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I am a Florida resident and received a settlement in 2011 for unlawful discrimination from my former employer in New York. Do I have to pay tax to New York for this settlement since I received the funds while I was a resident in Florida? Florida has no state tax and so I don't have to file or pay anything here.
ANSWER
Expert Carlton Melton's Answer:
You are required to file a New York income tax return if you have income from a New York source and your New York AGI is more than your New York standard deduction. If you were a nonresident of New York State, you are subject to New York State tax on income you received from New York State sources for the year. If you were a resident of New York State for only part of the year, you are subject to New York State tax on all income you received while you were a resident of the state and on income you received from New York State sources while you were a nonresident. New York source income is the sum (with adjustments for special accruals) of income, gain, loss, and deduction from:
1. real or tangible personal property located in New York State
2. services performed in New York State;
3. a business, trade, profession, or occupation carried on in New York State; and
4. a New York S corporation in which you are a shareholder
5. your distributive share of New York State partnership income or gain;
6. any income you received related to a business, trade, profession, or occupation previously carried on in this state, whether or not as an employee, including but not limited to, covenants not to compete and termination agreements.
If the income is from one of the previously listed sources, you will have to file a New York state tax return. If you are a part-year resident, your New York source income is the sum of:
1. all income reported on your federal return for your New York State resident period; plus
2. your New York source income for your nonresident period.
An unlawful discrimination settlement is taxable on your federal income tax return as Other Income as stated in Publication 4345 (Rev. 11-2010). The amount of other income reported on your federal return is also reported on the New York Form IT-203. This amount is then allocated between the portion of the amount that is derived from or connected with New York State sources and non-New York State sources.
There is a deduction available for attorney fees and court costs paid to recover a settlement for a claim of unlawful discrimination. This deduction could possibly limit the amount of tax to be paid on both your federal and New York State income tax returns.
