itonewbie
Level 15

That is because of the infamous NY personal income tax regulation section 132.18(a).  NYS is notorious for the position it takes on sourcing to NY compensation of NRs who do not telecommute for the convenience of the NY employer.  There are very narrow exceptions, provided it can be proven that the taxpayer’s home office is a bona fide employer office on any normal workday.  My presumption is that the employer should be familiar with this provision of the tax law and would have already considered the possibility of taking a contrary position.  This has been tried and tested in courts, challenged by both individual taxpayers and other states, and upheld over the years.

This presents a problem on the CA side.  If you research the CA tax code and regulations, you will see that credit is only allowed to the extent CA tax is assessed on income sourced to another state and sourcing for this purpose is determined based on CA tax code (i.e. not NY tax code and regulations).  Under CA regulations, wages are generally sourced based on where work is performed.  Technically, this could trigger double taxation, which is well attested.  Some states' regulations are more forgiving but not CA's, unfortunately.

You will likely need to be the bearer of bad news and decide what tax position to take in relation to CA (rather than NY).

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Still an AllStar