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MequonCPA
MequonCPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2327
Experience:  CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.
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Living in NY, working in NJ income tax question

Customer Question

I will be taking a job in NJ, but will continue to live in NY.

Come to find out that the two states do not have some sort of reciprocal income tax agreement and I could be "double taxed" for income earned.

It appears that I am required by my new employer ( and/or by NJ law?) to have NJ State tax withheld

Now I understand fully ,in April when I file I will get a credit for NJ taxes paid on my NY income taxes and things will even out.

BUT I am not a big fan of paying twice for something throughout the year, if I don't have to

Is it possible to just pay the NJ income taxes now? and then file a NY tax form in April?

or file a NY IT-2104 form and "max out" the withholding allowances allowed?

or is there any other legal options available do?

Thanks.
Submitted: 7 years ago.
Category: Tax
Expert:  MequonCPA replied 7 years ago.

Dear Customer -

I don't think you will be paying twice during the year. Your new employer will withhold NJ taxes not NY. When you file your returns next April all of your income will be included on your NY return. Your NJ return will only tax you on your NJ income. The NJ withholding from your wages should approximate your NJ tax. On your NY return you will receive a credit for the NJ tax liability.

Hope this helps.

Steve

MequonCPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2327
Experience: CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.
MequonCPA and 4 other Tax Specialists are ready to help you
Customer: replied 7 years ago.
Reply to Steve's Post: Steve:

Thank you. I am still confused somewhat.

I will be 100% based in NJ.

Yes, they will withhold NJ only ( by default). They have included in my packet a NY IT-2104, and stated that I may request ( my company) to withhold NY State taxes in addition to NJ taxes.

The above is where I am somewhat confused, I guess

What does "When you file your returns next April all of your income will be included on your NY return." mean?

Is that simply, I will file a NY State resident tax return in April and figure out what I may owe to NY then ( minus what I paid to NJ?) , and not have to worry about it til then?

Thank yoy
Expert:  MequonCPA replied 7 years ago.

Dear Customer -

If you have historically received refunds on your NY return, I would not withhold NY tax from your NJ income. That way your take home pay should be similar to what it would have been if your worked in NY.

As a resident of NY all of your income is taxable there. Because you are also taxed on a portion of that income in NJ, NY allows a credit against your NY tax liability for the NJ taxes.

I should essentially wash out when you file your returns next year.

Hope this helps.

Steve

Customer: replied 7 years ago.
Steve:

Thank you for providing guidance. It appears that I would not be doing anything illegal by not having NY taxes withheld.

Just a few points of clarification before I gladly accept your assistance.

- It appears, ( based on the tax brackets) that I would be paying approx 38% percent less taxes in NJ than I would if I lived and worked in NY. ( on approx $90,000+ income per year)
- I usually pay approx $150 - $250 per year back to NY. No refunds in several years
Customer: replied 7 years ago.
I wanted to add...

would any of this new information change your advice of not filing a NY IT-2104 with my new company?

Thank you
Expert:  MequonCPA replied 7 years ago.

Dear Customer -

Were you working in NYC before.

Customer: replied 7 years ago.
Not in NYC.

But lived and worked in NY.

Plus I wanted to add. I would understand I have to pay a much later amount back to NY in April, I would assume.
Expert:  MequonCPA replied 7 years ago.

Dear Customer -

Because you have mentioned that historically your NY tax was higher than what you expect from NJ, you may want to consider having your employer withhold the difference. You should be able to have them withhold a fixed $ amount. As another option, you could make quarterly estimated tax payments to NYS to cover the spread.

I think that rather than paying the difference next April, you should cover the bulk of the difference by withholding or estimated tax payments. That way you avoid the potential of and underpayment penalty.

Hope this helps.

Steve

Customer: replied 7 years ago.
Thank you. Very helpful.

I think I will go with the estimated tax payments
Expert:  MequonCPA replied 7 years ago.
You're welcome. Glad I could help.

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