Multi-state tax question

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Tom_T
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Multi-state tax question

Post by Tom_T »

Asking for a friend...

I'm personally familiar with the whole "live in NJ, work in NY" tax situation. Here's an added wrinkle. This person worked in NYC all of 2024, sometimes remote but with the occasional trip to the office. And, he lived seven months in NJ, four months in PA, then the final month in NYC. His employer was aware that he was in PA at one time.

I haven't asked him what his W2 looks like. I assume NY tax withheld; don't know about NJ and PA. Is he looking at filing returns for three states, with prorated income for each?

I may advise him to use an accountant. His taxes are pretty basic - single, standard deduction, some interest income - but filing three different state returns, with perhaps different reciprocity rules, sounds tricky. I'd like to at least tell him what issues are in play, and then he can take it from there.
MarkNYC
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Re: Multi-state tax question

Post by MarkNYC »

Here are the issues to be considered:

1. The taxpayer will be required to file 3 state tax returns: a part-year resident return for PA and for NJ, and for NY a Form IT-203 which will serve as both a part-year resident return for the one-month residency and a nonresident return for the rest of the year. The NY state return will also include a Form IT-360.1 to show the one-month NY City residency related to NYC income tax.

2. Each tax return will report all income received during the residency period. The NY return will include both the income received during the NY residency period and the NY state nonresident income. The PA and NJ returns will be allowed a credit for tax paid to NY related to NY state nonresident income received (and taxed) during each state's residency period.

It's rare to have to file 3 different part-year resident state returns for one calendar year. Adding nonresident state income to the mix makes it more complicated. Having only a W-2 and some interest income simplifies it a bit, but even competent and experienced tax preparers don't see this often so the tax preparation will be prone to mistakes.
Topic Author
Tom_T
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Re: Multi-state tax question

Post by Tom_T »

Thanks, that's a big help. Yes, it's going to be hairy. I wonder if FreeTaxUSA can handle this situation?
pancake19
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Re: Multi-state tax question

Post by pancake19 »

turbotax definitely can easily do this, no idea about freetaxUSA, it actually doesn't seem that complicated at all, maybe will take like 10 minutes more in turbotax...
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grabiner
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Re: Multi-state tax question

Post by grabiner »

PA has reciprocity with NJ, but neither state has reciprocity with NY. Thus he will have to pay NY on his salary.

Under NY tax law, if your in-person workplace is in NY, telework in another state has a source in NY. Therefore, all of his income is taxable to NY even when he was physically working in NJ or PA.

He will owe NJ and PA tax on all of his income earned while a resident, but can take a credit for tax paid to NY on the the same income.

NY City tax is imposed only on residents, so he will owe that tax only for income earned while he was a NYC resident; for the rest of the year, he owes only NY state tax (and PA city tax if his PA city charges one).
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Katietsu
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Re: Multi-state tax question

Post by Katietsu »

Using Turbotax along with excellent information from MarkNYC and grabiner is likely to get a more accurate result than one would see from a random tax preparer.
AnEngineer
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Re: Multi-state tax question

Post by AnEngineer »

Was he ever a NJ resident? Given the quick move maybe he never was.
That your facts or argument are wrong does not necessarily mean I disagree with your conclusion
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Nestegg_User
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Re: Multi-state tax question

Post by Nestegg_User »

AnEngineer wrote: Wed Feb 05, 2025 6:27 am Was he ever a NJ resident? Given the quick move maybe he never was.
It was stated SEVEN months in NJ... so definitely resident

The odd case here is that it would have been a non-resident NY if his sourced income wasn't from the state.
AnEngineer
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Re: Multi-state tax question

Post by AnEngineer »

Nestegg_User wrote: Wed Feb 05, 2025 6:39 am
AnEngineer wrote: Wed Feb 05, 2025 6:27 am Was he ever a NJ resident? Given the quick move maybe he never was.
It was stated SEVEN months in NJ... so definitely resident

The odd case here is that it would have been a non-resident NY if his sourced income wasn't from the state.
It depends on state law. If it was expected to be temporary, then possibly no NJ residency.
That your facts or argument are wrong does not necessarily mean I disagree with your conclusion
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Nestegg_User
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Re: Multi-state tax question

Post by Nestegg_User »

AnEngineer wrote: Wed Feb 05, 2025 6:43 am
Nestegg_User wrote: Wed Feb 05, 2025 6:39 am

It was stated SEVEN months in NJ... so definitely resident

The odd case here is that it would have been a non-resident NY if his sourced income wasn't from the state.
It depends on state law. If it was expected to be temporary, then possibly no NJ residency.
Statutory resident since, even if they don't consider it their "domicile", they spent over 183 days there. Taxed.

It also appears that, even though NY and NJ have agreements, NY they doesn't with PA. And with the PA and NJ having a reciprocal tax agreement (and the OP had spent under 183 days in PA and had moved so would be part-year resident) had the source income been from NJ the tax treatment "might" have been easier, just NJ and NY/NYC.
(and with the recent PA "convenience" bill, PA might likely have taken out its taxes, as it is noted as being retroactive. The OP will have to verify on their forms.)
AnEngineer
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Re: Multi-state tax question

Post by AnEngineer »

Nestegg_User wrote: Wed Feb 05, 2025 7:26 am
AnEngineer wrote: Wed Feb 05, 2025 6:43 am

It depends on state law. If it was expected to be temporary, then possibly no NJ residency.
Statutory resident since, even if they don't consider it their "domicile", they spent over 183 days there. Taxed.
"If New Jersey is not your domicile, you are only considered a resident if you maintain a permanent home and spend more than 183 days here."
-https://www.nj.gov/treasury/taxation/pd ... e/git6.pdf
Seems to also depend on whether there's a permanent home in NJ.
That your facts or argument are wrong does not necessarily mean I disagree with your conclusion
Topic Author
Tom_T
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Re: Multi-state tax question

Post by Tom_T »

OP here. The person in question was a regular NJ resident for years. Because of an apartment fire, he was forced to vacate in August, and circumstances led him to Pennsylvania. He did inform his NY employers; I do not know if they withheld any PA tax in addition to his NY tax. December 1, instead of returning to his now-renovated apartment, he fulfilled a goal of relocating to NYC.

An odd set of circumstances that wouldn't happen again.
bsteiner
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Re: Multi-state tax question

Post by bsteiner »

Tom_T wrote: Wed Feb 05, 2025 7:47 am OP here. The person in question was a regular NJ resident for years. Because of an apartment fire, he was forced to vacate in August, and circumstances led him to Pennsylvania. He did inform his NY employers; I do not know if they withheld any PA tax in addition to his NY tax. December 1, instead of returning to his now-renovated apartment, he fulfilled a goal of relocating to NYC.

An odd set of circumstances that wouldn't happen again.
In that case, he may have remained domiciled in New Jersey during his 4 months in Pennsylvania.
Topic Author
Tom_T
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Re: Multi-state tax question

Post by Tom_T »

bsteiner wrote: Wed Feb 05, 2025 9:55 am
Tom_T wrote: Wed Feb 05, 2025 7:47 am OP here. The person in question was a regular NJ resident for years. Because of an apartment fire, he was forced to vacate in August, and circumstances led him to Pennsylvania. He did inform his NY employers; I do not know if they withheld any PA tax in addition to his NY tax. December 1, instead of returning to his now-renovated apartment, he fulfilled a goal of relocating to NYC.

An odd set of circumstances that wouldn't happen again.
In that case, he may have remained domiciled in New Jersey during his 4 months in Pennsylvania.
Maybe... I'll have to ask him if his employer actually changed his address on his HR record to PA at the time.

Life lesson: don't live in three different states in one calendar year if you can help it. :)
humblecoder
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Re: Multi-state tax question

Post by humblecoder »

I am not a lawyer, accountant, or tax professional.

I am not sure if you would be considered a RESIDENT of PA for tax purposes. Based upon what is posted on the PA Department of Revenue website (https://www.pa.gov/agencies/revenue/res ... dency.html), you would only be considered a resident for tax purposes if:

1. Pennsylvania is your domicile, or
2. You have spent more than 181 days in PA

Clearly, moving to PA temporarily due to an apartment fire would not qualify as a change in domicile from NJ to PA. And since you were only in PA for 4 months (under 181 days), you wouldn't pass that test for residency either.

Based upon that, it would seem like your situation would be as follows:

1. Part year resident of NJ (Jan - Nov). All income earned Jan-Nov would be subject to NJ tax

2. Non-resident of NY (Jan-Nov) + Part year resident of NY (Dec). Any NY-source income earned from Jan-Nov would be subject to tax (your time as a non-resident but working a NY job). And all income earned in Dec would be subject to tax (your time as a resident of NY)

3. Non-resident of PA (Aug - Nov). You would file as a non-resident and any PA-source income earned in 2024 would be subject to tax. Presumably, your W2 income earned from your NY job while physically in PA would be subject to PA tax.

I am not an expert on tax law in those states, but usually for the time you are a resident of a state, all income earned during that time is subject to tax. Meanwhile, if you are nonresident, only income "sourced" from that state would be subject to tax.

It would seem like NY, NJ, and PA would have claim to your W2 income from Aug-Nov:
- NJ, because you were still domiciled there and considered a resident
- NY, because you were working for an employer based in NY
- PA, because you were physically in PA while working

Of course, you have the interactions between each state's tax, treaties between states, tax credits for taxes paid to other states, which makes it more complicated.

Again, disclaimer that I am not an accountant. I think your situation seems sufficiently complex that it might be worth a consultation with a professional.
AnEngineer
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Re: Multi-state tax question

Post by AnEngineer »

Tom_T wrote: Wed Feb 05, 2025 10:02 am Life lesson: don't live in three different states in one calendar year if you can help it. :)
In my experience if you just get the forms and instructions for each state it's fairly straightforward to compute after the fact.

Planning is harder, as some states don't tax based on when you're there but rather a proration of the tax that would be due from your total income based on the fraction sourced to that state out of your total income.
That your facts or argument are wrong does not necessarily mean I disagree with your conclusion
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grabiner
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Re: Multi-state tax question

Post by grabiner »

bsteiner wrote: Wed Feb 05, 2025 9:55 am
Tom_T wrote: Wed Feb 05, 2025 7:47 am OP here. The person in question was a regular NJ resident for years. Because of an apartment fire, he was forced to vacate in August, and circumstances led him to Pennsylvania. He did inform his NY employers; I do not know if they withheld any PA tax in addition to his NY tax. December 1, instead of returning to his now-renovated apartment, he fulfilled a goal of relocating to NYC.

An odd set of circumstances that wouldn't happen again.
In that case, he may have remained domiciled in New Jersey during his 4 months in Pennsylvania.
And NJ and PA have reciprocity, so any salary earned in PA while he was a NJ resident would not be taxed by PA.
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MarkNYC
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Re: Multi-state tax question

Post by MarkNYC »

grabiner wrote: Wed Feb 05, 2025 7:18 pm
bsteiner wrote: Wed Feb 05, 2025 9:55 am
In that case, he may have remained domiciled in New Jersey during his 4 months in Pennsylvania.
And NJ and PA have reciprocity, so any salary earned in PA while he was a NJ resident would not be taxed by PA.
In the OP's case, I'm not sure if the NJ-PA reciprocity applies. Without reading the specific language of the reciprocity law, I think it generally states that a NJ resident who is employed in PA pays tax only to NJ on wage income. But in this case the individual is employed in NY, not in PA, even though some of the work is performed remotely from PA. And PA taxes nonresident income earned from personal services performed in PA, which includes remote services for an employer outside PA as long as the individual was physically in PA when the services were performed.

So I think the OP's friend has some tax issues to be sorted out.
Topic Author
Tom_T
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Re: Multi-state tax question

Post by Tom_T »

MarkNYC wrote: Wed Feb 05, 2025 8:16 pm
grabiner wrote: Wed Feb 05, 2025 7:18 pm

And NJ and PA have reciprocity, so any salary earned in PA while he was a NJ resident would not be taxed by PA.
In the OP's case, I'm not sure if the NJ-PA reciprocity applies. Without reading the specific language of the reciprocity law, I think it generally states that a NJ resident who is employed in PA pays tax only to NJ on wage income. But in this case the individual is employed in NY, not in PA, even though some of the work is performed remotely from PA. And PA taxes nonresident income earned from personal services performed in PA, which includes remote services for an employer outside PA as long as the individual was physically in PA when the services were performed.

So I think the OP's friend has some tax issues to be sorted out.
Update: my friend has his W2s. He has three:

- One is for NY for the total income for the year, but includes one month of NYC wages/tax to cover his December residency in NYC.

- One is for NJ, for about 60% of the annual income, with no tax withheld. That is what I would expect based on my own experience as a NJ-NY commuter.

- One is for PA for a third of the annual income, with some tax withheld.

I'm not sure how they came up with these breakdowns since they don't exactly follow the facts of seven months NJ and four months PA, but it's close. Regardless, those are the numbers reported to the respective states.
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Nestegg_User
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Re: Multi-state tax question

Post by Nestegg_User »

AnEngineer wrote: Wed Feb 05, 2025 7:38 am
Nestegg_User wrote: Wed Feb 05, 2025 7:26 am

Statutory resident since, even if they don't consider it their "domicile", they spent over 183 days there. Taxed.
"If New Jersey is not your domicile, you are only considered a resident if you maintain a permanent home and spend more than 183 days here."
-https://www.nj.gov/treasury/taxation/pd ... e/git6.pdf
Seems to also depend on whether there's a permanent home in NJ.
See page 4 of your referenced document... you DO pay tax


AFA the PA withholding, PA passes a bill (noted above, the convenience for employer) which is why I noted that they needed to check whether PA taxes had been withheld.

{While I'm not CPA, I asked spouse ... who is; I do admit I should have limited the statement to say ... statutorially, one would be taxed by the state of NJ. Other states use the term statutory resident to show that, despite one not having a determination to make it their permanent home, they have exceeded a certain day limit; in some cases persons have been encouraged to keep a daily log, with receipts showing prescence in other states, if they anticipate they might get close to those limits (especially notable for CA/NV and OR/WA individuals).}
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