Employer Withheld for Two States on Same Income

[Bob Sandler]

My adult daughter, who lives in New York City, worked in New
Jersey for part of 2003. All the work was done in the
employer's corporate headquarters in NJ. She did not do any
work in NY for this employer. However, the NJ employer
withheld taxes for both NJ and NY on the same income. Her
federal W-2 has two lines in boxes 15 - 17. One line shows
NJ wages and tax withheld, and the other line shows NY wages
and tax. The federal, NJ, and NY wages are all the same
amount, and are equal to the total amount she earned. In
other words, they did not split her wages between NJ and NY.
They reported her total wages as the state wages for both
states.

Her W-2 form has two state Copy 2s, one with just the NJ
information, and one with just the NY information. (They
also withheld NYC tax, and this is shown on the federal
copies B and C, and the NY copy 2.)

Was the employer correct to withhold tax for both states? If
not, does it matter to my daughter? Should she just file the
returns for both states (NY resident and NJ nonresident)
using the amounts on the W-2 as they are?

Bob Sandler

 

[Phil Marti]

Her W-2 form has two state Copy 2s, one with just the NJ
information, and one with just the NY information. (They
also withheld NYC tax, and this is shown on the federal
copies B and C, and the NY copy 2.)

Was the employer correct to withhold tax for both states?

The employer was either very thoughtful or has a nexus in NY
that requires it to comply with NY withholding requirements.

Your daughter should prepare her returns in this order:

1. Federal
2. NJ (nonresident)
3. NY, paying special attention to credit for tax paid to
another state.

Phil Marti
Topeka, KS

 

[Katie Jaques]

My adult daughter, who lives in New York City, worked in New
Jersey for part of 2003. All the work was done in the
employer's corporate headquarters in NJ. She did not do any
work in NY for this employer. However, the NJ employer
withheld taxes for both NJ and NY on the same income. Her
federal W-2 has two lines in boxes 15 - 17. One line shows
NJ wages and tax withheld, and the other line shows NY wages
and tax. The federal, NJ, and NY wages are all the same
amount, and are equal to the total amount she earned. In
other words, they did not split her wages between NJ and NY.
They reported her total wages as the state wages for both
states.

Her W-2 form has two state Copy 2s, one with just the NJ
information, and one with just the NY information. (They
also withheld NYC tax, and this is shown on the federal
copies B and C, and the NY copy 2.)

Was the employer correct to withhold tax for both states? If
not, does it matter to my daughter? Should she just file the
returns for both states (NY resident and NJ nonresident)
using the amounts on the W-2 as they are?

No, the employer was not correct to withhold for both
states, but since it did, she should go ahead and use the
W-2's as they are to claim credit for the taxes withheld.
They should have withheld only for NJ, and for NY if at all,
only to the extent that the NY withholding would have been
more than the NJ withholding.

You may have a problem with the NY credit for the tax paid
to NJ, because the W-2 looks to NY as though she earned the
income in NY. I would attach BOTH W-2's to the NY return
and also attach a statement explaining the error. Not that
NY will likely look at any of that when the return is
processed, but when they ask the question (or deny the
credit) you can just send them another copy of the same
information. And you can have the satisfaction of saying to
the DOR, you dummies, the information was on the return, why
didn't you read it? <G>

Katie in San Diego

The foregoing is intended for educational purposes only and
does not constitute legal or professional advice.

 

[Bruce E. Cobern]

Was the employer correct to withhold tax for both states? If

No, the employer was not correct to withhold for both
states, but since it did, she should go ahead and use the
W-2's as they are to claim credit for the taxes withheld.
They should have withheld only for NJ, and for NY if at all,
only to the extent that the NY withholding would have been
more than the NJ withholding.

I hate to take exception to your replies, but in this
instance I think you are being overly cautious. First. I
don't see any error in the employer withholding in both
states, it happens all the time. In fact, if the employer
has nexus in NY he has no choice. You are correct that the
NY withholding should be net of the NJ tax, but we do not
know that it is not.

You may have a problem with the NY credit for the tax paid
to NJ, because the W-2 looks to NY as though she earned the
income in NY. I would attach BOTH W-2's to the NY return
and also attach a statement explaining the error. Not that
NY will likely look at any of that when the return is
processed, but when they ask the question (or deny the
credit) you can just send them another copy of the same
information. And you can have the satisfaction of saying to
the DOR, you dummies, the information was on the return, why
didn't you read it? <G>

I also don't see any potential problem with the credit, nor
do I see NY even questioning this. The wages are shown as
NJ wages because that is where the services were performed,
and as NY wages because of residency. This is also very
common and happens all the time. I doubt it will create the
least bit of a problem. In fact, everything in this
situation seems to be in order and just as it should be.

I fully agree with Phil's description of the sequence in
which the returns should be prepared.

 

[Bob Sandler]

You may have a problem with the NY credit for the tax paid

I also don't see any potential problem with the credit, nor
do I see NY even questioning this. The wages are shown as
NJ wages because that is where the services were performed,
and as NY wages because of residency.

But the wages are not shown as NJ wages on the NY copy of
the W-2. That copy shows only NY wages. It seems reasonable
to think that that might make NY question the credit. So I
like Katie Jaques' suggestion to attach both W-2s to the NY
return. (Actually I think I'll just attach a copy of the
federal W-2, which shows both states on one form.) That way
the NJ wages will in fact be shown, so NY state will be able
to clearly see NJ wages.

 

[Katie Jaques]

Was the employer correct to withhold tax for both states? If

I hate to take exception to your replies, but in this
instance I think you are being overly cautious. First. I
don't see any error in the employer withholding in both
states, it happens all the time. In fact, if the employer
has nexus in NY he has no choice. You are correct that the
NY withholding should be net of the NJ tax, but we do not
know that it is not.

I also don't see any potential problem with the credit, nor
do I see NY even questioning this. The wages are shown as
NJ wages because that is where the services were performed,
and as NY wages because of residency. This is also very
common and happens all the time. I doubt it will create the
least bit of a problem. In fact, everything in this
situation seems to be in order and just as it should be.

I fully agree with Phil's description of the sequence in
which the returns should be prepared.

Of course I defer to your local knowledge. Depending on the
OP's total income, the NJ tax may be less than the NY tax on
the same income and it may have been appropriate for the
employer to withhold the excess NY tax.

Katie

 

[bradgilliatt]

If ny and nj do not have reciprocity, and as mentioned, through nexus, the employer has to withhold in both states then your employer was just following the rules. Double taxation between states is very rare due to state tax credits and sourcing of income. Likely the tax liability in the lived in state will be minimal, if any. I would look into the possibility if the states w-4 equivelent allows for lower withholding (higher exemptions). Fyi - this would be similar to a fed exclusion if you state you do not have a liability at years end. Im not well versed in this subject, but its worth looking into for your daughter to free up cash flow and not to mention, refrain from giving escentially an interest free loan to the states treasury. To directly answer your question, she will square up at tax time.

 

[claudia delude]

Hello,
I am having the same issue and am not sure how to file. My W2 lists ND and CO (home state). There are seperate EIN numbers, the income is divided amongst both states, and the taxes paid is listed for each state. My question is this...on the state income tax forms, do I just enter the amount of earned income as what my employer has listed for each individual state? Or, do I enter the combined income (as instructed) from my federal tax return. Please advise.