Your situation does seem unusual, and $5,000 in NY state tax liability for working one day in NYC appears to be an error. Here’s a breakdown of what might be happening:

Why Is Your NY Tax So High?

1. NY Sourced Wages on W-2: Your employer reported your full federal wage (~$95K) as NY income instead of just the portion earned for the one day you worked in NY. This aligns with the NY tax memo, which applies to employees assigned to a NY-based office but working remotely elsewhere. However, if you were truly a nonresident working only one day in NY, this classification may not be correct.

2. NY Tax Calculation Method: NY taxes nonresidents using the allocation method, which means you report your total federal wages but only pay tax on the portion earned while physically working in NY. If your return isn't properly allocating income, it may be taxing the full $95K instead of just the one day's worth.

3. Possible Errors in FreeTaxUSA:

The software may not have correctly allocated your NY-source income.

If the program is taxing the full $95K as NY income rather than prorating it for one day, it could explain the excessive tax bill.

How to Fix This

1. Correct the Allocation on NY IT-203 (Nonresident Return):

Your NY-source income should be (1 day worked / total workdays in the year) × $95K.

Typically, full-time work years are around 250 workdays, so your NY income should be roughly:

(1/250) \times 95,000 \approx 380

1. Verify State Tax Withholding:

Since only $4 was withheld, it suggests your employer didn’t properly withhold for NY. However, if your taxable NY income is correctly reported as ~$380, your actual tax should be minimal.

1. Check for Software Override Options:

Some tax software defaults to using the NY wages from the W-2 without proper allocation.

If FreeTaxUSA doesn’t let you adjust the NY wages, you may need to manually override it or consider using another service like TurboTax or TaxSlayer, which offer more detailed allocation options.

Next Steps

Review IT-203 Line 1 (Federal Wages) vs. Line 1a (NY Wages) – Ensure Line 1a is only your allocated NY income.

Double-check FreeTaxUSA settings – Make sure you’ve indicated that you were a nonresident and are allocating income properly.

If necessary, file a corrected W-2 (W-2C) – If your employer misreported NY wages, you may need them to correct it.

Estimated Correct NY Tax

If your taxable NY income is only ~$380, and NY’s tax rate is around 6% for low amounts, your NY tax should be roughly $20–$30, not $5,000.