State, see TSB-M-09(5)I, Amendment to the Definition of New York Source Income of a Nonresident Individual);
• services performed in New York State;
• a business, trade, profession, or occupation carried on in New York State;
• your distributive share of New York State partnership income or gain;
• your share of New York State estate or trust income or gain;
• New York State Lottery winnings if the total proceeds of the prize are more than $5,000 (see Publication 140-W, FAQs: New York State Lottery Winners-What Are My Tax Responsibilities for New York State?);
• any gain from the sale, transfer, or other disposition of shares of stock in a cooperative housing corporation in connection with the grant or transfer of a proprietary leasehold, when the real property comprising the units of the cooperative housing corporation is located in New York State;
• any income you received related to a business, trade, profession, or occupation previously carried on in New York State, including but not limited to covenants not to compete and termination agreements (see TSB-M-10(9)I, Income Received by a Nonresident Related to a Business, Trade, Profession, or Occupation Previously Carried on Within New York State); and
• a New York S corporation in which you are a shareholder, including:
  • any gain recognized on the receipt of payments from an installment obligation for federal income tax purposes where the S corporation has distributed an installment obligation under IRC section 453(h)(1)(A) to the shareholders;
  • any gain recognized on the deemed asset sale for federal income tax purposes where the S corporation has made an election under IRC section 338(h)(10); and
  • any income or gain recognized on the receipt of payments from an installment sale contract entered into when the S corporation was subject to tax in New York in a case where the S corporation terminates its taxable status in New York (see TSB-M-10(10)I, Amendments to the Treatment of Certain S Corporation Income by Nonresident Taxpayers).

[Dave1818]

I worked as a teacher in NY in 2020, and separately earning capital gains and 1099 income in NJ.

I allocated those other sources of income as being 0% in NYS

My NYS income (stated in TT is higher than the amount earning in NY) I am unsure why and wonder if this may an error/bug in the software (I.e. not properly capturing the fact that some of the income streams occured outside NYS).

[Cynthiad66]

You will file in both NJ and NY and you have to report the full wages on both returns. (Just make sure that the income is not being double counted on each state.) You will get a tax credit in NJ for NY taxes paid on the same income.

You will need to file as non-resident for NY (for your NJ wages from the NY based company only). (As I mentioned above, NY is one of the few states that will require you to file in NY if you work remotely but the company is based in NY.) You will also need to file a NJ resident state tax return (for all income from all sources including your NJ wages being taxed in NY). You will get a state tax credit in NJ for any NY state taxes that you paid on your nonresident NY state tax return.

You will want to work on your non-resident NY state tax return first. You will then take a tax credit from your non-resident NY taxes on your resident NJ state tax return. (Please note that you will only get a tax credit for your NY taxes up to the amount of NJ taxes that would have been paid if the income was earned in NJ). 

Some additional information about NY state income taxes:

NY taxes all the income reported when calculating NY state income taxes (whether resident, part-year resident or nonresident) but you will only be required to paid a portion of the total NY state income taxes calculated (your percentage of the total NY tax that relates to your NY source income only)

The way that the NY state income tax return works is that NY looks at all of your income from all sources and generates a total NY state income tax on all income.

When NY is determining the actual NY state income taxes that you owe, NY multiples the total NY taxes on all income by the percentage of NY source income over all source income. So if all your income is $10,000 but NY source income is $8,000, NY will calculate the NY state income tax on $10,000 then multiply this total tax by your NY source income over total income ($8,000/$10,000) to get your percentage of NY state income taxes on your NY source income. So in this instance, your NY state income tax liability would be 80% of the total amount of NY taxes generated (on all income). That is why all your income is being reported on your NY state tax return.

You can preview your NY Tax summary to see what portion of the total taxes for NY you are actually paying

To preview NY Tax Summary:

• TurboTax Online sign-in, click Here
• Under Tax Timeline, click on Continue your return
• Go to "My Account" > "Tools"
• Under the Tools Center, select "view tax summary"
• Select "NY Tax Summary"

Just follow the TurboTax guide when working on your states (remembering to do your non-resident state return first) and TurboTax will do all the calculations and credits to your resident states return

Per @

DS30

[Jimmy53]

We lived in State A. My spouse had a w-2 income from state B and that amount is only income as earned from State B. However, the final review file of tax return show the taxable income for state B is more than actual w-2 income frim State B. How to resolve this? Thanks for help.

[DanielV01]

It depends.  However, if I was to guess, then state B is likely NJ, PA or MA.  All three of these states will double-up income that is also reported to another state (usually NY), but there is a way to remove the income.  The Massachusetts interview asks a specific question regarding this income and is easily removed.

If state B is NJ, you will see a screen in the NJ return entitled About these wages.  You will need to make sure the box is checked to exclude State A's income being reported from the NJ return.

If State B is PA, you will see a screen in the PA interview entitled Confirm these wages.  This will also have a checkbox that toggles to make the State A-reported income not taxable/taxable in PA.  Make sure State A is marked as Not Taxable in PA.

If State B is another state, please comments so we can further assist you (and commenting State A might also be helpful).

[martingale22]

I have a simpler and similiar situation with yours.

I worked remotely in MD for a NY company. 

in turbotax, seems i have to pay both NY and MD state tax,  is this right?

my impression is that I just need to pay the higher of the two state with NY tax credited back to MD state tax.

but somehow turbotax didn't allocate the tax withheld to NY.

and how can I get live rep support from turbotax?

[DMarkM1]

Yes it is possible you may owe both states.  Each state has their own tax brackets/rates/taxable income/deductions/credits, etc.  For NY as your non-resident state You will only pay NY taxes on whatever income is taxable by NY.  If the NY withholding and NY credits was not enough to cover the NY taxes then you will owe there.  

When you enter your form W2 that has NY income and withholding showing in boxes 15-17 then the withheld amount is credited on your NY return. In the NY interview you have the opportunity to allocate only the income that belongs to NY to NY.  Be sure to zero "0" any income sources that are not NY sources. Complete your NY non-resident interview first and take note of the income taxed and the tax liability in NY.  TurboTax will transfer that information to your resident MD return to claim a credit there; it is not always dollar for dollar.  

Generally the same will be true with MD, with one difference.  MD is your resident state and your resident state taxes income no matter where it is earned; there is no allocation.  There is however an opportunity to claim a credit for taxes paid to another state (NY) on your resident return.  In the MD interview, in the credits section you will have the opportunity to claim that credit. 

Again if your MD withholding and MD credits are not enough to cover your tax liability for your MD taxable income you will owe.

For live tax advice click the box "Live Tax Advice" in the upper right hand of your online TurboTax screen and follow the prompts.

@martingale22      

[rspeidel01]

Hi, 

So my fiancee's legal residence was in DE for the first part of 2024 and during that time she earned money from two jobs, one in DE and one in MA. Then she became a resident of MA and got a different job in MA. I'm working on her taxes right now and am little confused how to do the double taxed AGI credits for DE and MA. Here are some example numbers for each of the jobs: remote DE job - 2200, MA job while a legal resident of DE - 5000, MA job while a legal resident of MA - 32000.

Should I include the 2200 on the DE state return when it asks, "How much did you earn when you were a resident of DE?" I'm assuming yes. 

How do I figure out the double taxed AGI? 

[KeshaH]

You would enter all of the income she earned while she was a resident of DE, including the income earned from the MA employer.

On her MA return, only allocate the income that she earned while a MA resident. The income she earned from the MA employer while she lived in DE wouldn't be taxable to MA. 

@rspeidel01