17 Jun What will working from home do to my next tax return?
Q. I live in New Jersey and I work for a company based in New York City. My regular office is in New York City, but it’s closed because of the coronavirus and I work remotely from home. How does this impact the reporting of my 2020 taxes for both states? Is the income earned while working remotely considered as earned only in New Jersey or is my total pay still considered totally New York income?
A. With so many people working at home, you raise a smart question.
When you are a resident of one state and work in another, your income is taxed in both states because the income you receive is always taxable to your resident state, said Steven Gallo, a certified public accountant and personal financial specialist with U.S. Financial Services in Fairfield.
However, he said, you are given a tax credit in your resident state, New Jersey, for any taxes paid to a non-resident state for income you earn while physically working in that state.
Therefore, last year, if you worked entirely in New York City, the income you earned there was taxed by New York and New Jersey gave you a credit for those taxes against your New Jersey resident taxes, Gallo said.
Under your current circumstances, some advisors believed the “convenience rule was going to be suspended due to COVID since the reader is working remotely at the employer’s request and not for his personal convenience because the New York office was closed, Gallo said. **
Subsequently, he said, New Jersey has announced that they will not be looking to tax remote workers as having earned the income in New Jersey, he said.
New York has not yet advised on the matter.
To cover yourself, accurately track how many days you are physically working in each state to properly file your tax return as the further advisement comes, he said.
** This story was updated to reflect new guidance from the state of New Jersey.
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This story was originally published on June 17, 2020.
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