NY tax withheld in error.

[TaxmannEA]

I have a client that worked for a company that is based in NY. She performed all of her work in Illinois and Iowa. The employer incorrectly took NY withholding and shows her income as NY state wages. How do we file to recover the tax that was withheld in error? I can't seem to find the magic button to click that makes it all better.  

[Possi]

I filed a NY Non-resident return and zero out the NY income. Mine is a VA resident. We have done that for 2 years.

[GraceNY]

1 hour ago, TaxmannEA said:

I have a client that worked for a company that is based in NY. She performed all of her work in Illinois and Iowa. The employer incorrectly took NY withholding and shows her income as NY state wages. How do we file to recover the tax that was withheld in error? I can't seem to find the magic button to click that makes it all better.  

NYS imposes a personal income tax on a nonresident individual's taxable income that is derived from NY sources (Sec 601(e) NYS Tax Law).

NY provides some guidance on how one can be exempted from paying nonresident  taxes if you meet certain factors.  See TSB-M-06(5)(I) at www.tax.ny.gov.

See also "Huckaby v. NYS Division of Tax Appeals" wherein an individual was liable for taxes on 100% of the wages earned from a NY employer while working from his home in Tennessee. 

Looks like your client may have to file a NYS Non-Resident Return (IT-203) as well as a Resident return for the state she resides in.

Grace

 

[TaxmannEA]

This company is a personnel management service that provides services to local medical providers. The client is an Illinois resident who only works in the local area. They should have taken Illinois withholding, but defaulted to NY on the records. No one noticed until the W-2 arrived. They have corrected the file, but she has to deal with the mix up on the 2016 return and for 2 months of 2017. I don't believe that the client would owe NY tax as this company simply vets the credentials of the employees for the local provider and handles payroll. Why is it that the highly  skilled people pay the least attention to the pay stub? 

[Medlin Software, Dennis]

Good old NY.  Submitted sample forms (to get approve to print them from our software).  All fake data except our address and name.  Sent it to their forms approval person.  Was approved.  Was also dunned for not paying the taxes shown on the fake data submitted to their substitute forms department.  Clearly they want a bite if the apple when any sort of nexus might be claimed.

[Lion EA]

Is she working in Illinois and Iowa at her employer's request, visiting clients or whatever?  If so, file a NY NR return eliminating the income from out of NY client sites by using the allocation schedule detailing days worked.  Is she working from home for her own convenience?  Then NY considers her under the control of her NY employer with NY-sourced income.  File a NY NR return and pay the NY taxes.  Her expense reports to her employer will give you dates that she worked out of NY for employer's convenience, when that employer reimbursed her for travel, biz meals, etc., to service clients.  But, she'll want her contract or offer of employment letter from her employer requiring her to be in Illinois and Iowa as a condition of the job to keep for her records -- and keep a copy in your files.  She can be a bit of a hybrid, such as telecommuting (NY sourced income) but making visits to client sites in Illinois and Iowa and any biz site out of NY as required by her employer -- that's why the allocation schedule asks about days worked from home.  NY is tough.