Q: NY state income tax on a temporary assignment


J

JKC

I live in Texas where there is no state income tax. I will
soon be on a temporary assignment in NY for 6 months. Will I
be subject to NY state income tax for those 6 months? If
yes, is there anything I can do to avoid or minimize tax
consequences?

Thanks, in advance, for your help.
 
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A

A.G. Kalman

JKC said:
I live in Texas where there is no state income tax. I will
soon be on a temporary assignment in NY for 6 months. Will I
be subject to NY state income tax for those 6 months?
Yes. NY (and all other states with an income tax) will tax
you on your NY earnings.
is there anything I can do to avoid or minimize tax
consequences?
Generally, no. I have observed that many employers who
relocate employees on a temporary assignment that will incur
a significant tax hit, will provide some form of an offset
(higher rate of pay, bonus, incentive and/or tax
assistance). Have you asked the employer?
 
D

David Woods, EA, ChFC, CLU

JKC said:
I live in Texas where there is no state income tax. I will
soon be on a temporary assignment in NY for 6 months. Will I
be subject to NY state income tax for those 6 months? If
yes, is there anything I can do to avoid or minimize tax
consequences?
You will be subject to NY tax on those wages.
 
S

Seth Breidbart

JKC said:
I live in Texas where there is no state income tax. I will
soon be on a temporary assignment in NY for 6 months. Will I
be subject to NY state income tax for those 6 months? If
yes, is there anything I can do to avoid or minimize tax
consequences?
Keep a very accurate calendar of precisely which days you're
in NY or outside NY, and which of them you work. You might
be able to allocate earned income based on either ratio.
Also, you want to be careful to prevent NY from claiming
you're a part-year resident, in which case it will tax a
share of all your income (including interest and dividends)
for the year.

Seth
 
K

Katie

JKC said:
I live in Texas where there is no state income tax. I will
soon be on a temporary assignment in NY for 6 months. Will I
be subject to NY state income tax for those 6 months? If
yes, is there anything I can do to avoid or minimize tax
consequences?
As Seth suggested, if you have any significant income (e.g.,
interest, dividends, income from partnerships or other
flow-through entities outside New York) other than your
salary, it will be important for you to avoid establishing
part-year residence in New York. As a nonresident, you are
taxable only on income from sources within New York, which
includes compensation for services performed there. As a
resident, you would be taxable on all of your income, from
all sources.

New York defines a resident to include persons domiciled
elsewhere who maintain a permanent place of abode in the
state and spend more than 183 days of the taxable year
there. If your assignment in NY is truly temporary, you
will not have a "permanent" place of abode even though you
rent an apartment to live in while you are working there.
It is important, though, to have the temporary nature of
your assignment documented. Coincidentally, there is a
recent Division of Tax Appeals ALJ decision on this issue:
Petition of Facundo Vazquez, NYS Division of Tax Appeals,
ALJ, DTA No. 819810, 05/05/2005. The taxpayer was an
Argentinian citizen on an H-1B1 temporary (but renewable)
visa to work in the US. He was in NY more than 183 days in
2000 and 2001, and maintained a place of abode (a rented
apartment), but argued that he was a nonresident because his
job assignment was temporary. Unfortunately all the
documentation said was that his employment was "at will,"
which the Administrative Law Judge took to mean
"indefinite." As a result he was held to be a resident,
taxable on all of his income.

So: if there is any other income, make sure you have a
contract or other document from your employer with a
definite termination date. Then it will not matter if you
are in NY for more than 183 days. (Note: any part of a day
counts.)

Katie in San Diego

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

ed

the NY part year resident form should lead you to the
correct amount of NY tax for your situation. You should pay
NY tax on only your wages for time you spend in NY (there
may be some wages for NY business while you're in Texas
which NY can't tax).

You can deduct the NY tax you pay or is withheld in 2005 on
Schedule A next April.

ed
 
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S

Seth Breidbart

wrote:
New York defines a resident to include persons domiciled
elsewhere who maintain a permanent place of abode in the
state and spend more than 183 days of the taxable year
there. If your assignment in NY is truly temporary, you
will not have a "permanent" place of abode even though you
rent an apartment to live in while you are working there.
You might also consider renting an apartment in New Jersey,
so as to avoid spending 183 days in NY (since presumably you
won't go to work on weekends, at least not that often).

Seth
 
K

Katie

New York defines a resident to include persons domiciled
You might also consider renting an apartment in New Jersey,
so as to avoid spending 183 days in NY (since presumably you
won't go to work on weekends, at least not that often).
NJ has exactly the same statutory language as NY. So if the OP
maintains a permanent place of abode and spends more than 183 days in
NJ, he'll be a NJ resident taxable on all of his income (including the
NY earnings). Remember that any part of a day counts in the 183 days.

I don't see any benefit to commuting from New Jersey.

Katie in San Diego

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

Katie

ed said:
the NY part year resident form should lead you to the
correct amount of NY tax for your situation. You should pay
NY tax on only your wages for time you spend in NY (there
may be some wages for NY business while you're in Texas
which NY can't tax).

You can deduct the NY tax you pay or is withheld in 2005 on
Schedule A next April.
We probably should point out, though, that if the OP performs any
services for his NY employer at his home in Texas, that income WILL be
subject to NY tax even if he is a nonresident of NY. NY has a peculiar
"convenience of the employer" regulation (20 NYCRR 132.18(a)) that says
that earnings from services performed at a nonresident employee's
out-of-state home for a NY employer are NY source income unless the
services were performed there out of necessity (i.e., because by their
nature they could not be performed at the employer's office) and not
for the convenience of either the employee or the employer. Crazy as
it may seem, the NY Court of Appeal (high court) has repeatedly upheld
this regulation, and the U.S. Supreme Court denied certiorari in a
recent appeal on the issue (Zelinsky v. Tax Appeals Tribunal (1 NY3d
85, 769 NYS2d 464 , cert denied 4/26/04 158 L Ed 2d 619).

Katie in San Diego

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

Dick Adams

Katie said:
We probably should point out, though, that if the OP performs
any services for his NY employer at his home in Texas, that
income WILL be subject to NY tax even if he is a nonresident of
NY. NY has a peculiar "convenience of the employer" regulation
(20 NYCRR 132.18(a)) that says that earnings from services
performed at a nonresident employee's out-of-state home for a NY
employer are NY source income unless the services were performed
there out of necessity (i.e., because by their nature they could
not be performed at the employer's office) and not for the
convenience of either the employee or the employer. Crazy as it
may seem, the NY Court of Appeal (high court) has repeatedly upheld
this regulation, and the U.S. Supreme Court denied certiorari in a
recent appeal on the issue (Zelinsky v. Tax Appeals Tribunal
(1 NY3d 85, 769 NYS2d 464 , cert denied 4/26/04 158 L Ed 2d 619).
This creates an interesting situation. I would not be surprised
if there were numerous workarounds for this in effect. The easiest
would be opening a Texas office for the employer.
 
H

Han

Katie said:
NJ has exactly the same statutory language as NY. So if the OP
maintains a permanent place of abode and spends more than 183 days in
NJ, he'll be a NJ resident taxable on all of his income (including the
NY earnings). Remember that any part of a day counts in the 183 days.

I don't see any benefit to commuting from New Jersey.
2 points:
NY City income tax is not levied on non-residents of NY City.
That can make a difference. NJ taxation is subject to a
reciprocity agreement with NY. Tax paid to NY is subtracted.
 
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K

Katie

Dick said:
Katie wrote:
This creates an interesting situation. I would not be surprised
if there were numerous workarounds for this in effect. The easiest
would be opening a Texas office for the employer.
If the employer is not already a Texas taxpayer, it may be
reluctant to subject itself to the franchise tax by opening
an office there, to say nothing of incurring the cost of
creating an out-of-state office for the purpose of saving
taxes for the employee. The idea wouldn't survive the
cost-benefit analysis of many employers. This may be
especially true for employers that make significant sales
into the employee's state of residence and are otherwise
protected by P.L. 86-272. Of course the employee's
performing non-solicitation services for the employer in
that state already exceeds P.L. 86-272 protection, but it is
likely to fly below the radar as long as the employee works
out of his home. Opening an office would put the employer
on the screen.

Katie in San Diego

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

Katie

2 points:
NY City income tax is not levied on non-residents of NY City.
That can make a difference.
True. The OP didn't say he would be working in the city,
but if he does, he'll be better off taxwise to live outside
it. I'd be willing to pay quite a lot of tax, though, if I
worked in NYC these days, not to have to commute from Long
Island, Westchester, or NJ <G>. You'd have to compare the
additional tax cost with the costs (in both money and time)
of commuting. And adjust for the presumably higher cost of
housing in the city.

NJ taxation is subject to a reciprocity agreement with NY.
Tax paid to NY is subtracted.

Reciprocal agreements between states in effect cede the tax
to the state of residence. A resident of State A working in
State B pays tax only to State A. New York does not have
reciprocal agreements with any other states.

New Jersey does allow its residents credit for taxes paid to
other states. That may be what you had in mind. Net, if
the OP lived in NJ and was taxed as a resident there, he
would in effect be taxed on his NY source income at the
higher of the two states' average rates for his income
level, filing status, etc.

He wouldn't be any better off, or not very much so, than if
he was a resident of NY. Tax rates in NJ are lower than in
NY (until you get over $500,000; then the NY rate is lower),
but the credit is limited to the proportion of the NJ tax
that relates to the "double taxed" income. However, as you
point out, he would avoid the NYC earnings tax (which could
also be avoided by living outside the city, in NY state).

Katie in San Diego

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

Ira Smilovitz

2 points:
NY City income tax is not levied on non-residents of NY City.
That can make a difference. NJ taxation is subject to a
reciprocity agreement with NY. Tax paid to NY is subtracted.
NY City income tax isn't levied on non-residents of NY City
who live in NY State either. NJ residents who work in NYC
generally end up paying more in state taxes than those who
are NYS residents/NYC nonresidents.

Ira Smilovitz
 
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G

Gary Goodman

(e-mail address removed) says...
True. The OP didn't say he would be working in the city,
but if he does, he'll be better off taxwise to live outside
it. I'd be willing to pay quite a lot of tax, though, if I
worked in NYC these days, not to have to commute from Long
Island, Westchester, or NJ <G>. You'd have to compare the
additional tax cost with the costs (in both money and time)
of commuting. And adjust for the presumably higher cost of
housing in the city.

NJ taxation is subject to a reciprocity agreement with NY.
Tax paid to NY is subtracted.

Reciprocal agreements between states in effect cede the tax
to the state of residence. A resident of State A working in
State B pays tax only to State A. New York does not have
reciprocal agreements with any other states.

New Jersey does allow its residents credit for taxes paid to
other states. That may be what you had in mind. Net, if
the OP lived in NJ and was taxed as a resident there, he
would in effect be taxed on his NY source income at the
higher of the two states' average rates for his income
level, filing status, etc.

He wouldn't be any better off, or not very much so, than if
he was a resident of NY. Tax rates in NJ are lower than in
NY (until you get over $500,000; then the NY rate is lower),
but the credit is limited to the proportion of the NJ tax
that relates to the "double taxed" income. However, as you
point out, he would avoid the NYC earnings tax (which could
also be avoided by living outside the city, in NY state).
NJ property taxes are usually lower than for NYC suburbs.

The commute to work in NYC is dependent on how close you are
to decent transportation. For example, if you work in
Midtown Manhattan, the commute from parts of NYC is longer
than from parts of northern NJ or even Long Island.

My commute to work near Times Square is 35 to 40 minutes
from 2.5 miles away (during times of moderate weather, I can
walk it in about 50 minutes). The commute will be 50 to 55
minutes for me when I come in from northern NJ, about 8
miles from the office.

Gary
 

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