Following up on my previous posts (links below): Wall Street Journal Tax Report, For Remote Workers, Time Is Running Out to Fix State-Tax Messes:
If you’ve worked from home this year, and that home is in a different state from your office, think about your taxes immediately. Acting now could help avoid surprise bills, interest and penalties when filing state taxes next year.
This year the coronavirus pandemic turned millions of workers into telecommuters, and many haven’t yet returned to the office. People who have worked from a state that isn’t their usual one may need to file returns and pay taxes to more than one state for 2020.
These requirements will come as a shock to many: More than 70% of Americans don’t know that telecommuting from another state can affect a worker’s state-tax bill, according to an October survey by The Harris Poll for the American Institute of CPAs. ...
The challenge is that each state’s tax system is a unique mix of rules. When someone owes income tax to more than one state, these systems often clash, and the taxpayer can wind up owing more tax, or the same, or (rarely) less. The outcome often depends on variables like tax rates, credits and agreements between the states.
This year some states have added even more complexity by issuing special tax rules for the pandemic. Fourteen states and the District of Columbia have announced they won’t tax people working there remotely because of Covid-19, according to data compiled by the AICPA.
That sounds generous, but some states offering this benefit—including Massachusetts, Maine, Georgia, and Pennsylvania—also intend to tax remote workers whose jobs are based in-state while they are working remotely out of state due to the pandemic, according to Eileen Sherr, a state-tax specialist with the AICPA.
In other words, if a Boston tech employee has been working from home in New Hampshire since March, Massachusetts still wants its income tax.
Prior TaxProf Blog coverage:
- Edward Zelinsky (Cardozo), Coronavirus, Telecommuting, and the 'Employer Convenience' Rule, 95 State Tax Notes 1101 (Mar. 30, 2020) (reviewed by Young Ran (Christine) Kim (Utah) here)
- Wall Street Journal Tax Report, The Tax Consequences Of Working From Home During COVID-19 (Apr. 7, 2020)
- Wall Street Journal Tax Report, Employees Working Remotely In A Different State Face A Nasty Tax Surprise (June 9, 2020)
- Columbia Journal of Tax Law, Taxing Remote Workers (Oct. 27, 2020)
- Reset Work, States Are Taxing Nonresidents Who Barely Spent Time In Them This Year On Their Full 2020 Income (Nov. 3, 2020)