NYS Non-Resdient

[BPT]

I have a client that is a New Hampshire resident. He lived and worked all of 2020 in NH. While NH has tax on interest and dividends they don’t tax wages. The W-2 he received from his New York employer shows NY wages in box 16 with very little state income tax in box 17. The question is does he have to file a NYS non-resident return but adjust the return to show none of the wages are NY sourced? Or don’t file a NY return at all? I’m concerned with the latter because NYS is going to have a W-2 that shows NYS wages. I think his employer needs to change his W-2 going forward to only show NH wages in box 16? Any input is much appreciated.

[Lion]

NYS considers income NY-sourced if earned from a NY employer. Only if the employee is out of NY "for the convenience of the employer," such as to service NH clients that cannot be serviced remotely or to receive training that is only offered in-person in NH or the NY employer has a bona fide location in NH, can the employee allocate earnings to days in and days out of NY. And, NY has won a lot of court cases on this issue! Read the NY instructions.

[ATSMAN]

Just to add my 2 cents, NY will win just like MA does (until the Supreme court decides the NH suit). All these non residents that at one time had NY or MA sourced income BUT because of COVID they worked remotely from outside MA/NY the entire year are now challenging the "source" of that income to be their resident state and not NY/MA.

[Lion]

And, the states will fight it hard. If an employee is ruled to have non-NY-sourced income, that opens up the NY employer to have nexus in that other state. That would mean a biz return in that state and unemployment, workers' comp, payroll taxes, as well as state income tax in a new state. They are and will fight that all the way to the Supreme Court. In the meantime, the little employee will pay taxes to the state where he/she formerly worked for his employer.

[BPT]

Thanks for the feed back. I don't think it matters for purposes of this discussion but my client relocated to New Hampshire permanently but not necessarily because of Covid. He moved to NH 12/2/19 well before anyone knew the impact of Covid. Certainly an interesting discussion but from the taxpayers perspective it seems unreasonable to have to pay tax to a state that the taxpayer no longer physically works in or lives. I think it may be best to advise him of the risk and let him determine how he would like to file. I suspect he will not show NY source income and fight it in the future if / when NY calls.

[Lion]

He moved to NH. NY did not send him to NH. It was not for the convenience of the employer. It was for the convenience of the employee. NY will fight it. However, if NH wins against MA, then maybe NH can win against NY -- if NH wants to fight NY or your client wants to take NY to court.

[ATSMAN]

He moved to NH. NY did not send him to NH. It was not for the convenience of the employer. It was for the convenience of the employee. NY will fight it. However, if NH wins against MA, then maybe NH can win against NY -- if NH wants to fight NY or your client wants to take NY to court.

Good advice. I NEVER get into a fight with this matter by taking a position that is contrary to what I have seen all these years. If this was my client and he insisted on not paying NYS tax I would disengage. I don't have a dog in this fight!

[New York Enrolled Agent]

Thanks for the feed back. I don't think it matters for purposes of this discussion but my client relocated to New Hampshire permanently but not necessarily because of Covid. He moved to NH 12/2/19 well before anyone knew the impact of Covid. Certainly an interesting discussion but from the taxpayers perspective it seems unreasonable to have to pay tax to a state that the taxpayer no longer physically works in or lives. I think it may be best to advise him of the risk and let him determine how he would like to file. I suspect he will not show NY source income and fight it in the future if / when NY calls.

Read this - it may not matter what you think.

3 No. 8: In the Matter of Thomas L. Huckaby v. New York State Division of Tax Appeals, Tax Appeals Tribunal, et al. (cornell.edu)

[ATSMAN]

NYEA is absolutely correct. It is not for us to "think" what is correct. I stick with the black-white letter of the law in this matter. Due to COVID restrictions I have over 20 or 25 clients who strictly work out of their homes in a neighboring state and they are all complaining and I tell them the same thing.

[BPT]

Box 15 of the W-2 shows NY. Box 16 show $X which is the federal wages that NY requires in box 16. To the right of page 2 on the ADP W-2 it shows less than $2K of wages reported to NYS. I completely agree its not what I think it should or shouldn't be but rather the letter of the law. If less than $2K was actually reported to NYS as NYS wages it doesn't seem right to report what is in box16 which will slam my client. Now if NY wants to challenge my client as I presume many others they can certainly do that but if less than $2K was reported as NY wages it appears that is what should be picked up as NY source. I appreciate the feedback. Thanks.

[Lion]

NYS starts with the federal AGI. Follow the flow. Go ahead and try to allocate wages to out of NYS, but one of the questions NY asks is how many days the taxpayer worked at home. Do it correctly, or your client WILL get slammed. NY is VERY aggressive.