Should I manually subtract wages earned in other states when entering W2 box 16 for NY state

[kevin_nj]

I'm a NJ resident working in NY, so when I get my W2, there are two states for BOX 15,16 and 17. The issue is that the NY state wages seem to include the wages made in other state. For instance, my total wage is 100 (BOX 1), BOX 16 for NJ is 30, while BOX 16 for NY still show 100. Should I do the calculations and put down 70 as the number on BOX 16 for NY in turbo tax (100 - 30)? Appreciate the answer!

[ErnieS0 · Accepted solution]

You can adjust the amounts on the New York line of your W-2. However the proper way to do it is on the New York allocation section,.

New York requires employers to report total earnings for the whole year in state wages and to adjust this on the return.

The New York section will ask you whether all your income was earned in NY.

1. On New York Income Allocation, say No to Were all of your wages and/or your self-employment income earned in New York State?
2. Edit Your W-2 on Your Form W-2 Summary
3. Choose Allocate by Number or Days or Allocate by Percentage on Allocate Wages to New York (percentage is usually the easier calculation)

If you adjusted the amounts on your W-2, instead say Yes to Were all of your wages and/or your self-employment income earned in New York State? because you are only reporting NY amounts.

[kevin_nj]

@ErnieS0 Thanks! I did it the proper way you suggested. Now I'm on NJ state tax, where it asks me to remove each state wage line that is a duplicate, the suggestion seems to be removing the NY one. My NJ wage is much lower than my Fed taxable income, is that normal? For instance, my Fed taxable income is 100, NY state wage matches that as 100, but my NJ has only 30. Should I be removing the NY line or the NJ line? The hint on the page seems to suggest remove NY line. 

Reading some articles online make me feel my W2 BOX 16 for NJ may not be correct, they said NJ amount is typically higher than the Fed amount (BOX 1). 

[RaifH · Accepted solution]

If you worked in NY full-time, then all the income for NY in boxes 15-17 are correct. They should match the federal amount in Box 1.

NJ is weird. They tax contributions to cafeteria plans, HSAs, retirement accounts that are not 401(k)s that fed and NY do not. That means your taxable NJ income is often higher than NY or federal. The amount your employer is reporting as NJ income may be the additional wages that are not taxable federally or by New York.

If that is the case, then you would want to report the full amount reported as NY wages on your nonresident NY return. On your NJ return, your total wages are what was reported on NY plus the additional amount for NJ due to the items that are taxable in NJ but not elsewhere. Your NJ resident income from this job will be the amount reported to NY, which matches the federal, plus the amount reported as NJ to account for the state's different tax laws. You will get a credit for the taxes paid to NY on your NJ return. 

[kevin_nj]

Thanks @RaifH , I believe the majority of the amount reported in NJ is taxable federally, so I can't add them together when prepping NJ return, otherwise the taxable income is MUCH higher than what I actually earned. I did go through my pay stubs for 2021,  looks like company switched my earnings from taxable in NY to taxable in NJ in October. So my taxable wages in NY stopped increasing after Oct, and that's when my taxable wage in NJ started to accumulate.

What I did on the remove duplicate page when prepping NJ return, is to remove the NJ line and only select the NY wages (since it's much closer to the federal taxable income). Now I'm facing issues with figuring out the additional amounts I need to report on the page that follows. Doesn't look like the number can be found on my W-2 easily. Can I do this to get the additional amounts: Taxable wages in NJ (amount on W2 Box 16 for NJ matches the amount on my  final paystub) + Taxable wages in NY (in my final pay stub) - BOX 1 

[RaifH]

For the Other Wage Adjustments - W-2 you should be able to determine if you had any forms of compensation that require a NJ adjustment from your W-2.

Dependent care benefits are reported in Box 10 and would have to be added to NJ income. Adoption benefits are reported in Box 12 with Code T. Box 12 Codes E, F, G, or H denote various non-401(k) retirement plan contributions that would have to be added to your NJ income. If you see an amount in Box 14 or on the top of your W-2 that says CAFE 125 or something like that, that would be contributions to a cafeteria plan that would need to be added. You can probably find the same information on your paystubs as well. I think by doing the NJ + NY - Federal you would only end up with the excess from October on. 

Removing the NJ wages was correct. It makes sense if you were telecommuting, or if your company taxed you like you were a telecommuter. With the ending of the pandemic, New Jersey stated that people working from NJ would be taxed by their home state beginning October 1, no matter where their employer location was. 

New York requires its employers to withhold tax for NY no matter where their employees are located with few exceptions.

[kevin_nj]

@RaifH Gotcha. For "Other Wage Adjustments - W2" in NJ return. I should include BOX 10. Do you know if I need to include BOX 12 with code of W (Employer Contributions to HSA). If yes, should I put down full amount or only the amount I contributed (my employer contributes to half of total amount)?

[RaifH]

Yes, sorry I missed that one. The entire contribution must be added to derive NJ income. Any money you spent out of it for qualified medical expenses is deductible in NJ, if your medical expenses surpass 2% of your AGI. 

If you already adjusted it due to a cafeteria plan, your employer HSA contribution may already be included in that number.