In March 2021, the NYC Department of Finance revised the instructions for Form NYC1127, Return for Nonresident Employees of NYC. The revised instructions state:

“If you were a New York City employee for only part of 2021, you must report that portion of your federal items of income and deduction which is attributable to your period of employment by the City of New York. Complete Form IT-360.1 calculated as if the period of employment is the period of residence. Enter the amount from line 47 of the Form IT-360.1 on page 1, line 1 of this form and attach the pro forma Form IT-360.1."

Drake Software released an update for these revisions in July, 2021. The Pro-Forma IT-360.1 will now be generated for part year employees filing form NYC1127.

Married Filing Joint - Only One Spouse is a NYC Employee

The software automatically excludes the “other spouse’s income” when the NYS return has a married filing joint filing status and only spouse is an employee of NYC. Overrides for the attachment NYC1127B, Schedule A Line 2 – Non-NYC Employee Income are available on NY > Cities tab > screen(s):

• EMP1

• EMP2

• EMP3

Select the appropriate code in the TSJ box, choose NYC1127 SCH A LINE2 as the For Form code, and make the necessary entries.

Part Year NYC Employee

The taxable income for part year employees of NYC is now calculated by automatically generating Pro-Forma IT-360.1. The other spouse’s income is now automatically excluded with attachment NYC1127B. Any overrides for these adjustments computed for part year employees and MFS filers excluding their spouse’s income, can be made on NY > Cities tab > screen(s):

• EMP1

• EMP2

• EMP3

Select the appropriate code in the TSJ box, choose NYC1127 SCH A LINE2 as the For Form code, and make the necessary entries.

These changes were made to confirm with the NYC 1127 instruction changes and to simplify the filing process for preparers. Instead of having to directly enter the “other spouse’s income” or adjustments to taxable income for part-year employees, the software will now compute these adjustments automatically.

Full-Year Nonresident Employees Filing Form NYC1127 Using Filing Status of Head of Household, Single or Married Filing Jointly:

For the purposes of computing your NYC1127 tax liability, there are only two adjustments allowed for full year employees who are not filing MFS. The taxable income for Form NYC1127 will flow from Form IT-201, line 37 or Form IT-203, line 36. The only adjustments allowed are:

1. NYS Charitable Gift Trust Contributions Included in your NYS itemized deduction.

   • The software will automatically addback any NYS charitable gift trust contributions included in your NYS itemized deduction on attachment NYC1127C Line 1 NYS Taxable Income.

2. NYC1127 Withholdings Used to compute your NYS itemized deduction.

   • Any addback for the NYC 1127 withholdings used to compute your NYS itemized deduction must be entered directly on screen 1127.