Taxable refunds NY/NJ

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nyc888
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Taxable refunds NY/NJ

Post by nyc888 » Wed Mar 07, 2018 6:27 pm

Hey guys,

Appreciate if you could give me some advice on my tax situation. I live in NJ and work in NYC. I get NY state taxes withed from my paycheck every month. So last year, I got all the withholding back from New York state and paid a large chunk of it back to New Jersey. This is the second year that I have lived in NJ. My accountant has prepared a draft 2017 tax returns and I noticed that almost all of my 2016 New York state tax refund shows up at 1040 line 10. I did itemized deduction last year. Is this right? At a minimum, shouldn't the accountant use the difference between NY refund and NJ payment? I got a big refund from NY, but I also paid most of it to NJ.

If what he did is correct, it seems a very unfavorable treatment. Anything I could do going forward to mitigate this? I checked with my employer and they told me that they can't do NJ withholding. But I want to avoid this happening again next year.

A separate question but also related to 1040 line 10. I hit AMT last year and I did itemized deductions. Conceptually, does it sound right to you that almost all my NY state refund from last year shows up in this line?

Thanks!

seawolf21
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Re: Taxable refunds NY/NJ

Post by seawolf21 » Wed Mar 07, 2018 6:51 pm

Really depends on your particular set of numbers if the refund is taxable. Are you paying AMT this year? If so, chances are the taxable refund is not really having any effect on your taxes.

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Re: Taxable refunds NY/NJ

Post by Grt2bOutdoors » Wed Mar 07, 2018 6:55 pm

It’s right, you took a deduction for those taxes last year, so a refund is considered income in the following year. You can not get the benefit of a deduction and a refund, that is like collecting twice.
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scrabbler1
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Re: Taxable refunds NY/NJ

Post by scrabbler1 » Wed Mar 07, 2018 8:04 pm

State tax refunds or rebates can affect other things in your return, even after netting out the refund with the deduction you took. In the last few years, I have received two NYS property tax rebates per year. One I got for the prior year and one in the same year. The one for the prior year I had to include back as income, but the one I got in the same year I was able to apply as a negative deduction on Schedule A (after nearly mistakenly taking it like the prior year one as income). Treating it as a negative deduction saved me some money because it lowered my (M)AGI and raised my ACA premium subsidy.

pshonore
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Re: Taxable refunds NY/NJ

Post by pshonore » Wed Mar 07, 2018 8:09 pm

Is there a reciprocal agreement between NY and NJ? If not, I don't understand why you got all NY withholding back. You generally owe taxes where you work, and get a credit for that which reduces your resident state tax bill

scrabbler1
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Re: Taxable refunds NY/NJ

Post by scrabbler1 » Wed Mar 07, 2018 8:38 pm

pshonore wrote:
Wed Mar 07, 2018 8:09 pm
Is there a reciprocal agreement between NY and NJ? If not, I don't understand why you got all NY withholding back. You generally owe taxes where you work, and get a credit for that which reduces your resident state tax bill
NY and NJ have no reciprocal agreement. As to why the OP got any NYS taxes back, I don't really know, either.

Back in my working years, my old company was in NYC and we had a lot of NJ residents who, like the OP, filed NJ resident tax returns and NY non-resident tax returns. What happened, as some of them told me at the time (this was in the 1990s), they ended up with a NY tax liability but no NJ tax liability. This was because NY's tax rates were much higher than NJ's, so their resident credit for taxes paid to NY was 100%, the maximum allowed.

Eventually, the company moved to NJ so all of us NY residents had to file NJ non-resident tax returns. But with NJ's tax rates lower than NY's, our resident credit was a carve-out of some of the taxes owed to NY. The NJ residents saw a tax cut, paying less to NJ than they did to NY.

My payroll dep't sometimes misallocated the NY and NJ withholding, so I sometimes ended up owing NJ extra while getting a refund from NY.

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grabiner
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Re: Taxable refunds NY/NJ

Post by grabiner » Fri Mar 09, 2018 12:06 am

If you are getting a large NY state refund, you need to adjust your withholding. Is your employer incorrectly withholding as if you were a NYC resident? Or are you not claiming the right number of NY allowances on your withholding form? You should try to have NY withhold enough tax to cover the NY tax due on your salary.

You should be able to take a credit against the NJ tax for the tax you paid to NY on the same income. If your NJ rate is higher than your NY rate, you will get a credit for the full NY tax; otherwise, the credit will be limited to a prorated share of the NJ tax. Therefore, you won't have a very large NJ tax bill, but you may still have a bill for income taxed by NJ but not by NY.

If you paid AMT in 2017, you cannot deduct the taxes you paid to either NY or NJ, so you probably won't owe any 2018 tax on the refund. (The reason for "probably" is that you might still have gotten some benefit, if the refund exceeds the amount of extra deductions which caused you to pay AMT.)
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Re: Taxable refunds NY/NJ

Post by scrabbler1 » Fri Mar 09, 2018 1:11 am

If you need to adjust your withholding allowances for your NY taxes but keep them the same for your federal allowances, you can file NY form 2104 which is the state version of the federal W-4 form.

https://www.tax.ny.gov/pdf/current_form ... ill_in.pdf

Back in the late 1990s, after I paid off my mortgage, I began taking the standard deduction for NY but kept itemizing for the Feds. I had to change my state withholding allowances for NY to compensate. so going forward I always had a different number of allowances. I left the NJ allowances alone (i.e. same as federal) because it was close enough to what it should have been. But, if you need to adjust your NJ allowances, they have a form similar to NY's form.

http://www.state.nj.us/treasury/taxatio ... t/njw4.pdf

nyc888
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Re: Taxable refunds NY/NJ

Post by nyc888 » Fri Mar 09, 2018 8:42 am

seawolf21 wrote:
Wed Mar 07, 2018 6:51 pm
Really depends on your particular set of numbers if the refund is taxable. Are you paying AMT this year? If so, chances are the taxable refund is not really having any effect on your taxes.
Yeah, based on the draft I still owe some AMT this year.

nyc888
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Re: Taxable refunds NY/NJ

Post by nyc888 » Fri Mar 09, 2018 8:47 am

scrabbler1 wrote:
Wed Mar 07, 2018 8:38 pm
pshonore wrote:
Wed Mar 07, 2018 8:09 pm
Is there a reciprocal agreement between NY and NJ? If not, I don't understand why you got all NY withholding back. You generally owe taxes where you work, and get a credit for that which reduces your resident state tax bill
NY and NJ have no reciprocal agreement. As to why the OP got any NYS taxes back, I don't really know, either.

Back in my working years, my old company was in NYC and we had a lot of NJ residents who, like the OP, filed NJ resident tax returns and NY non-resident tax returns. What happened, as some of them told me at the time (this was in the 1990s), they ended up with a NY tax liability but no NJ tax liability. This was because NY's tax rates were much higher than NJ's, so their resident credit for taxes paid to NY was 100%, the maximum allowed.

Eventually, the company moved to NJ so all of us NY residents had to file NJ non-resident tax returns. But with NJ's tax rates lower than NY's, our resident credit was a carve-out of some of the taxes owed to NY. The NJ residents saw a tax cut, paying less to NJ than they did to NY.

My payroll dep't sometimes misallocated the NY and NJ withholding, so I sometimes ended up owing NJ extra while getting a refund from NY.
Thanks for the reply. I asked around and other friends living in NJ and working in NYC are doing the same, i.e. do non-resident NY filing, get most withholding back, file NJ resident taxes and pay most of the refunds back to NJ. So I was thinking if the refunds always get taxed as income I should adjust my withholding as low as possible to save taxes.

nyc888
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Re: Taxable refunds NY/NJ

Post by nyc888 » Fri Mar 09, 2018 8:55 am

grabiner wrote:
Fri Mar 09, 2018 12:06 am
If you are getting a large NY state refund, you need to adjust your withholding. Is your employer incorrectly withholding as if you were a NYC resident? Or are you not claiming the right number of NY allowances on your withholding form? You should try to have NY withhold enough tax to cover the NY tax due on your salary.

You should be able to take a credit against the NJ tax for the tax you paid to NY on the same income. If your NJ rate is higher than your NY rate, you will get a credit for the full NY tax; otherwise, the credit will be limited to a prorated share of the NJ tax. Therefore, you won't have a very large NJ tax bill, but you may still have a bill for income taxed by NJ but not by NY.

If you paid AMT in 2017, you cannot deduct the taxes you paid to either NY or NJ, so you probably won't owe any 2018 tax on the refund. (The reason for "probably" is that you might still have gotten some benefit, if the refund exceeds the amount of extra deductions which caused you to pay AMT.)
Thanks for the advice! Based on the draft, it seems i get 100% of NY state withholding back and I will pay 90% of that to NJ. That sounds like the opposite of what you just described. If I work in NYC but don't live in NYC, do I still owe NY state taxes? I know for sure there's no NYC taxes due.

Re AMT, it seems my accountant needs to rerun my 2016 taxes by adding the NY tax refund to the Schedule A to see if the AMT owed changes? If AMT amount stays the same, i don't need to add the refund back as income for this year. If AMT amount is lower, part of the refund should be added to 1040 line 10. Am I right?

nyc888
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Re: Taxable refunds NY/NJ

Post by nyc888 » Fri Mar 09, 2018 8:58 am

scrabbler1 wrote:
Fri Mar 09, 2018 1:11 am
If you need to adjust your withholding allowances for your NY taxes but keep them the same for your federal allowances, you can file NY form 2104 which is the state version of the federal W-4 form.

https://www.tax.ny.gov/pdf/current_form ... ill_in.pdf

Back in the late 1990s, after I paid off my mortgage, I began taking the standard deduction for NY but kept itemizing for the Feds. I had to change my state withholding allowances for NY to compensate. so going forward I always had a different number of allowances. I left the NJ allowances alone (i.e. same as federal) because it was close enough to what it should have been. But, if you need to adjust your NJ allowances, they have a form similar to NY's form.

http://www.state.nj.us/treasury/taxatio ... t/njw4.pdf
Thanks! I don't have any NJ withholding at all at the moment. I wonder if I need to lower NY withholding to lower the likelihood of getting taxed for the big refund every year from NY.

seawolf21
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Re: Taxable refunds NY/NJ

Post by seawolf21 » Fri Mar 09, 2018 10:26 am

nyc888 wrote:
Fri Mar 09, 2018 8:42 am
seawolf21 wrote:
Wed Mar 07, 2018 6:51 pm
Really depends on your particular set of numbers if the refund is taxable. Are you paying AMT this year? If so, chances are the taxable refund is not really having any effect on your taxes.
Yeah, based on the draft I still owe some AMT this year.
Couple of general observations.

If you work in NYC but don’t live in NYC, then no NYC income tax but there is NY state income tax.

Whatever you pay to NY, you would get as a $1 per $1 credit on NJ so the end result is you still pay the same amount of state income tax holistically (total of NY and NJ combined); it’s just how much of a cut NY and NJ get from that total.

Your 2016 NY tax refund being taxable on 2017 Federal level means you likely itemized your state income on 2016 1040 Schedule A. However if you paid AMT for 2016, then that state income tax deduction probably got negated by AMT. If it is indeed negated by 2016 AMT, then the 2016 NY refund should NOT be taxable on 2017 Federal return.

For example:
Your 2016 Scehdule A list a $20,000 income tax deduction but you receive a $5,000 NY tax refund.

You would then recalculate your 2016 Federal tax with a Schedule A state income tax deduction of $15,000 ($20,000 minus $5,000). If the recalculated total tax on 2016 1040 remains unchanged, the $5,000 refund is NOT taxable in 2017 Federal return. If the recalculated total tax on 2016 1040 decreases, then the $5,000 refund is taxable. If you paid AMT in 2016, chances are the recalculated taxes would be same as before making the $5,000 not taxable this year.

scrabbler1
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Re: Taxable refunds NY/NJ

Post by scrabbler1 » Fri Mar 09, 2018 12:35 pm

nyc888 wrote:
Fri Mar 09, 2018 8:58 am
scrabbler1 wrote:
Fri Mar 09, 2018 1:11 am
If you need to adjust your withholding allowances for your NY taxes but keep them the same for your federal allowances, you can file NY form 2104 which is the state version of the federal W-4 form.

https://www.tax.ny.gov/pdf/current_form ... ill_in.pdf

Back in the late 1990s, after I paid off my mortgage, I began taking the standard deduction for NY but kept itemizing for the Feds. I had to change my state withholding allowances for NY to compensate. so going forward I always had a different number of allowances. I left the NJ allowances alone (i.e. same as federal) because it was close enough to what it should have been. But, if you need to adjust your NJ allowances, they have a form similar to NY's form.

http://www.state.nj.us/treasury/taxatio ... t/njw4.pdf
Thanks! I don't have any NJ withholding at all at the moment. I wonder if I need to lower NY withholding to lower the likelihood of getting taxed for the big refund every year from NY.
I hope you aren't subject to any underwithholding penalties from NJ because your employer refuses to or is unable to withhold NJ taxes. Surely, a NYC employer should be able to handle that likely possibility. If, for some reason, your employer is unwilling or unable to withhold any NJ taxes, you might want to pay estimated NJ taxes during the year. If you have any non-NJ income, such as investment income, you might owe some NJ taxes on it if it isn't canceled out by any resident credit.

As for your NY taxes, if you are being overwithheld, you should simply file a NY IT-2104 form with your payroll department so you can have less withheld and see that money now instead of waiting a year to get it back. You can use some of that extra money to pay your estimated NJ taxes, in effect doing what your employer is unable or unwilling to do.

nyc888
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Re: Taxable refunds NY/NJ

Post by nyc888 » Fri Mar 09, 2018 1:43 pm

seawolf21 wrote:
Fri Mar 09, 2018 10:26 am
nyc888 wrote:
Fri Mar 09, 2018 8:42 am
seawolf21 wrote:
Wed Mar 07, 2018 6:51 pm
Really depends on your particular set of numbers if the refund is taxable. Are you paying AMT this year? If so, chances are the taxable refund is not really having any effect on your taxes.
Yeah, based on the draft I still owe some AMT this year.
Couple of general observations.

If you work in NYC but don’t live in NYC, then no NYC income tax but there is NY state income tax.

Whatever you pay to NY, you would get as a $1 per $1 credit on NJ so the end result is you still pay the same amount of state income tax holistically (total of NY and NJ combined); it’s just how much of a cut NY and NJ get from that total.

Your 2016 NY tax refund being taxable on 2017 Federal level means you likely itemized your state income on 2016 1040 Schedule A. However if you paid AMT for 2016, then that state income tax deduction probably got negated by AMT. If it is indeed negated by 2016 AMT, then the 2016 NY refund should NOT be taxable on 2017 Federal return.

For example:
Your 2016 Scehdule A list a $20,000 income tax deduction but you receive a $5,000 NY tax refund.

You would then recalculate your 2016 Federal tax with a Schedule A state income tax deduction of $15,000 ($20,000 minus $5,000). If the recalculated total tax on 2016 1040 remains unchanged, the $5,000 refund is NOT taxable in 2017 Federal return. If the recalculated total tax on 2016 1040 decreases, then the $5,000 refund is taxable. If you paid AMT in 2016, chances are the recalculated taxes would be same as before making the $5,000 not taxable this year.
Thanks a lot! Very clear.

nyc888
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Re: Taxable refunds NY/NJ

Post by nyc888 » Fri Mar 09, 2018 1:47 pm

scrabbler1 wrote:
Fri Mar 09, 2018 12:35 pm
nyc888 wrote:
Fri Mar 09, 2018 8:58 am
scrabbler1 wrote:
Fri Mar 09, 2018 1:11 am
If you need to adjust your withholding allowances for your NY taxes but keep them the same for your federal allowances, you can file NY form 2104 which is the state version of the federal W-4 form.

https://www.tax.ny.gov/pdf/current_form ... ill_in.pdf

Back in the late 1990s, after I paid off my mortgage, I began taking the standard deduction for NY but kept itemizing for the Feds. I had to change my state withholding allowances for NY to compensate. so going forward I always had a different number of allowances. I left the NJ allowances alone (i.e. same as federal) because it was close enough to what it should have been. But, if you need to adjust your NJ allowances, they have a form similar to NY's form.

http://www.state.nj.us/treasury/taxatio ... t/njw4.pdf
Thanks! I don't have any NJ withholding at all at the moment. I wonder if I need to lower NY withholding to lower the likelihood of getting taxed for the big refund every year from NY.
I hope you aren't subject to any underwithholding penalties from NJ because your employer refuses to or is unable to withhold NJ taxes. Surely, a NYC employer should be able to handle that likely possibility. If, for some reason, your employer is unwilling or unable to withhold any NJ taxes, you might want to pay estimated NJ taxes during the year. If you have any non-NJ income, such as investment income, you might owe some NJ taxes on it if it isn't canceled out by any resident credit.

As for your NY taxes, if you are being overwithheld, you should simply file a NY IT-2104 form with your payroll department so you can have less withheld and see that money now instead of waiting a year to get it back. You can use some of that extra money to pay your estimated NJ taxes, in effect doing what your employer is unable or unwilling to do.
Yeah. Will look into that. Thanks!

ivk5
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Re: Taxable refunds NY/NJ

Post by ivk5 » Fri Mar 09, 2018 2:01 pm

Pay close attention to whether your state tax refunds are really taxable if you're paying AMT. Tax software and tax preparers sometimes get this wrong, falsely assuming if you itemized and deducted state taxes paid that the subsequent refund of those taxes is taxable income in the year received.

In fact it is taxable only to the extent the prior deduction produced an actual tax benefit - if you're subject to AMT, some or all of the deduction did not produce an actual tax benefit.

pshonore
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Re: Taxable refunds NY/NJ

Post by pshonore » Fri Mar 09, 2018 4:18 pm

nyc888 wrote:
Fri Mar 09, 2018 8:47 am
scrabbler1 wrote:
Wed Mar 07, 2018 8:38 pm
pshonore wrote:
Wed Mar 07, 2018 8:09 pm
Is there a reciprocal agreement between NY and NJ? If not, I don't understand why you got all NY withholding back. You generally owe taxes where you work, and get a credit for that which reduces your resident state tax bill
NY and NJ have no reciprocal agreement. As to why the OP got any NYS taxes back, I don't really know, either.

Back in my working years, my old company was in NYC and we had a lot of NJ residents who, like the OP, filed NJ resident tax returns and NY non-resident tax returns. What happened, as some of them told me at the time (this was in the 1990s), they ended up with a NY tax liability but no NJ tax liability. This was because NY's tax rates were much higher than NJ's, so their resident credit for taxes paid to NY was 100%, the maximum allowed.

Eventually, the company moved to NJ so all of us NY residents had to file NJ non-resident tax returns. But with NJ's tax rates lower than NY's, our resident credit was a carve-out of some of the taxes owed to NY. The NJ residents saw a tax cut, paying less to NJ than they did to NY.

My payroll dep't sometimes misallocated the NY and NJ withholding, so I sometimes ended up owing NJ extra while getting a refund from NY.
Thanks for the reply. I asked around and other friends living in NJ and working in NYC are doing the same, i.e. do non-resident NY filing, get most withholding back, file NJ resident taxes and pay most of the refunds back to NJ. So I was thinking if the refunds always get taxed as income I should adjust my withholding as low as possible to save taxes.
There is still something amiss here. If you are working in NY state, you owe taxes on all that income to NY. There should be no reason why you or anyone who works in NY state should get most of their NY withholding back. If your employer is erroneously withholding NYC tax, that is a different matter.

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grabiner
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Re: Taxable refunds NY/NJ

Post by grabiner » Fri Mar 09, 2018 11:01 pm

nyc888 wrote:
Fri Mar 09, 2018 8:47 am
Thanks for the reply. I asked around and other friends living in NJ and working in NYC are doing the same, i.e. do non-resident NY filing, get most withholding back, file NJ resident taxes and pay most of the refunds back to NJ. So I was thinking if the refunds always get taxed as income I should adjust my withholding as low as possible to save taxes.
The refund is only taxable if it s a refund of previously deducted payments, which is close to a wash. For example, if you paid $10K too much income tax to NY in 2017, and deducted that $10K from your 2017 federal taxes, then the $10K refund you receive in 2018 will be taxable. If you didn't deduct the payment (because the AMT prevented you from getting any benefit), the refund is not taxable in 2018.

It's still better to avoid getting a big state tax refund. You might have a delay getting your refund if something goes wrong; this has happened to me three times with state taxes. And some provisions in the federal tax code, such as the child tax credit, are based on adjusted gross income, rather than taxable income, so you have a net loss for deducting money one year and reporting an equal amount as income the next year.
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scrabbler1
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Re: Taxable refunds NY/NJ

Post by scrabbler1 » Sat Mar 10, 2018 11:05 am

grabiner wrote:
Fri Mar 09, 2018 11:01 pm
nyc888 wrote:
Fri Mar 09, 2018 8:47 am
Thanks for the reply. I asked around and other friends living in NJ and working in NYC are doing the same, i.e. do non-resident NY filing, get most withholding back, file NJ resident taxes and pay most of the refunds back to NJ. So I was thinking if the refunds always get taxed as income I should adjust my withholding as low as possible to save taxes.
The refund is only taxable if it s a refund of previously deducted payments, which is close to a wash. For example, if you paid $10K too much income tax to NY in 2017, and deducted that $10K from your 2017 federal taxes, then the $10K refund you receive in 2018 will be taxable. If you didn't deduct the payment (because the AMT prevented you from getting any benefit), the refund is not taxable in 2018.

It's still better to avoid getting a big state tax refund. You might have a delay getting your refund if something goes wrong; this has happened to me three times with state taxes. And some provisions in the federal tax code, such as the child tax credit, are based on adjusted gross income, rather than taxable income, so you have a net loss for deducting money one year and reporting an equal amount as income the next year.
Besides the child tax credit, I know of two other provisions where being able to net out a tax refund/rebate with the current year's state/local tax deduction saved me money compared to having to declare the refund/rebate in next year's taxes as adjusted gross income. The first is medical expenses which are based in part on one's AGI. Raise your AGI and your med expenses go down. The second is the ACA premium subsidy which uses a percent of (M)AGI to determine the subsidy - and if one is eligible at all. In 2016, I was about to mistakenly fail to net out 1 of 2 state property tax rebates from my state taxes paid; realizing this and fixing it before I filed my return saved me about $100.

nyc888
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Re: Taxable refunds NY/NJ

Post by nyc888 » Mon Mar 19, 2018 4:33 pm

pshonore wrote:
Fri Mar 09, 2018 4:18 pm
nyc888 wrote:
Fri Mar 09, 2018 8:47 am
scrabbler1 wrote:
Wed Mar 07, 2018 8:38 pm
pshonore wrote:
Wed Mar 07, 2018 8:09 pm
Is there a reciprocal agreement between NY and NJ? If not, I don't understand why you got all NY withholding back. You generally owe taxes where you work, and get a credit for that which reduces your resident state tax bill
NY and NJ have no reciprocal agreement. As to why the OP got any NYS taxes back, I don't really know, either.

Back in my working years, my old company was in NYC and we had a lot of NJ residents who, like the OP, filed NJ resident tax returns and NY non-resident tax returns. What happened, as some of them told me at the time (this was in the 1990s), they ended up with a NY tax liability but no NJ tax liability. This was because NY's tax rates were much higher than NJ's, so their resident credit for taxes paid to NY was 100%, the maximum allowed.

Eventually, the company moved to NJ so all of us NY residents had to file NJ non-resident tax returns. But with NJ's tax rates lower than NY's, our resident credit was a carve-out of some of the taxes owed to NY. The NJ residents saw a tax cut, paying less to NJ than they did to NY.

My payroll dep't sometimes misallocated the NY and NJ withholding, so I sometimes ended up owing NJ extra while getting a refund from NY.
Thanks for the reply. I asked around and other friends living in NJ and working in NYC are doing the same, i.e. do non-resident NY filing, get most withholding back, file NJ resident taxes and pay most of the refunds back to NJ. So I was thinking if the refunds always get taxed as income I should adjust my withholding as low as possible to save taxes.
There is still something amiss here. If you are working in NY state, you owe taxes on all that income to NY. There should be no reason why you or anyone who works in NY state should get most of their NY withholding back. If your employer is erroneously withholding NYC tax, that is a different matter.
Understood.

One other technical point. My accountant messed up my 2016 taxes. I earned all my income from work in NYC, although in 2016 I only lived in NYC from Jan 1, 2016 to Feb 15, 2016 and afterwards I moved to my current apartment in New Jersey but still worked in NYC. From what I understand, my income in 2016 was 100% taxable by New York state, 1.5-month of that was taxable by New York City and 10.5-month of that was taxable by New Jersey state. Is this correct? My accountant had me getting almost 100% refunds from New York state withholding and paid most of that to New Jersey. I believe I would only get a little refund from New York state and should owe a little to nothing to New Jersey.

He's doing my amended 2016 returns now but he told me the software doesn't allow him to do what I describe above. Am I wrong?

nyc888
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Re: Taxable refunds NY/NJ

Post by nyc888 » Mon Mar 19, 2018 4:37 pm

seawolf21 wrote:
Fri Mar 09, 2018 10:26 am
nyc888 wrote:
Fri Mar 09, 2018 8:42 am
seawolf21 wrote:
Wed Mar 07, 2018 6:51 pm
Really depends on your particular set of numbers if the refund is taxable. Are you paying AMT this year? If so, chances are the taxable refund is not really having any effect on your taxes.
Yeah, based on the draft I still owe some AMT this year.
Couple of general observations.

If you work in NYC but don’t live in NYC, then no NYC income tax but there is NY state income tax.

Whatever you pay to NY, you would get as a $1 per $1 credit on NJ so the end result is you still pay the same amount of state income tax holistically (total of NY and NJ combined); it’s just how much of a cut NY and NJ get from that total.

Your 2016 NY tax refund being taxable on 2017 Federal level means you likely itemized your state income on 2016 1040 Schedule A. However if you paid AMT for 2016, then that state income tax deduction probably got negated by AMT. If it is indeed negated by 2016 AMT, then the 2016 NY refund should NOT be taxable on 2017 Federal return.

For example:
Your 2016 Scehdule A list a $20,000 income tax deduction but you receive a $5,000 NY tax refund.

You would then recalculate your 2016 Federal tax with a Schedule A state income tax deduction of $15,000 ($20,000 minus $5,000). If the recalculated total tax on 2016 1040 remains unchanged, the $5,000 refund is NOT taxable in 2017 Federal return. If the recalculated total tax on 2016 1040 decreases, then the $5,000 refund is taxable. If you paid AMT in 2016, chances are the recalculated taxes would be same as before making the $5,000 not taxable this year.
Thanks!

One other technical point. My accountant messed up my 2016 taxes. I earned all my income from work in NYC, although in 2016 I only lived in NYC from Jan 1, 2016 to Feb 15, 2016 and afterwards I moved to my current apartment in New Jersey but still worked in NYC. From what I understand, my income in 2016 was 100% taxable by New York state, 1.5-month of that was taxable by New York City and 10.5-month of that was taxable by New Jersey state. Is this correct? My accountant had me getting almost 100% refunds from New York state withholding and paid most of that to New Jersey. I believe I would only get a little refund from New York state and should owe a little to nothing to New Jersey.

He's doing my amended 2016 returns now but he told me the software doesn't allow him to do what I describe above. Am I wrong?

dknightd
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Re: Taxable refunds NY/NJ

Post by dknightd » Mon Mar 19, 2018 5:00 pm

Something seems wrong about this. As I understand it if you work (or earn money) in NY then you have to pay NY taxes on that money. Then when you do your NJ return you get a credit for having paid tax to the other state. You should be filing two state tax returns: non-resident for NY, and resident for NJ.

Google "work in NYC live in NJ taxes"

I think you should have a talk to your accountant and make sure they are familiar with how tax law works . . .

dknightd
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Re: Taxable refunds NY/NJ

Post by dknightd » Mon Mar 19, 2018 5:09 pm

nyc888 wrote:
Mon Mar 19, 2018 4:37 pm

One other technical point. My accountant messed up my 2016 taxes. I earned all my income from work in NYC, although in 2016 I only lived in NYC from Jan 1, 2016 to Feb 15, 2016 and afterwards I moved to my current apartment in New Jersey but still worked in NYC. From what I understand, my income in 2016 was 100% taxable by New York state, 1.5-month of that was taxable by New York City and 10.5-month of that was taxable by New Jersey state. Is this correct? My accountant had me getting almost 100% refunds from New York state withholding and paid most of that to New Jersey. I believe I would only get a little refund from New York state and should owe a little to nothing to New Jersey.

He's doing my amended 2016 returns now but he told me the software doesn't allow him to do what I describe above. Am I wrong?
I think you are right. But I'm not a tax expert . . .

nyc888
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Re: Taxable refunds NY/NJ

Post by nyc888 » Mon Mar 19, 2018 5:22 pm

dknightd wrote:
Mon Mar 19, 2018 5:00 pm
Something seems wrong about this. As I understand it if you work (or earn money) in NY then you have to pay NY taxes on that money. Then when you do your NJ return you get a credit for having paid tax to the other state. You should be filing two state tax returns: non-resident for NY, and resident for NJ.

Google "work in NYC live in NJ taxes"

I think you should have a talk to your accountant and make sure they are familiar with how tax law works . . .
Yeah. I had to do amended taxes for 2016. I learned that my accountant did it wrong because all my 2016 NY state refunds (huge amount) became all taxable in 1040 line 10.

dknightd
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Re: Taxable refunds NY/NJ

Post by dknightd » Mon Mar 19, 2018 6:19 pm

You'll probably have to also refile for 2017, or ask for an extension. I hope your accountant is not charging extra for correcting the mistakes.
In the end it will probably be a wash. The taxes you deducted from NJ that year, are probably what you are seeing as your taxable refund from NY. So on the Fed form it is likely a wash. Unless your accountant tried to double dip and claim deductions for both NY and NJ taxes last year. Bottom line is, you signed the forms, you should have at least some understanding of what you sign

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grabiner
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Re: Taxable refunds NY/NJ

Post by grabiner » Mon Mar 19, 2018 10:43 pm

nyc888 wrote:
Mon Mar 19, 2018 4:37 pm
One other technical point. My accountant messed up my 2016 taxes. I earned all my income from work in NYC, although in 2016 I only lived in NYC from Jan 1, 2016 to Feb 15, 2016 and afterwards I moved to my current apartment in New Jersey but still worked in NYC. From what I understand, my income in 2016 was 100% taxable by New York state, 1.5-month of that was taxable by New York City and 10.5-month of that was taxable by New Jersey state. Is this correct? My accountant had me getting almost 100% refunds from New York state withholding and paid most of that to New Jersey. I believe I would only get a little refund from New York state and should owe a little to nothing to New Jersey.

He's doing my amended 2016 returns now but he told me the software doesn't allow him to do what I describe above. Am I wrong?
You should have filed a part-year and non-resident NY return, and a part-year NJ return. You owe NYC tax on all your income earned through Feb. 15. From Feb. 16 on, you owe NY tax but not NYC tax on your salary; you would not owe NY tax on other income such as interest. From Feb. 16 on, you also owe NJ tax on all your income, but you could take a credit against NJ tax for the NY tax earned on the same income.

Therefore, you shouldn't get a big refund from NY; you should owe relatively little NJ tax.
Wiki David Grabiner

seawolf21
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Re: Taxable refunds NY/NJ

Post by seawolf21 » Wed Mar 21, 2018 7:09 pm

nyc888 wrote:
Mon Mar 19, 2018 4:37 pm
Thanks!

One other technical point. My accountant messed up my 2016 taxes. I earned all my income from work in NYC, although in 2016 I only lived in NYC from Jan 1, 2016 to Feb 15, 2016 and afterwards I moved to my current apartment in New Jersey but still worked in NYC. From what I understand, my income in 2016 was 100% taxable by New York state, 1.5-month of that was taxable by New York City and 10.5-month of that was taxable by New Jersey state. Is this correct? My accountant had me getting almost 100% refunds from New York state withholding and paid most of that to New Jersey. I believe I would only get a little refund from New York state and should owe a little to nothing to New Jersey.

He's doing my amended 2016 returns now but he told me the software doesn't allow him to do what I describe above. Am I wrong?
This would be accurate.

Does your accountant specialize in income taxes? If so, then software not allowing this scenario is no excuse as accountant either 1.) not aware of your tax obligations or 2.) aware of tax obligations but too lazy to prepare by hand if software doesn't allow and to inform you that the tax return is knowingly inaccurate.

I believe even Turbo Tax allows for this.

Page 30 (for Line 51) in Instructions for IT-203 https://www.tax.ny.gov/pdf/current_forms/it/it203i.pdf provides specific instructions for part-year NYC residents; need to file IT-203 and IT-360.1.

nyc888
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Re: Taxable refunds NY/NJ

Post by nyc888 » Thu Mar 22, 2018 4:59 pm

seawolf21 wrote:
Wed Mar 21, 2018 7:09 pm
nyc888 wrote:
Mon Mar 19, 2018 4:37 pm
Thanks!

One other technical point. My accountant messed up my 2016 taxes. I earned all my income from work in NYC, although in 2016 I only lived in NYC from Jan 1, 2016 to Feb 15, 2016 and afterwards I moved to my current apartment in New Jersey but still worked in NYC. From what I understand, my income in 2016 was 100% taxable by New York state, 1.5-month of that was taxable by New York City and 10.5-month of that was taxable by New Jersey state. Is this correct? My accountant had me getting almost 100% refunds from New York state withholding and paid most of that to New Jersey. I believe I would only get a little refund from New York state and should owe a little to nothing to New Jersey.

He's doing my amended 2016 returns now but he told me the software doesn't allow him to do what I describe above. Am I wrong?
This would be accurate.

Does your accountant specialize in income taxes? If so, then software not allowing this scenario is no excuse as accountant either 1.) not aware of your tax obligations or 2.) aware of tax obligations but too lazy to prepare by hand if software doesn't allow and to inform you that the tax return is knowingly inaccurate.

I believe even Turbo Tax allows for this.

Page 30 (for Line 51) in Instructions for IT-203 https://www.tax.ny.gov/pdf/current_forms/it/it203i.pdf provides specific instructions for part-year NYC residents; need to file IT-203 and IT-360.1.
Agree! Thanks

nyc888
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Re: Taxable refunds NY/NJ

Post by nyc888 » Thu Mar 22, 2018 4:59 pm

grabiner wrote:
Mon Mar 19, 2018 10:43 pm
nyc888 wrote:
Mon Mar 19, 2018 4:37 pm
One other technical point. My accountant messed up my 2016 taxes. I earned all my income from work in NYC, although in 2016 I only lived in NYC from Jan 1, 2016 to Feb 15, 2016 and afterwards I moved to my current apartment in New Jersey but still worked in NYC. From what I understand, my income in 2016 was 100% taxable by New York state, 1.5-month of that was taxable by New York City and 10.5-month of that was taxable by New Jersey state. Is this correct? My accountant had me getting almost 100% refunds from New York state withholding and paid most of that to New Jersey. I believe I would only get a little refund from New York state and should owe a little to nothing to New Jersey.

He's doing my amended 2016 returns now but he told me the software doesn't allow him to do what I describe above. Am I wrong?
You should have filed a part-year and non-resident NY return, and a part-year NJ return. You owe NYC tax on all your income earned through Feb. 15. From Feb. 16 on, you owe NY tax but not NYC tax on your salary; you would not owe NY tax on other income such as interest. From Feb. 16 on, you also owe NJ tax on all your income, but you could take a credit against NJ tax for the NY tax earned on the same income.

Therefore, you shouldn't get a big refund from NY; you should owe relatively little NJ tax.
Thanks!

nyc888
Posts: 22
Joined: Wed Mar 07, 2018 6:10 pm

Re: Taxable refunds NY/NJ

Post by nyc888 » Thu Mar 22, 2018 5:00 pm

dknightd wrote:
Mon Mar 19, 2018 6:19 pm
You'll probably have to also refile for 2017, or ask for an extension. I hope your accountant is not charging extra for correcting the mistakes.
In the end it will probably be a wash. The taxes you deducted from NJ that year, are probably what you are seeing as your taxable refund from NY. So on the Fed form it is likely a wash. Unless your accountant tried to double dip and claim deductions for both NY and NJ taxes last year. Bottom line is, you signed the forms, you should have at least some understanding of what you sign
No he's not charging extra. But I literally audited 3 rounds of drafts and pointed out his mistakes with your guys' help.

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