I just noticed today that my wife's paycheck deductions never changed from NY State when we move to CT 4 months ago. She called her HR dept and they told her that her office in is NY State so she still has to pay NY income tax. My HR department changed my income tax to CT and my office is in NY State. Which HR department is right? I've always been under the assumption that you pay income taxes in the state you live not the state you work. If it is the state we live how does my wife rectify the fact that she has been paying NY taxes for the past 3 months?
Moderator: And you expected the HR folks to know the answer? Either call Payroll or wait for Katie Jacques to post the answer.
I assume you'll find a nice way of suggesting she might get a little more curious about where her money is going.
I don't know about NY and CT. Not all states are reciprocal, e.g., MO and KS. While you're waiting for an answer here (that you should confirm anyway), check either state's instruction book. If it turns out that she doesn't owe NY tax for this period she may be able to get the withholding credited to CT *if* it can be done before the end of the year. Otherwise you just resolve it when you file, getting a refund from NY and paying CT. (Your liability is based on your residency, not on which state the employer withheld for.)
Missouri doesn't care where you live, they want their tax money. We live on the IL-Mo border and a lot of people live in IL and work in MO. IL gives a credit of tax paid to other states so the taxpayer does not have to pay in both states. I will yeild to Katie for the answer to the NY-CT question. Missy Doyle
NY will tax you on any income you earned while you were a resident of NY and also from sources in NY while you lived elsewhere. Since you moved out of NY in 2006, you will file an IT-203 (Part year resident return) instead of an IT-201 (Resident return). The IT-203 will ask for information on your total federal income, the portion of that earned while you were a resident of NY, and your wages while you were working in NY but living in CT. The tax being withheld will be applied to your calculated NY tax and you will either get a refund or have to pay more in. (If CT is like NY)
CT will also tax you on the income you earned while a resident of CT working in NY, but give you a credit based on what you actually paid to NY for that same income. This might be the year to have your taxes prepared by a local CT preparer who is undoubtedly familiar with this situation.
If you work in NY state, you are subject to NY tax on all of your earnings (even if you perform some of your work at your home in Connecticut). Your wife's employer is correct to withhold NY tax. Your employer should be doing the same. You will end up overpaid to Connecticut and underpaid to New York. Actually, you pay tax to BOTH the state where you live AND the state where you work. This is a universal rule unless there is a reciprocal agreement between the two states involved, or one or both states do not impose comprehensive individual income taxes. (New York does not have reciprocal agreements with any other states.) The state of your residence taxes all of your income, regardless of source. A state where you are a nonresident can tax only your income from sources within that state. Income from personal services (e.g., employment) has its source where the services are performed. So the state where you work will tax your income from services performed there. You and your wife will file a part-year resident return with NY and report all of your income for the part of the year when you were residents, plus your NY source earnings (and any other NY source income, e.g. income from real or tangible personal property in NY) for the part of the year when you were nonresidents. You will also file a part-year resident return with Connecticut, reporting all of your income from the time you became residents, including your NY earnings. Connecticut will give you credit for the tax you pay to NY on your NY earnings AFTER the date you became a Connecticut resident, limited to the proportion of your Connecticut tax liability that relates to that income. You may want to get professional help in doing your returns for this transition year, which can get pretty complicated--and do-it-yourself software, e.g. Turbo Tax, doesn't always handle these situations correctly without an override. Katie in San Diego
There is a difference (since a few years) between NY State and NYC (or Yonkers) city income taxes. I work in Manhattan and live in NJ, and prior to the change, I had to pay NY State and NYC income taxes (as well as some NJ taxes), although I did not reside in NYC. The change was that non-residents of NYC now do not pay NYC income taxes anymore. NY State still gets its exorbitant share, which in NJ counts in some way towards NJ income taxes.
It is not that difficult to do my Fed, NY and NJ taxes myself, and even the part-year NY resident taxes weren't that bad when we had moved from LI to NJ in 1998. (Follow the grandkids!)
Han makes a good point. If the OP and his wife were residents of NYC before they moved to CT, they were subject to the NYC income tax. Since they became nonresidents of NYC, they are no longer subject to the NYC tax. Of course, if their residence was in NY state but outside the city before the move to CT, they weren't subject to the NYC tax either before or after the move. Here's the history of the NYC "commuter tax":
From 1966 until 1999, New York City imposed an income tax on nonresidents who worked in the city -- a so-called "commuter tax." In 1999 the Legislature amended the law to exempt New York State residents from the tax, while continuing to apply it to nonresidents of the city who were residents of other states. The New York Court of Appeal ruled that the amendment violated the Privileges & Immunities and Commerce clauses of the U.S. Constitution _City of New York, et al., v. State of New York, et al._, NY Court of Appeals, 94 NY2d
577, 730 NE2d 920, 709 NYS2d 122. The legislation that enacted the exemption for NYS residents contained a clause specifying that, if the exemption was ruled unconstitutional, the commuter tax would be automatically repealed in its entirety. As a result, the tax was retroactively repealed as of July 1, 1999, the date on which the amendment took effect. Residents of the city still pay the resident personal income tax. But nonresidents are not subject to it. Katie in San Diego
BeanSmart website is not affiliated with any of the manufacturers or service providers discussed here.
All logos and trade names are the property of their respective owners.