I worked in NJ and NY this year. I am a NJ resident. I am using turbo tax. When I do each state filing, do I only enter the W2s that were sent by that state into the respective return or do I need to keep them add them together? Any insight is appreciated.

Dave

Dave:

That can be tricky, as New Jersey uses a slightly different method of determining what your gross wage is when compared to the IRS method (the NJ method produces a higher gross wage). Recognizing this, the NJ tax officials allows you to adjust the wage on the NJ state tax forms themselves. I have not used TurboTax for years, so I cannot say how the NJ state version of TurboTax addresses this issue.

Now, since you are a NJ resident, New Jersey expects you to report all of your income, regardless of where you earned it. New York, on the other hand, will tax you only on income you earned while physically present in NY state. TurboTax should refer you to the Non-Resident version of the NY Tax Form, on which your federal income and your NY-only income will be separated and the NY state income tax should be calculated only on the income which originates from NY state.

The good news is that, if you are paying both NY and NJ income taxes on the same income, NJ allows a dollar-for-dollar credit on the NY taxes paid.

Contact me if you have other questions.

Atlanta Tax Expert

Hello

I live in NJ and work in NYC.
Since my employer is based in NYC, they withheld (NY State) Taxes around 5% and local Taxes(NYC) around 3%.

So when I fill Form NJ-1040, I find that I owe the whole year taxes to NJ (around 2+%). Is that the case it should be?

Also since I am NY non-resident, I believe I have to fill Form IT-203, where I should get back all the NYC Local Taxes and most of the NY State Taxes that were paid to NY State. Am I correct?

Going by above, when I fill in the form I find that I get back all the Local Taxes paid to NYC, but only a fraction of the Tax paid to NY State.
Additionally on the NJ-1040 form, I find that I owe NJ State Tax for entire year.

I used to think I would get back most of the NY State from NY & then pay it to NJ. I do find that in Form IT-203, I get back all the local NYC Taxes paid.

What all do I need to fill in to file the State Tax Returns correctly?

Also what is the dollar-to-dollar credit that NJ offers for Taxes to other jurisdiction that you just mentioned?

Please help me clear the picture.

Thanks

hifriend27:

Since you are a New Jersey (NJ) resident, NJ expects you to pay taxes on all of your income, regardless of where you earn it. However, New York (NY) also expects you to pay all of their taxes for the income you earn in NY.

As noted, NJ gives you a dollar-for-dollar credit for the NY/NYC taxes you are paying. You claim this credit on NJ Schedule A. Since it is likely the NY state tax is higher than the NJ state tax, that will cause you to get all of your NJ state tax withheld back as a refund.

Are you doing this manually (NOT a good idea) or are you using tax software (better plan, though the GIGO [Garbage In, Garbage Out] rule applies)? However, since you have two different state returns along with your federal return to file, you may find that using software like TaxCut or TurboTax may cost you about $90 just to buy the software.

I'll do your return (federal and both states) for that software cost. For an additional $15, I will Efile your federal return (sorry, I cannot efile the state returns as both NY and NJ require registration in order to efile with them; the registration costs are prohibitive).

Your return will be done quickly and correctly. I have a NJ couple who work in NYC whom I can ask to e-mail you as a reference. BTW, I have never met them in person! They, like you, asked questions on an advice board just like this one and eventually became my clients.

Give it some thought and let me know!

Atlanta Tax Expert

Hello!

Thanks a lot for your prompt reply.
I was in fact looking for some professional to help me out & am definitely interested in going ahead with you.

Could you help me understand the following:

1>. NJ State Resident Taxes - Form NJ-1040:
So that would mean that the NJ State Taxes I am supposed to pay would get nullified by the credit for Taxes to other jurisdiction.
e.g. If I am supposed to pay 2000, I would get credit of almost 1900-2100
as per the percentage, effectively I would either get a refund of 2000-1900 = 100$(OVERPAYMENT) or have to pay 2000-2100 = 100$(OWE).

or WOULD I get anything more than that?

2>. NY State NonResident Taxes - Form IT-203:
Since I have paid NY State Tax(5%) as well as NYC Local Taxes(3%)
as per Tax withheld by my employer, How much should I be effectively be paying Tax to NY State?
I believe since I stay in NJ, I should be paying only State Taxes in the range of NJ State Tax which is around 2%, so I get back the (5% + 3% ) - 2% for NJ = 6% (OVERPAYMENT) back from NY State Tax.

However I find that I do get back the 3% NYC Local Taxes, but only a fraction of the NY State Tax(5%) that was paid get back on the refund.

How much should does one owe to NY State as a non-resident?

3>. Is there any other Form that I would need to fill in for the NYC Local Taxes paid? If above is incorrect as per getting Local Taxes back, what is the correct way.


4>. Also can you suggest other ways to maximize refunds & save Tax that
I maybe applicable.

Thanks for the service you would provide.

Thanks

hifriend27:

1) More than likely you will get all of your NJ withholdings back as a refund.

2) Your percentage of taxes paid is based on the NY and NYC tax tables. You are taxed as if you were a NY state resident. In fact, until sometime in the mid-1990s, NYC non-residents were taxed at a higher rate (the federal courts put a stop to that practice, which is why your calculations show you getting most, if not all, of your NYC taxes back). Is it fair? Probably not, but never assume taxes are fair, just legal.

3) On my tax software, the NYC taxes are imbedded in the NY state tax Form IT-203. Like you, my non-resident clients have not owed NYC taxes for several years, so they have no money withheld from their checks and there is no entry to claim a refund. If your situation is similar, I recommend you do the same so you will not have to deal with it next year.

4) If you will continue to work in NYC and live in NJ and, assuming your NY state taxes will always be higher than your NJ state tax liability, then stop having NJ state income taxes withheld from your check. Withholding taxes for NJ which are returned in toto the following year is lending NJ your money for a year interest-free!

If you would like for me to do your taxes, contact me via e-mail at [email protected] with a phone number and I will call to discuss details.

Atlanta Tax Expert

I lived and worked in NY state (not NYC) for 3/4 of 2004. I moved to NJ in Sept. and got a job in NYC. I have not changed my legal address from NY state to NJ state yet but I gave the new job in NYC my NJ address for my taxes. I'm going to pay my NY state taxes for my previous job in NY state but I'm confused about what taxes I have to pay for the NYC job while living in NJ (while although not techically a resident yet). My legal residence is still in NY state. I checked my pay statements for this new job and ONLY NY state taxes are being withheld.

Can you help? Thank you.

NY/NJconfused:

Assume you are not Hifriend27.

Your legal residence is New Jersey. It changed when you moved permanently to New Jersey (bought a house, signed a lease for an apartment, moved in with a roommate, whatever).

That means you have to file a NJ tax return. However, since you work in NY state, you also have to pay NY state income taxes. Since NJ gives you a dollar-for-dollar credit for taxes paid to NY state and since the NY state tax rate is higher than NJ, you will owe no taxes to NJ.

In fact, due to a credit given to renters and homeowners in NJ (you may or may not qualify as a part-year resident), you may be entitled to a small refund even though no taxes were withheld.

BOTTOM LINE: File both NY and NJ state income tax returns.

> Since NJ gives you a dollar-for-dollar credit for taxes paid to NY state and since the NY state tax rate is higher than NJ, you will owe no taxes to NJ.

I beg to differ... :rolleyes:

The way NJ does this is to figure out the amount that is taxed by NY, and calculate the percentage of this amount w.r.t. your total NJ taxable income, then take out that percentage of your NJ tax as your "credit". So it is definitely not dollar-for-dollar -- since NY tax rate is generally higher you get less than a dollar for a dollar.

Since NY can only tax your NY based income (although the rate base is your entire income!) and things like interest income etc. are considered non NY if you live in NJ, the percentage is rarely 100%, so you'll still need to pay NJ tax, even if your NY tax will be more than your total NJ tax.

For example, suppose you made 80K from a NYC job and had 20K interest/dividends, and 20K other income that is not taxable in NY but in NJ. For simplicity ignore the various deductions etc. NY will calculate your tax based on 100K, which is 6K, then reduce it to 80% (80k/100k), to 4.8K. NJ will calculate your tax base don 120K, which is 4.8k, then figure that you have 67% (80k/120k) income taxed by NY, so you get 4.8K*67%=3.2K credit, i.e. you only pay NJ 1.6K. So you are paying 4.8K+1.6K = 6K total and you need to pay both states.

In a nutshell, you pay the full amount of NJ tax plus the diff between NJ and NY rate (both calculated based on your total income!) on your NY income.

And talking about property tax reduction -- the worksheet for that is the same as that for NY tax credit, and it won't go below zero. (Of course if your income is very low then the other credits may kick in. But that's a different story.)

Please correct me if I am wrong...

Snehne:

I will not argue the math, since the three NJ clients that I service earn all of their income in NYC and have little or no NJ-only income.

In all three cases, they paid only NY state/NYC taxes, and got the property/renter's credit for NJ. Even though all three made six-figure salaries, none of them have any NJ taxes withheld from their paychecks. From my perspective, that means the NJ credit for taxes paid to other states is effectively dollar-for-dollar, but I have not examined the math thoroughly, so I will yield to you on this issue.

Hi,

This is my first year doing taxes, and needless to say I am slightly confused. Both myeslf and my wife live in New Jersey and work in NYC. Exactly which forms do we have to complete? Do we have to complete NY, NJ and federal returns? If so, would a program like TurboTax do all three?

Thanks in advance,
Alan

Alan:

TurboTax will do the return for you, and it will transfer the figures from your W-2s to the state tax software. However, it will not transfer figures from the NY software to the NJ software to properly figure the credit for paying taxes in NY. There are also a few other pitfalls you have to avoid. Finally, to use TurboTax in interview mode will take about four hours.

To buy the TurboTax Basic and the two state softwares will cost you about $85. I assume you are renting, with no children (since this is your first return). For $85, I will prepare your federal return plus both state returns. If you want to efile your federal return, that's an extra $15. I cannot efile the state returns as I am not registered for either NJ or NY.

If you are interested, contact me at [email protected] and we will discuss the details.

Hi,

I just moved to NY City and started a job in NJ. Can somebody explain to me the tax rates for living in New York City and working in NJ? Do I have to pay full rate state income taxes to New Jersey even though I don't live in the state?

Thanks
KAS

Thcahcs:

Most states require people who work in the state to pay the state income tax. Fortunately, their home state normally gives them a credit against their own state income taxes.

New Jersey gives a credit for payment of NY state taxes by NJ residents.

The reverse is also true. You claim it using Form IT-112-R (New York State Resident Tax Credit).

Hello,

I was a tax-paying MA state resident until August 2004 when I moved to NY to begin medical school. Since then, I have been paying NY taxes on my biweekly stipend. My total taxable income (both states combined) qualifies me for free Turbotax web efile, but the web-based program only allows me to file one state return in addition to my federal return. I am wondering if it is possible to file a joint multistate/federal return on the internet, and it it is possible, how to go about doing so. I realize that this may come at a cost, but with so many web-based tax programs out there, I wanted to ask you if you knew of any that might be free. Without the web, how on earth would I file a joint state/fed return? Thank you so much for your timly help. Its really fantastic that you advise people.

Hilarie

Quote:

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Originally Posted by AtlantaTaxExpert

Thcahcs:

Most states require people who work in the state to pay the state income tax. Fortunately, their home state normally gives them a credit against their own state income taxes.

New Jersey gives a credit for payment of NY state taxes by NJ residents.

The reverse is also true. You claim it using Form IT-112-R (New York State Resident Tax Credit).

---

What would be the form for someone living in New Jersey and Working in new York?

Dear AtlantaTaxExpert,

Here you've been talking about NJ residents working in NY and getting dollar-for-dollar credit for NJ state tax payments. Does CT have the same agreement with the state of NY to provide a credit for CT taxes paid by CT residents working in NY. If yes, what ratio does this credit have? Dollar-for-Dollar?

Thanks,
alpnash

Hilarie:

Most Web-based software is not set up to handle multi-state returns. In fact, a fair number of the state software only offers the bare-bone form requirements.

To save time, please e-mail me at [email protected] with your financial information (which I assume you would rather not put on a public forum). I can then guide you through the process. More than likely, you will be able to efile your federal return, but will have to file your New York and Massachusetts return by paper, since both states will want a copy of the other state's tax return.

Atamir:

The credit for NY state taxes paid is computed on Schedule A to NJ-1040.

Alpnash:

The credit for NY taxes paid is computed on Schedule 2 to CT-1040. It does not look like a dollar-for-dollar credit, but rather a pro-ration of some type.

I also live in NJ while working in NYC. However, due to the nature of my work, I have extensive business travel out of both NY and NJ. My understanding is that I am not liable for NY tax during the time I am on business travel out of NY although my employer is based in NYC.

Any input on this? Thanks a lot.

Wayne

Wayne:

In my opinion, if you are based in NYC (have an office there), I suspect NYC considers you to be working in NYC and, like NY state, will tax you accordingly.