1. (a) The New York State personal income tax deducted and withheld in any calendar year is allowable as a credit against the New York State personal income tax of the person with respect to whom such New York State personal income tax was withheld. Where New York State personal income tax has actually been withheld, such credit for the New York State personal income tax withheld will be so allowed even though the withheld New York State personal income tax has not been paid over to the Division of Taxation.

   (b) Year of credit.

   The New York State personal income tax withheld during any calendar year will be allowed as a credit against the New York State personal income tax imposed under article 22 of the Tax Law for the taxable year of such person which begins in that calendar year. Thus, a taxpayer reporting on a calendar-year basis receives credit for the New York State personal income tax withheld during such taxpayer's entire reporting year. A taxpayer filing on a fiscal-year basis is allowed credit against such taxpayer's New York State personal income tax for the New York State personal income tax withheld in the calendar year during which such fiscal year began.

   Example:

   A files on a fiscal-year basis beginning June 1, 1985 and ending May 31, 1986. The full amount of New York State personal income tax withheld during the calendar year 1985 must be claimed as a credit on such fiscal-year New York State personal income tax return, and it may not be prorated to reflect the portion withheld from June 1, 1985 to December 31, 1985. The Wage and Tax Statement (form IT-2102) for 1985 must be attached to the New York State personal income tax return filed for such fiscal year ending May 31, 1986.

   (c) Credit on New York State personal income tax return for less than a full taxable year.

   If the person from whom the New York State personal income tax was withheld has more than one taxable year beginning in a calendar year, the full amount of the New York State personal income tax withheld during that calendar year will be credited against the New York State personal income tax for the last taxable year beginning in such calendar year.

   Example:

   B files his New York State personal income tax returns on a calendar-year basis. He is permitted to change to a fiscal-year basis and his first New York State personal income tax return on this basis is for the fiscal year beginning July 1, 1977 and ending June 30, 1978. He also files the required short period New York State personal income tax return for the period January 1, 1977 to June 30, 1977. The credit for the New York State personal income tax withheld for the calendar year 1977 will be applied against the New York State personal income tax for the fiscal year July 1, 1977 to June 30, 1978, since such fiscal year is the last taxable year beginning in the calendar year 1977. Thus, no credit with respect to the New York State personal income tax withheld during the calendar year 1977 may be applied to the New York State personal income tax for the short-period New York State personal income tax return, January 1, 1977 to June 30, 1977.

Tax Law, § 673