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Situation:

  • NYC Resident
  • Work 1-2 days a week in NYC
  • Work 4 days a week in CT
  • Employer is taking taxes of my paycheck to both states which sums up to about 40% in taxes

Questions:

I was reading that eventually at least some part of the taxes paid into 2 states will be returned. Is it true? If yes, in what form should I expect the return? Is there anything specific I need to do other than using TurboTax Pro when doing my taxes and filling all the information that will be requested by the app?

  • This is anecdotal only so commenting instead of answering, but I have filed tax returns for multiple states in the same year and all I had to do was fill out a state tax form for each state, which turbotax or taxhawk or whatever I used handled just fine. State tax returns came at different but not delayed times. Nothing out of the ordinary. – Gramatik Oct 9 '18 at 19:37
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You will file a regular NY state form IT-201 as a NYC resident and a Connecticut non-resident form CT-1040NR. CT and NY have a reciprocity agreement where you get a full NY tax credit for income taxes paid to CT.

Your CT taxes should only be based on the amount of time you work in the state. For instance, if 80% of your time is spent in CT then 80% of your income is CT taxable income. Your employer should be accurately calculating and withholding the appropriate proportions.

However, NY taxes all income regardless of where it is sourced. Since CT has lower tax rates on income than NY and NYC, you should have income tax withheld for both states to avoid having a large tax liability in April. At the end of the day, you will effectively pay the equivalent of NY tax rates on all the income.

If you know they are over-withholding and you are looking to get back some of the money throughout the year instead of as a refund, you could alter your NY state withholding allowances with your HR department.

  • Thank you for your answer! They are holding CT, NY, NYC and Federal taxes from my paycheck. CT only for the time worked in CT. I can imagine that in April I should get a return for the amount payed to CT from NY state, is that correct? – D. Budak Oct 18 '18 at 15:51
  • The answer is - it depends on how much they are withholding. You will get a tax credit on your NY return for the tax paid to CT but that doesn't mean that you will get a refund. Your refund will depend on if you have withheld more NY taxes than you needed to. – Garrett Gould Oct 18 '18 at 17:22

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