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Posted by Richard on May 15, 2008, 3:07 pm
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An editor with a technical question: In an article about place of
employment vs. place of residence, we have an example of an employee
who lives full-time in New York State but works full-time in an office
in New Jersey. One expert told me he pays all state income taxes to
New York as his place of residence. Another told me the exact
opposite: all taxes to New Jersey as place of employment.
For the purposes of this article, there are no extra details: the
employee does not have a pied a terre in New York, nor does he do any
work, freelance or otherwise, from his home.
Any thoughts?
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Posted by Phil Marti on May 15, 2008, 4:50 pm
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"Richard" wrote:
> An editor with a technical question: In an article about place of
> employment vs. place of residence, we have an example of an employee
> who lives full-time in New York State but works full-time in an office
> in New Jersey. One expert told me he pays all state income taxes to
> New York as his place of residence. Another told me the exact
> opposite: all taxes to New Jersey as place of employment.
It depends on state law. For example, DC/MD/VA are fully reciprocal, i.e.,
you pay only where you live.
OTOH, KS and MO have no reciprocity, so if you live in one state and work in
the other you pay both. The usual treatment in such cases is that the
resident state gives the taxpayer a credit for the tax paid to the
nonresident state, but there are exceptions to that too.
I believe NY/NJ operate under the "usual" no reciprocity arrangement I
described, but someone who knows for sure should be along shortly.
--
Phil Marti
Clarksburg, MD
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<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
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Posted by Han on May 15, 2008, 9:24 pm
Please log in for more thread options @trnddc01:
> I believe NY/NJ operate under the "usual" no reciprocity arrangement I
> described, but someone who knows for sure should be along shortly.
>
I have been paying NY (where I work) and deducting this as a credit from NJ
taxes as per NJ instructions. I would think that in your case (reverse
case), it should work again with reciprocity: NJ taxes first, since it is
earned there, then NY takes its taxes, with the NJ tax paid as a a credit
--
Best regards
Han
email address is invalid
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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Posted by Katie on May 16, 2008, 7:16 pm
Please log in for more thread options > An editor with a technical question: In an article about place of
> employment vs. place of residence, we have an example of an employee
> who lives full-time in New York State but works full-time in an office
> in New Jersey. One expert told me he pays all state income taxes to
> New York as his place of residence. Another told me the exact
> opposite: all taxes to New Jersey as place of employment.
>
> For the purposes of this article, there are no extra details: the
> employee does not have a pied a terre in New York, nor does he do any
> work, freelance or otherwise, from his home.
>
> Any thoughts?
Richard, the answer is that your employee's NJ earnings are taxed in
BOTH NY and NJ.
States generally tax residents on all of their income, regardless of
its source. They can tax nonresidents only on income with a source in
the state. Income from personal services has its source where the
services are performed. So a person who lives in State A and works in
State B pays tax to both states on his or her earnings. The resulting
double taxation is generally mitigated by one state (usually the
residence state) allowing credit for the tax paid to the other, or by
a reciprocal agreement between the two states whereby a resident of
one working in the other pays tax only to the residence state.
New York has no reciprocal agreements with any other states, but it
will allow a NY resident credit for taxes paid to another state on
income with a source in that state. NY Tax Law Sec. 620. The credit
is limited to the proportion of the NY tax liability that relates to
the income taxed by the other state. 20 NYCRR Sec. 120.1 and 120.2.
The result is that, net, the taxpayer pays state tax on that income at
the higher of the two states' average rates for his or her filing
status, income level, number of dependents, etc.
Your hypothetical employee would have NJ tax withheld from his salary,
and would file a nonresident return with NJ. He would file a resident
return with NY, including the NJ source income, and claim a credit on
the NY return for the NJ tax.
Katie in San Diego
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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