Question

Work in office in NY and at Home in NJ... do I need to allocate wages for both states?

Forum|Forum|6 years ago
February 4, 2020
1 reply
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My wife and I live in NJ. I work in NY and 100% of my income is earned in NY.

My wife works 3 days/week in NY at her company's office and informally works from home in NJ the other 2 days/week. By informally I mean her boss allows her to work from home 2 days/week but her company is only withholding state taxes for NY and her clients are in NY.

Does she need to allocate her wages 60/40 between NY & NJ? If we allocate wages between the two states, does that flag us with NY state for potential underpayment? Does NJ get pissed that we under-withheld for the state? I'm a bit confused and want to make sure we're doing everything by the book/avoiding audit risk.

KathrynG3

No. The line by line instructions of the NJ-1040 state that Line 15 for Wages includes all wages earned inside and outside of New Jersey.

Regarding income taxed by another jurisdiction, you are entitled to a credit for all taxes withheld from the other jurisdiction. Since only New York state taxes are being withheld, then you both can correctly subtract all the taxes paid in New York.

Please see New Jersey 1040 Resident Return Instructions, page 32 which states:

Income From New York. When claiming a credit for taxes paid to New York, the amount on line 1 must reflect the “New York State Amount” actually taxed by New York from the New York IT-203. Certain adjustments may be necessary to determine the income actually taxed by New York. If you are subject to the New York tax on lump-sum distributions, complete separate Schedule NJ-COJs for the ordinary income and the lump-sum distribution.