Question

fulltime remote work for NY - shouldn't be paying state tax, but turbotax....

Forum|Forum|3 years ago
March 30, 2023
2 replies
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Hello - I started working remotely for a NY institution last year. Never once stepped foot in NYS (live in Tennessee) and it's at the convenience of my employer. Yet when I fill out a non-resident return, I'm taxed on my income from the NY source.

That seems incorrect according to 132.18(a) and numerous discussions that I've read here. How do I get Turbotax to respond to my situation correctly? (Have ticked off every non-resident box in IT203, but maybe there is something more).

@kristinelbly

A

AminyAuthor

from sources listed by @TomD8

“A nonresident who works in another State but who performs no work in New York is not subject to New York State tax liability no matter for whose convenience or necessity he performs the work.”

Hayes v. State Tax Comm, 61 A.D.2d 62, 64 (N.Y. App. Div. 1978)

Hayes v. State Tax Comm, 61 A.D.2d 62 | Casetext Search + Citator

And the definition of NY-source income of a non-resident from NY Tax Bulletin IT-615 refers only to income from work carried out in New York.

https://www.tax.ny.gov/pubs_and_bulls/tg_bulletins/pit/ny_source_income_nonresident.htm

These cases and NY publications appear to indicate I do not have "NY-source income", because that term only applies to work done in NYS, where I have never been.

E

ErnieS0

A fully remote employee who never spends a day in New York does not have NY source income. To be subject to NY tax, you have to have worked “within” and “without” of New York.

See: New York’s Convenience Rule: Under the COVID Microscope

See That said, New York is very aggressive about taxing remote employees and there have been cases where the facts appear to favor the taxpayer, but they have lost.

You can file a nonresident NY return and get back all your withholding. Change your NY wages to $0.

On New York Income Allocation, say No to Were all of your wages and/or your self-employment income earned in New York State?
Edit Your W-2 on Your Form W-2 Summary
Choose Allocate by Percentage on Allocate Wages to New York and enter 0%.

If your employer agrees that you are working remotely for their convenience, speak to them about stopping NY withholding and classifying you are a Tennessee employee.

You will probably have to file Form IT-2104-E Certificate of Exemption from Withholding.

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A

AminyAuthor

Appreciate your guidance, @ErnieS0.

My employer stopped withholding NY tax, after the first month, when I clarified my situation.

IT-2014-E says one of the criteria to use it is that I'm: "under age 18, or over age 65, or a full‑time student under age 25; and..." As I'm not very young or retired, it seems I cannot use that form.

A

AminyAuthor

@kristinelbly

I'm paper filing NY taxes (got an extension). Was never once in NY (100% remote).

Is there some magic phrase I need to include on a cover letter? Will a single sentence saying, "I'm 100% in TN", suffice? My employer filed a corrected W2 that says have have $0 state wages.

Or do I not need to say anything?

T

TomD8

Employee

@Aminy --

If you have a W-2c that shows zero NY wages in the corrected Box 16, then you shouldn't have a problem. I wouldn't attach any note or letter. If NY raises a question later, you can explain at that time.

**Answers are correct to the best of my ability but do not constitute tax or legal advice.

K

kristinelbly

@Aminy

It sounds like your employer withheld, given the paper filing requirement.

Complete an IT-203-B, list all the workdays as days worked outside of the State. Enter 0 on days worked from home (on the basis you are not subject to the convenience rule under 132.18(a) to require an inclusion of days on this line).

You can include a statement with your tax return that says:

I am not subject to tax under New York State Sec. 132.18(a). Which states, in pertinent part, “If a nonresident employee . . . performs services for his employer both within and without New York State, his income derived from New York State sources includes that proportion of his total compensation for services rendered as an employee which the total number of working days employed within New York State bears to the total number of working days employed both within and without New York State.”

I did not perform services both within and without New York State during the tax year, as I worked 100% remotely from my residence outside of the State. Therefore, I am not subject to the convenience of the employer rule. This point is supported in case law, Matter of Arthur Hull Hayes, where the court stated "only if, and to the extent that, his services were rendered within this State. Compensation for personal services rendered by a nonresident individual wholly without the State is not included in his New York adjusted gross income, regardless of the fact that payment may be made from a point within the State".

You may get a desk audit notice asking you to obtain a letter from your employer, confirming you did not work any days in New York State. It sounds like your employer will be cooperative (given the W-2 adjustment) in providing that. After the submission of the letter, they should issue the refund (as experience has shown me). Just remember to respond timely.

Kristine L. Bly, EA Private Client Services / Residency / Tax ControversyPartner, Cohen & Company