[geekyguy]

Hello, I need help from the experts here about a important question I have with respect to filing my taxes for NY & NJ.

In the past years I suffered too less amount being deducted with my company based in Jersey and I asked them to deduct more (hoping that I'd get a nice return back as we also had a baby this year). In the meantime, I switched jobs and accepted a position in NYC and agreed to work for W2 (where I pay for my family medical insurances and no benefits unlike my previous employer with whom I was yearly salaried with benefits). I work for a day rate with no benefits and thought I could itemize my insurance payments I made since joining the new company (which comes to around 4K for 4 months I worked with this new company).

My wife too worked for most of this year till we had our baby and she was a resident in NJ and worked in NJ as well. Since I got my W2 from both my employers I wanted to try and find out how much I'd get a return. I used one of the online tax software and entered my first W2 from my previous employer and I was so glad to see that I was getting a hefty amount as return (I selected - Married filing separately with one dependent). I was also getting about 800 dollars back from NJ as well.

All changed the moment I entered my NY W2. My NY W2 did not deduct any tax for NJ, and deducted only for NY. But NJ added up both my salaries and thought I didn't pay tax for that amount. My federal return shrunk 1/3 and the NJ tax showed that I owed about about 10K (if I leave the NJ state tax withheld amount blank in that NY W2) and 8K (if I enter the same amount paid for NY state in the NJ tax withheld column).

That means I have to pay a lot more money than I anticipated of a return. I was shocked and still am and wondering whether this would ever change with the addition of my wife's W2. I had a rough year with expenses sky rocketing for me with medical, parental visits for more than 6 months and attorney fees, tickets and international mortgage payments etc.

If some one can shed some light and let me know how I should be filing this, I'd greatly appreciate that.

Thank you!

[ebaines]

Your tax software should show that you owe NY State tax on your NY state income, and that the NJ tax return shows you getting a credit for the amount of tax you paid to NY. Maybe the online software isn't sophisticated enough to capture this correctly - what does it show for the NJ-1040 line 39 - "credit for income tax paid to other jurisdictions?"

[geekyguy]

Thanks for your Reply. I didn't get that far. There is a label up top that gets updated after I complete each of my W2's. I didn't provide any itemizations as well. All I did was: enter the two W2's and you may be right as it might all be the NY tax. How should the actual tax be calculated between NY and NJ?

[ebaines]

1. First NY tax is calculated on your NY salary. The actual tax rate is determind by your total income (although NY taxes only your NY State income, they need to know your total income to determine the applicable tax rate). Since you switched jobs mid-year this means you enter 3 W-2's - one for your NJ job, one for your NY job, and one for your wife's NJ job. The tax software should understand that NY tax is due only on income from one of those 3 W-2's.

2. Then your NJ tax is calculated, based on your total income for the year (all 3 W-2's), but with a credit given to income tax already paid to other jursidictions. Since NJ's rates are generally lower than NY's, at the end you should owe NJ tax for your earnings in NJ and your wife's earnings, but pretty much nothing on your NY income.

[geekyguy]

Thanks for the reply ebaine. I did go all the way and completed the NJ and NY states and included my non-resident status for NY and that solved the issue. :)