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Discussion:Wages from 2 States on W2

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Discussion Forum Index --> Basic Tax Questions --> Wages from 2 States on W2


Discussion Forum Index --> Tax Questions --> Wages from 2 States on W2

Rbcpa4174 (talk|edits) said:

11 March 2011
Ok not sure if this is correct but one of my clients a full time resident of New Jersey.

He earned wages from the same company in both NY and NJ. He received the following two W2's:

  1. Federal Wages of $45,000 SS Med etc.. and NJ Wages of 45,000 with NJ state wittholdings.
  2. Blank boxes except for NY wages of 45,000 and NY withholdings.

Im confused because wouldn't they allocate the NY wages and NJ wages seperatly on the W2's. For example 10,000 NY and 35,000 NJ.

However the company did inform him of the exact wages that he earned for NY but this number is not reflected on teh W2.

What should I do??

KatieJ (talk|edits) said:

11 March 2011
This would be correct if he was a full year resident of NJ and worked all the time in New York. Also, it's correct under New York regulations if the part of the work he performed in NJ was done at his home rather than at a location of the employer (or a client of the employer) in New Jersey.

You would never reduce the NJ wages for the wages earned in NY. A resident is taxed on all income regardless of source.

If he performed some of his services in NJ at a location of the employer, or at some other location in NJ where his duties were required as a matter of necessity, then the NY W-2 should reflect only the portion of his wages that was actually earned by working in NY. I would have him request a corrected NY W-2 from the employer. If the employer is unwilling to do that, you would report the amount shown on the W-2 and subtract the portioned earned in NJ.

Fortunately NJ allows credit for all taxes paid to another state on income taxed by that state, without regard to its own sourcing rules. So even if 100% of his compensation is properly taxed by both NY and NJ, there won't be double taxation.

Nightsnorkeler (talk|edits) said:

11 March 2011
Doesn't NY have a form on which to allocate wages earned in NY, 203-B?

Death&Taxes (talk|edits) said:

11 March 2011
I believe what is happening here is that the employer is leaving up to the employee to allocate his wages to NY on the form NS mentions. As much as I would like to see Katie's ideal solution, many employers just don't want to spend the time, or take the responsibility.

Doug M (talk|edits) said:

11 March 2011
D&T is right. This is an NY issue. Had this with a return last year. You allocate. I know it sounds crazy, was hoping a NY tax professional would chime in.

My understanding is that the W-2 is correct as it stands (I lost a client over this, told client to go back to ER and ask them to correct the W-2. EE came back to me and said the W-2 is correct, I said "can't be".) You allocate is what D&T is saying, and I agree.

Trailman423 (talk|edits) said:

11 March 2011
Nightsnorkeler: You are correct in that the wages could be allocated on the NY IT-203-B, specifically Schedule A of that form. You may also allocate them using other methods, but must attach a schedule showing how you calculated this amount. I believe most software packages will produce such a schedule for you; otherwise, simply attach your own. NY does warn, however, in its instructions for the IT-203, that failure to attach the IT-203-B will delay the processing of your return and could result in penalties and interest being charged (presumably (IMO) if they don't agree with your computation).

KatieJ: You've been a wealth of information in regard to state issues here on TA, and I am among many who sincerely appreciate your contributions. I do, however, need to disagree with you on this thread in one regard: In this instance the wages reported in the state wage box of the W-2 are correctly reported, regardless of the fact that they don't truly reflect the amount that the TP earned while working in NY. According to NY TSB-M-02(3)I, which can be found here: http://www.tax.ny.gov/pdf/memos/income/m02_3i.pdf , the amount to be reported in the state wage box of the W-2 must match the amount reported in box 1 federal wages.

Now I am not saying that this makes much sense to me to report it this way, and no it does not reflect the actual amount earned while working in NY, but it is proper reporting on the W-2 according to NY.

D & T: Based on the above, the employer followed their responsibilities as per NY instructions. They also took the extra time and effort (which they should) to give the employee the exact amount of wages that should be reported as subject to NYS tax on their return.

Rbcpa4174: You will need to know some specific work day information to properly complete the NY IT-203-B, including nonworking days such as Saturdays and Sundays, holidays, sick leave, vacation, and other nonworking days not considered in the above categories. The computation this form will make may or may not coincide with the amount of wages that the employer has indicated to the employee that is subject to NYS tax. If it does not match, you may wish to do your own computation and attach a schedule showing such.

Some other notes: According to the IT-203 instructions, if the income does not depend directly on the volume of the business transacted (for example, hourly wages), the schedule A of the IT-203 MUST be used to compute the amount taxable to NY. I do not agree that this computation would be correct if you consider such things as a raise occurring sometime in the year and a larger amount of non-NY income occurring after such raise as occurred prior to such wage increase. You may do separate schedule A's for different jobs, but it is not clear that you can use separate schedule A's for separate pay rates at the same job. Overtime at a non-NY location as opposed to little or none at the NY location will also cause this computation to be incorrect. What I think it amounts to is do you want to fight NY if one (or some other) of these examples applies to you, or do you just want to give NY a little extra because its not worth the time and expense to fight the issue. As for myself, I'd prefer to only give them what they deserve, but admittedly it is often not cost effective.

I've been in NY (near the border with NJ and PA) for all of my 14 years as a preparer so yes I have dealt with many of these issues and yes it can still sometimes give me a headache working through them.

KatieJ (talk|edits) said:

13 March 2011
Thanks, Trailman. I certainly concede to your knowledge of NY, which is much more detailed than mine!

Illini (talk|edits) said:

13 March 2011
Good discussion - I ran into this last year. I allocated using the software, but did not use the NY form you recommended. Basically received a notice from NY asking for allocation "proof" and the matter was settled using the phone and the fax. I have the same W-2 this year too, so I will be sure to allocate using the NY form. Thanks for the insights! (I think NY makes it way more difficult than it needs to be. Most states show the actual wages earned in that state on the W-2 so it is very clear what actually happened.)

Trailman423 (talk|edits) said:

14 March 2011
KatieJ: I wouldn't go quite that far. You've managed to teach me a thing or two about my own state of NY in some of your prior posts.

Incidentally, the employer also reports the full amount of Federal wages in it's 4th quarter NY wage report (NYS-45). Thus, the employer never reports to NY the amount that is taxable to the state. It is all left to the employee to allocate. The employer does make a calculation as to what wages are subject to withholding and withholds accordingly, but this calculation is not reported to NY; only the withholding amount is reported.

Village69 (talk|edits) said:

14 March 2011
Just make sure that when you prepare state of NJ 1040 that the wages are not double. If that becomes the case, you will need manually change the allocation.

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