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supera · Oct 14, 2009, 07:49 AM

Hi,

Here is my situation - pl let me know if I need to pay any NY state/NY City tax.

- My employer is based in Michigan and all my payment is processed in Michigan office. The Michigan state tax is deducted from my paychecks
- I am a permanent resident of New Jersey. I know that I need to pay taxes for NJ being a resident and claim all payment back from MI
- Now my employer is under a sub contract with another consulting company based in New York State (not New York City), and the project I work on is for a client based in New York City (work location is New York City and I travel from NJ to NYC everyday)

Pl let me know if you need more details.

Thanks in advance.

AtlantaTaxExpert · Oct 14, 2009, 09:56 AM

Okay, you need to have the Michigan withholding STOPPED and all the previous Michigan withheld taxes refunded to you. Otherwise, you will have to file an Michigan return to get all the taxes back. The state of Michigan has no legal standing to tax your salary because you neither live nor work in Michigan.

You know about the NJ filing requirements.

You should have NY state income taxes withheld from your salary, because you will pay taxes to NY state on the income earned while in NY state. You can claim a credit for these NY state taxes on your NJ return, and that will probably completely offset your NJ state tax liability, relieving you of the need to have NJ taxes withheld.

Since you do NOT live in NY city, you have NO NY city income tax liability.

supera · Oct 19, 2009, 09:11 AM

Thanks.

Considering my current scenario, I am assuming that I will have to file taxes for each state i.e MI, NJ and NY coming tax season. So now what's the step for each state i.e claim credit from which state for a particular state return?

ebaines · Oct 19, 2009, 10:16 AM

Hello Supera. Here's what you do:

1. If your employer can't (or won't) refund the MI tax that was incorrectly withheld, then you have to file a MI income tax return in January 2010 showing $0 MI income and whatever amount was withheld for MI. This will start the process of MI sending you a full refund. Unfortunately there is no way to get MI to pay your refund amount directly to NY or NJ - you have to be the banker for this. That's why it would be better to work through your employer to stop the withholding and get a full refund before the end of 2009.

2. NY State income tax form IT-203 (for non-residents). On this form you have to report all your income for the year, but you pay tax only on the NY State portion of that income.

3. If your employer can't (or won't) start withholding NY State income tax, you should consider filing estimated income tax forms with NY State each quarter. This is to avoid having to pay interest charges for late payments when you file your return. You don't need to do this for 2009 (since this is your first year of employmenet in NY), but should consider starting this in April 2010.

4. After you have completed the NY State tax form, you then complete the NJ resident tax form (NJ-1040). You will calculate an initial tax amount based on all your income, but then take a credit for taxes paid to NY State. Depending hw much of your income is from NY sources, it's posible that you may owe little (or nothing) to NJ, but as a resident you still have to file.

supera · Oct 19, 2009, 11:57 AM

Thanks a lot for your suggestions. Now that I think of it I have spent the first 4 months of this year (Jan to Apr) on a NJ project (i.e staying in NJ and working in NJ) and the rest of the year would be on NY project (i.e. staying in NJ and working in NY). So now I am a bit confused on how to take care of those 4 months. Pl advise.

ebaines · Oct 19, 2009, 12:05 PM

Originally Posted by supera

Thanks a lot for your suggestions. Now that I think of it I have spent the first 4 months of this year (Jan to Apr) on a NJ project (i.e staying in NJ and working in NJ) and the rest of the year would be on NY project (i.e. staying in NJ and working in NY). So now I am a bit confused on how to take care of those 4 months. Pl advise.

You take care of your NJ income tax on the NJ resident income tax form (form NJ-1040), just as I described earlier. Just be aware that because you have some NJ-source income (from those first four months) and your employer failed to withhold NJ income tax on it, you will probably find that when you do your NJ income tax the credit from what you paid NY will not entirely offset the full NJ tax bill. Hence you will probably have to write NJ a check, as well as NY.