Part-Time Resident: NY state tax filing is taxing all of my income for 2021, even though I only lived there and made income for 1.5 months

Forum|Forum|4 years ago
March 3, 2022
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I am filing two state returns this year, one in NY and one in MA (I moved). I made most of my income in MA, however when I file for NY, I am being taxed on ALL of my income (NY and MA) rather than what I only made in NY, despite having two separate W2 forms for each state. I have spoken to multiple representatives and no one has been able to offer assistance on this issue. I have double, triple checked my federal and state forms and have even restarted all forms several times and this keeps occurring. Does anyone have any ideas on what could be causing the issue or who else I can contact for advice?

Best answer by BillM223

This is not a TurboTax error; it is the result of the unusual way that New York does tax for part-year and nonresidents. It only appears that New York is taxing you on all your income. See Form IT-203.

Yes, your state income is on line 31, and yes, line 32 comes from the federal amount on line 31, not the state amount.

However, down on line 45, TurboTax calculates a ratio of your state income to your federal income (see that?). This results in an allocated (to New York) tax on line 46.

In other words, NYS calculates tax based on your federal income, then reduces it by the ratio of NY income to federal income.

Make sense?

BillM223Answer

Yes, your state income is on line 31, and yes, line 32 comes from the federal amount on line 31, not the state amount.

However, down on line 45, TurboTax calculates a ratio of your state income to your federal income (see that?). This results in an allocated (to New York) tax on line 46.

In other words, NYS calculates tax based on your federal income, then reduces it by the ratio of NY income to federal income.

Make sense?

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IHateTaxes12345

If it only appears, why is my total for the state taxes absurdly high compared to my income earned in the state? Its not reflecting the real value. I only worked 2 months in NYC I shouldnt owe 10k + already paid 10K on 2 months of work.

KeshaH

Your New York tax liability might be higher than expected for a couple of key reasons.

1. If you earned income in multiple states but haven't properly divided up how much income was earned in each state, New York is calculating tax on all of your income. New York calculates tax liability based on all income and then prorates it based on how much New York source income you received. If you haven't let TurboTax know how much of your income was New York source, it will count all of your income as sourced to New York.

2. If you work for a New York based employer, New York has special rules that may allow them to tax all of your wages, even if you worked remotely from another state. This is called the "convenience of the employer rule" - basically if you're working remotely by choice rather than because your job necessitates it (for example, if your employer doesn't have a place for you work in New York), New York may still tax that income.

In the second case, if your income is taxable to New York and your state of residence, your resident state will generally allow a credit for the taxes that you pay to New York.