Started a hybrid gig in January. Live in Flatbush, office is in Midtown, boss said I can work from my parents’ place in Jersey City two days a week. Payroll just updated my withholding so the NYC local tax line only covers three days a week. Their explanation: “city tax follows where you physically work.” I always thought if you live in the five boroughs, your whole salary is subject to city income tax no matter where you sit. Am I wrong, or did payroll just create an April surprise for me? I don’t want to owe a chunk because somebody clicked the wrong box.

You’re not wrong. NYC resident personal income tax is based on residency, not physical location. A full-year resident of New York City pays city income tax on all income, including wages earned while working outside the city. The “where you physically work” test applies to nonresidents and part-year residents. HR is using the nonresident sourcing rule incorrectly.

For you, the entire salary should appear as NYC local wages and be subject to city withholding. If payroll reduced the local tax line to three-fifths, that’s a mistake. Tell them you are still a New York City resident and ask them to restore full city withholding. You may want to submit a new IT-2104 withholding allowance certificate with your address and city withholding instructions.

One caveat: New Jersey may also want tax on wages for days physically worked in New Jersey, even if you are not a NJ resident. If NJ tax is withheld or paid, you may be able to claim a resident credit on your New York State return for income tax paid to another state. But that credit does not apply to city tax. So the city portion stays.

HR is 100% confusing the convenience rule for nonresidents with resident tax! The convenience rule says a NJ resident working for a NY employer may still owe NY tax on remote days unless the home office meets certain requirements. That has nothing to do with you. You are a NYC resident — your Jersey parents’ place is not a tax home that changes city tax.

The payroll person needs to look at your residency status, not your work location. I’d ask them to show you where in the withholding instructions it says city tax follows the desk. They won’t find it, because it doesn’t!

Have you tried checking your paystub from before January? Was the local tax line the full salary before they changed it? That’s your easiest proof.

Appreciate it. So HR definitely owes me a corrected withholding. Follow-up: do I actually need New Jersey to withhold anything? Payroll says they won’t do NJ because I’m not a NJ resident. But if I’m physically in Jersey two days a week, is NJ going to come looking for something? Or does New York just take the whole pot and NJ gets nothing? I don’t want to file a NJ nonresident return over two days if it’s not required.

New Jersey generally taxes nonresident wages for services performed in New Jersey. Two days a week in Jersey City is enough to create NJ-source wages. The fact that you are a New York City resident doesn’t make that income exempt in New Jersey. New York and New Jersey do not have the same kind of reciprocal agreement that, say, New Jersey and Pennsylvania have.

In practice, many New York employers do not withhold New Jersey tax for a NY resident who occasionally works from there, because they may not be registered or they just take the easier path. That doesn’t mean New Jersey can’t ask later. If NJ is due, you may need to file a NJ nonresident return and pay tax on the portion of wages earned there. You then claim a credit on your NY State resident return, but again not against NYC tax.

The cleanest approach is to ask payroll if they are registered to withhold New Jersey nonresident wages. If they won’t, keep a simple log of days worked in New Jersey and set aside some money for a possible NJ filing. Usually the states sort out the credit; the city portion remains separate.

YES to the NJ withholding part! NJ has a nonresident employee withholding rule — if you work there enough days, the employer is supposed to withhold NJ income tax, even if you live somewhere else. It’s not optional just because your W-4 says Flatbush.

You should ask payroll for an NJ-W4 or whatever their system calls it. And if they say “we only withhold for state of residence,” that’s the same lazy answer as the city tax thing.

Have you tried asking HR for a written breakdown of how they sourced your wages? That usually makes them actually look at the rules instead of guessing. Also check whether your employer has any other Jersey remote workers — if yes, they’re probably already set up.

Update: I asked payroll for a breakdown. They sent me an email saying “remote days are not subject to NYC resident tax” and told me to speak to a tax professional. So now I’m not just fixing my withholding, I’m trying to explain to the person who runs payroll that I’m still a resident when I’m sitting in Jersey. Good times.

I’ll keep a log of the Jersey days like astoria_arch said. Worst case I make estimated payments for the city shortfall. Better than a big bill.

That payroll email is going to age badly if they get audited. You may want to send a short, polite reply with the NYC Department of Finance resident income tax page and the exact language: a full-year resident is subject to city tax on all income regardless of where earned. Ask them to correct the local wages line for future paychecks.

On your own return, even if payroll never fixes it, you can still report the full salary as city income and pay the difference. The danger is that your W-2 will show reduced city wages. If the W-2 is wrong, you have to request a corrected W-2, because attaching the full salary to your return while the W-2 shows lower city wages can trigger a matching notice. Keep the email and paystubs showing the change.

For New Jersey, track the actual days. If NJ later sends a notice, your log plus calendar entries and maybe train or tunnel receipts will support your position. You don't have to volunteer a NJ filing if the amount is small and payroll won't withhold, but know the exposure exists.

Exactly! Also check the local wages box on your W-2 at year end — if they reduced city withholding for half the year, the local tax line might be understated. You don’t want to wait until next February to notice.

Have you tried comparing your paystub from March to one from October? If the NYC local tax line dropped, that’s your smoking gun. And don’t let payroll hide behind “speak to a tax professional.” You’re not asking for tax advice; you’re asking them to withhold based on your residency.

I’d push for a corrected paystub by next pay period. If they keep refusing, maybe ask for the name of the payroll system they use — some of them have a simple “resident city” override.

They finally fixed it. After I sent them the Department of Finance language and copied my boss, the payroll person changed my city withholding back to the full amount. They also admitted they've been doing this to two other NYC residents who work from Jersey sometimes, so maybe I saved them from a surprise too.

Now I just need to decide whether to file NJ. My Jersey days are only two a week, and the amount feels small. I'll keep the log and see what my W-2 shows. Thanks for talking me off the ledge.

Glad it got fixed. One last thing: keep an eye on your first full paycheck after the correction. Payroll sometimes fixes the withholding but doesn't true up the missed city tax from previous pay periods. If they don't catch you up, you can still avoid a surprise by making an estimated city payment or increasing city withholding for the last few months of the year.

If your employer ever switches you to a formal hybrid arrangement where you are assigned to the Jersey location more permanently, that could change the analysis. But as long as your home and domicile are still in the city, the city tax stays.