Deferred compensation

[rafapark]

I plan to retire on Jan 2017. I have some deferred compensation which will be paid starting Jan 2018 and beyond every year for around 5 to 6 years. I currently work in New York but will be residing in Florida starting on the date I will retire. Since that is income, do I have to pay state taxes in New York where my employer is based on in Florida where I will reside?

Thanks a lot.

[gauss]

To address this you will need to consult the state tax laws in both New York and Florida.

Since it is my understanding that Florida does not have an individual income tax, the real question will be what is your liability to New York?

I suspect that the answer will be in the details of the rules regarding income tax in the state of New York for nonresidents. You might want to start by looking here.

Quote:

If you are a New York State nonresident you must file Form IT-203, Nonresident and Part-Year Resident Income Tax Return, if you meet any of the following conditions: You are a nonresident with New York source income and your New York adjusted gross income Federal amount column (Form IT-203, line 31) exceeds your New York standard deduction. You want to claim a refund of any New York State, New York City, or Yonkers income taxes withheld from your pay. You want to claim any of the refundable or carryover credits available. You had a net operating loss for New York State personal income tax purposes for the tax year, without having a similar net operating loss for federal income tax purposes. You may have additional filing responsibilities if you have Yonkers income.

Note that I am NOT (or ever have been) an accountant
-gauss

[pb4uski]

Quote:

Originally Posted by rafapark I plan to retire on Jan 2017. I have some deferred compensation which will be paid starting Jan 2018 and beyond every year for around 5 to 6 years. I currently work in New York but will be residing in Florida starting on the date I will retire. Since that is income, do I have to pay state taxes in New York where my employer is based on in Florida where I will reside? Thanks a lot.

State income taxes will be based on what state you are resident in when you receive the deferred compensation. Since Florida does not have an income tax, your pension income will not be subject to state income tax.

I seem to recall that some states tried to claim that they were entitled to taxes based on the notion that it was earned in their state but deferred, but the courts rejected that argument. YMMV.

[MileKing]

In general, pb4uski is correct, but like many tax issues it is not that simple. The type of plan (qualified vs. non-qualified) comes into play as does the timeframe over which you take your distributions. Your post states you will be taking distributions over 5-6 years. If your plan is a non-qualified plan, I believe NY could legally come back and tax that income as the distribution timeframe is less than 10 years. See this link for some info:

http://www.ebsplans.com/linked/ebs%2...20sep%2008.pdf

Also, when you relocate to Florida and assume domicile/residency there, you need to be sure you have absolutely no connections remaining to NY. No property in NY, no income from any NY source, no bank accounts in NY, no NY drivers license or car registrations, no mailing addresses in NY, no memberships in local groups, etc......nothing. Even a single one of these, no matter how insignificant it may appear, could open the door for NY to question your domicile/residency and make the case that you are still a NY resident and/or are domiciled there and thus owe NY state taxes.

(Note: The above is for informational purposes only and does not constitute legal, tax, or financial advice. I recommend contacting an attorney, CPA, or financial advisor to discuss your specific situation.)

[2B]

It's going to depend how your company issues the funds and how they fill out your tax forms. If they call it NY income (which I think they will), you are hosed. I suggest you ask your plan rep when the time is appropriate on the matter.

[rafapark]

Great input everybody. Thanks a lot.

[IBWino]

Quote:

Originally Posted by pb4uski I seem to recall that some states tried to claim that they were entitled to taxes based on the notion that it was earned in their state but deferred, but the courts rejected that argument. YMMV.

Yup. After retirement, my former colleague moved from California to Nevada (which has no income tax), and California tried to get him to pay taxes on his 401k withdrawals. He refused and they eventually backed off.

[Walt34]

Quote:

Originally Posted by pb4uski I seem to recall that some states tried to claim that they were entitled to taxes based on the notion that it was earned in their state but deferred, but the courts rejected that argument. YMMV.

This is good to know as I had wondered about that. I have six figures in an IRA that came from a 457 account (rolled over). The money was earned in MD and now we live in WV, both of which tax IRA withdrawals. By the time I start withdrawals I hope to be a resident of PA, which does not tax IRA withdrawals.

[fidler4]

Quote:

Originally Posted by Walt34 This is good to know as I had wondered about that. I have six figures in an IRA that came from a 457 account (rolled over). The money was earned in MD and now we live in WV, both of which tax IRA withdrawals. By the time I start withdrawals I hope to be a resident of PA, which does not tax IRA withdrawals.

+1 We are in a similar situation. I don't think PA will tax your pension income either if I remember correctly.


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[Walt34]

Quote:

Originally Posted by fidler4 +1 We are in a similar situation. I don't think PA will tax your pension income either if I remember correctly.

Correct. PA is very tax-friendly to retirees.

[MRG]

Quote:

Originally Posted by Walt34 Correct. PA is very tax-friendly to retirees.

While your alive it's great. They do hit your estate, if that's a consideration.

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[Walt34]

Quote:

Originally Posted by MRG While your alive it's great. They do hit your estate, if that's a consideration.

Yes, you're right on that. For us it isn't an issue but it sure would be for many.