Remote worker in TN but Employer in NY

[tbrown4182]

I work remotely in TN for a company that is based in NY. I did not have any NY taxes withheld on my paychecks. I'm not sure how to handle this. Do I file a nonresident return with NY? I've seen information about the convenience of employer rule, etc., but I am still confused. I did not work a single day in the state of NY. All of my work was completed in TN. I do not have a state income tax in TN.  Do I owe NY state taxes?

[Vanessa A]

 NY has a Convenience of the Employer Rule.  Basically, this rule says if you are working remotely for your convenience then you are considered to be working in NY.  If you are working remotely for your employers convenience, then you would not be considered to have income from NY sources.  

If your employer requires you to have a home office or they do not have an office or workspace for you, then you would be working in TN for the convenience of your employer and you would NOT be subject If you never worked in NY at all, then you would be working in TN for the convenience of the employer. If any of these situations apply to you, then you would NOT have to file a NY nonresident return.  

If on the other hand, you lived in NY and your employer kindly allowed you to move to TN and work from  home or you worked temporarily in the NY office, this would be for your convenience and you would have to file a nonresident return.  If you do NOT meet the criteria to be considered working remotely for the convenience of the employer, then ALL of your income from this job while working remotely would be taxable to NY.  Then you would need to file a NY Non-Resident return. 

(Edited 2/27/24 @ 9:36AM PST) @tbrown4182

[tbrown4182]

Thank you for the information! When you say file the NY return first do you mean a nonresident return? And am I supposed to file it before my federal return?

[Vanessa A]

Your federal return is always done first. Since you are in TN, without a state income tax, there would not be a first for states.  Normally, if you live in a state that has an income tax and work in another you file the nonresident state and then the resident state.  Since you live in TN, the NY return would not be relevant.

So since you live in a state without income tax, you would just file the NY nonresident return IF you do not meet the Convenience of the Employer Rule. Otherwise, you will only file your federal return. 

[Opus 17]

It is very important to understand the details of the convenience of the employer rule.

If you never worked or lived in NY state for even one day in 2023, the convenience of the employer rule does not apply to you.  None of your income is NY income and you do not need to file a New York tax return.

(See for example the Hayes (1978) court case or 20 CRR-NY 132.4)

However, if you worked one or more days in New York (while living there or visiting; maybe you have a required monthly meeting in person, or you had 3 days of training and orientation, etc.) then all your income from the New York employer is subject to the convenience of the employer rule, and you must then proceed to evaluate whether that rule applies to you (considering the circumstances of your employment). 

[TomD8]

To add a bit to @Vanessa A  and @Opus 17's answers:

New Tork tax law states that if you never physically worked within New York State, not even for a single day, then you owe no income tax to New York.  Here is the relevant New York Statute:

"Compensation for personal services rendered by a nonresident individual wholly without New York State is not included in his New York adjusted gross income, regardless of the fact that payment may be made from a point within New York State or that the employer is a resident individual, partnership or corporation. "

https://www.law.cornell.edu/regulations/new-york/20-NYCRR-132.4#:~:text=Compensation%20for%20persona....

[Opus 17]

---

@tbrown4182 wrote:

Thank you for the information! When you say file the NY return first do you mean a nonresident return? And am I supposed to file it before my federal return?

---

For the sake of future readers:

When using turbotax, you prepare your federal return first.  If you have one or more state returns, you open those returns after completing the federal return, and your federal income and deductions will flow to the state returns, then you can make state-specific adjustments.  In the case of a person who owes income tax as a state resident, and as a non-resident to a different state, work on the non-resident return first.  You have to manually tell Turbotax how much of your income applies to the non-resident state, and the non-resident state will assess its tax.  Then the resident state will tax all your world-wide income, and apply a credit for taxes paid to another state.

Here, because the taxpayer has stated they never worked inside of NY, they aren't required to file a NY non-resident return.