This is the reverse of some recent questions. I was transferred to a NJ office supposedly on a temporary basis. It was recently made permanent. Because of the temporary nature, they never changed my withholding and still haven't contacted me about doing so. So, right now, I only have NYS withholding being done. Is that the best? Scenario?

Will I have to file returns for both states?

You WILL have to file in both NJ and NY.

But, as noted on the other posting, the states give credit for taxes paid to the other state.

You will probably have to pay something to NY state, since their tax rate is higher.

As for NJ, start the withholding immediately, as NJ will NOT give you a credit for NY state income taxes paid as a NY state resident.

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Originally Posted by AtlantaTaxExpert

You WILL have to file in both NJ and NY.

But, as noted on the other posting, the states give credit for taxes paid to the other state.

You will probably have to pay something to NY state, since their tax rate is higher.

As for NJ, start the withholding immediately, as NJ will NOT give you a credit for NY state income taxes paid as a NY state resident.

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So I should only have NJ withholding, not NY withholding?

No, I did not say that.

You WORK in NJ, so you will have to pay taxes to NJ FIRST!

Since NY has a HIGHER tax rate, the credit for the NJ taxes paid will noy completely offset your NY state income tax, so you need SOME taxes withheld to cover the NY state tax liability.

Gotcha. So how do I set my NY withholding so I'm not lending the governments losts of money?

Scott<>

Do a strawman NY tax return for 2007 to determine what you will owe, then subtract your NJ tax liability. The difference is what needs to be withheld.