Why is New York taxing combined income when only 1 person worked in New York?

You will see New York prorating your taxes on the Let's Review Your New York Numbers screen at the end of your New York return. At first, it may appear as if New York taxes all your income, but you can rest assured that they don’t. New York State uses the New York Income Factor when determining your tax amount. Their state return starts with all your taxable income and taxes it at the applicable New York State rate based on your total income. Then, the state uses your New York sourced income (the amount you allocated) to determine your New York Income Factor, which is what percentage of your income was earned in NYS. Lastly, they multiply your total tax by the New York Income Factor to determine your NYS tax. You will see this towards the bottom of the screen, under the header Taxes.