I live in CO but my company is in NYC. NY state tax is withheld from my check. Do I need to pay CO tax?

Question

I want to claim exemption from the NY city tax, but I'd rather just pay the NY state tax rather than try to get that money back and then give it to CO. What are the rules here?

Answer 1

A few years ago, I read an article that said New York assumes that if you work from home for a company in New York state, you pay New York tax on that income. I'm not sure if this is still the case.

You may want to check with the New York Department of Taxation.

I have had clients that lived in New Jersey and worked from home for New York businesses that had to pay New York taxes. They got a credit on their New Jersey return for the taxes paid to New York.

Answer 2

If you live and work in CO, your employer shouldn't be withholding NY taxes anyway.  Get them to stop that.  Makes no difference where their head office is.  You owe CO only.

Answer 3

Since you live and work in CO, you owe state tax to CO and nothing to NY.  Where the company's HQ is doesn't matter.  You need to do exactly what you say you don't want to:  file NY to get all your withholdings back and file CO to pay them what you owe.  You may owe CO an underpayment penalty since you didn't "pay as you go" (pay CO as the money was earned) and if you are talking about 2007, you will owe a late payment penalty.

To avoid this you need to do one of two things:

1-best: Convince your employer to quit taking NY tax out and have them withhold CO tax instead

2-adequate: Make estimated quarterly payments to CO so you don't owe them the whole year's worth at the end and you don't have underpayment penalties

If they are a not a huge company and the have few employees in CO, they may refuse to withhold CO taxes, so #2 may be the best you can expect.  But either way, try to turn off the NY withholding - you don't owe NY anything.