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In 2012 my wife was paid out her accrued comp time from her

job with the city of...
In 2012 my wife was paid out her accrued comp time from her job with the city of new york. She quit her job in December 2011 and moved in with me in DC. What is the optimal filing status for the federal and state returns. Is the comp time income taxable by DC?
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Answered in 3 minutes by:
4/7/2013
Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16,593
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
Verified

MyVirtualCPA :

Thanks for asking your question! I'm sorry to hear about your tax issue and I'm going to try my best to help you understand or resolve it.

MyVirtualCPA :

How are you today

MyVirtualCPA :

The optimal filing status for you is married filing jointly

Customer:

Sorry, I am confused, I thought a tax lawyer was going to answer this.

MyVirtualCPA :

I am a CPA.

MyVirtualCPA :

CPA, EA, and Tax attorneys can all practice before the IRS

Customer:

OK.

Customer:

So what filing status makes sense for DC and is the deferred comp taxable?

MyVirtualCPA :

Deferred compensation is taxable when received.

Customer:

in DC?

Customer:

U there?

MyVirtualCPA :

Yes sorry.

MyVirtualCPA :

Is the deferred compensation a qualified or non qualified plan?

Customer:

neither. It is overtime she earned in years 2011 and prior. The city pays it out at her salary at the time of termination. Her last check date was late August.

MyVirtualCPA :

Okay - yes this is taxable both for federal and DC

Customer:

New York wants to tax it too though. Seems unfair to pay in both places.

MyVirtualCPA :

Well, did she live in New York when she earned the income?

Customer:

Yes.

MyVirtualCPA :

Did she live in both DC and New York?

Customer:

She moved to DC in December 2011.

Customer:

She started working in DC in June 2012.

MyVirtualCPA :

Well then DC should not tax the vacation pay

Customer:

She lived in NYC till December 2011.

MyVirtualCPA :

You would file joint federal returns

MyVirtualCPA :

and then file separate for DC

MyVirtualCPA :

and she would file separate for NY and NYC

Customer:

OK. I don't know if this is out of scope of the original question, but she owns a coop in Brooklyn, which she rents out to a friend.

MyVirtualCPA :

That's fine. You paid a good price for this session, so I want you to get all the answers you need

Customer:

Cool.

MyVirtualCPA :

So what is your question about the apartment in Brooklyn?

Customer:

Sorry, ... just wondering how that works with mortgage deductions. Are there state mortgage deductions?

MyVirtualCPA :

Well, she would have a schedule e on her federal return, and that income would flow through to your state or DC return

MyVirtualCPA :

Her mortgage interest would be deductible

Customer:

What's a schedule e?

Customer:

You mean rental income?

MyVirtualCPA :

Yes

Customer:

Deductible in DC?

MyVirtualCPA :

Yes.

MyVirtualCPA :

It is.

Customer:

What about New York, does she have to declare the rental income there?

MyVirtualCPA :

Yes, she will always have to declare the rental income in New York state and NYC

MyVirtualCPA :

Because that income is earned there.

MyVirtualCPA :

But, she will receive credit on her DC return for the tax she paid to New York state

Customer:

ok. so its a credit on the botXXXXX XXXXXne?

MyVirtualCPA :

It's a credit on the tax due yes

MyVirtualCPA :

But just for the New York state tax, she won't get a credit for the NYC taxes

Customer:

So you're basically paying DC tax rates overall.

MyVirtualCPA :

Basically - but you have to file both returns

Customer:

at least state-wise...

MyVirtualCPA :

Correct

Customer:

ok, so the new york state tax form has this crazy allocation formula, which assumes you worked in the state. what should she do with that? basically act as if her last check date was her last employment date?

MyVirtualCPA :

She would file as a part year resident

MyVirtualCPA :

So she would pay tax on income earned up until the point she moved to DC.

MyVirtualCPA :

IF she did not live in NY during the year she would file a non-resident return

Customer:

but she moved 12/2011.

Customer:

ok, so non-resident.

MyVirtualCPA :

Yes.

Customer:

what about the allocation formula? they ask about days worked...but it was paid out time.

MyVirtualCPA :

How many days were the compensation for?

Customer:

about 8 months.

Customer:

till 8/25 payroll.

Customer:

8/25/2012

MyVirtualCPA :

Then I would use that as the time worked

Customer:

OK. cool. Thanks for your help.

Customer:

Does this transcript get saved?

MyVirtualCPA :

Yes it should with your login

MyVirtualCPA :

Login and you should be able to see it again, if not contact customer support and they can get it for you

Customer:

ok. thanks again! good answers!

MyVirtualCPA :

If I've answered your questions, please rate my response "excellent" so that I may receive credit for assisting you today.

Customer:

sure thing.

Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16,593
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
Verified
Megan C and 87 other Tax Specialists are ready to help you
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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16,593
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Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

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