NYC Deficit Puts the Squeeze on Vital “1127” Nonresident…

Unless specifically excluded, since 1973 all NYC employees who live outside the boundaries of the City  of New York are contractually required to pay to NYC, as a condition of employment, an amount equal to the amount of income tax that they would have paid to NYC if they were NYC residents. Procedurally this is accomplished by filing annual Forms 1127.

In the quest to raise funds to meet their huge budget deficit, NYC Department of Finance is turning over every possible stone, including trying to put the squeeze on the most vital NYC services, NYPD, NYFD, Sanitation and other vital service workers by twisting the language in the NYS tax return instructions stating that only NYC residents can claim NYC tax credits (against income tax). In so doing, NYC is trying to strong arm all NYC nonresident 1127 employees by sending out letters to “1127” filers, stating that an error was made on the 2025 Form 1127 claiming that what they are calling a “STAR” benefit which has been a credit on the NYS return since 2016 is not allowable on the Form 1127. This is an absolute fabrication, and they are trying hint that they could, but won’t, assess tax adjustments going back to 2016 (which by law they are not permitted pursuant to the statute of limitations) if the thousands of nonresident employees pay the amount using a Quick Payment now.

In summary, what they refer to as the Star credit is actually a NYC school tax credit (there are two, a fixed amount and the rate reduction credit). In 2016 NYC revised the NYS school property tax relief adjustment (STAR) to a nonrefundable income tax credit which is available to all NYC residents on their income tax returns (a combined NYS/NYC resident IT-201. As NYC Charter/Administrative Code Chapter 49-Section 1127 states that NYC nonresident employees contractually agree, as a condition of employment, to pay to NYS an amount that is equivalent to what they would have paid in NYC income tax had they been a NYC resident. To determine that amount, the property tax credits that are allowable to NYC residents for must be, and are, deducted from the determined NYC income tax liability. This is clearly consistent with the language of the law and explicitly stated in the instructions to Form 1127 and subtracted from the NYC income tax liability on line 3 of Form 1127, in order to determine the contractual amount that is due pursuant to Code 1127.