Teleworking and the Impact on State and Local Taxes

With the COVID-19 pandemic continuing, many people are still working from home or telecommuting; raising question as to what effect this indefinite change to location may have on state filing requirements.

A general note, some states have addressed some of these telecommuting questions with more likely to follow. In addition, various items of legislation have been presented by members of Congress to solidify the treatment of remote workers across the country with the latest being introduced by US House member Mary Gay Scanlon (D-PA) through H.R. 8056, Remote Worker Relief Act of 2020, providing that any employee working remotely in connection with COVID-19 would be deemed to be performing services at their primary work location, and, alternatively, if the employer maintains a system that tracks employee work locations, the employer may, at its option, source the wages to the location where the remote work is performed.

For Businesses:

With individuals working from home, businesses should evaluate if those home addresses are outside of their current state footprints. If so, determinations should be made as to potential withholding requirements to various states or potential registration requirements due to triggering nexus thresholds with an employee presence. 

Another important note to consider is whether or not you will have employees returning to the office. If you stay in a telecommute environment, these issues may continue to present themselves if you expand presence within other states.

For Individuals:

If you’ve taken your shelter or are telecommuting from a state outside of where you normally do business, you may need to consider whether or not your stay has been long enough to deem you a resident of that state. Most states consider 183 days within their borders as deemed residency. If you have been sheltering in place since the pandemic began, you’re most likely nearing if not exceeding this threshold. Make sure to review these nexus requirements if you are in a state outside of your norm.

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Julie A Helms, CPA

Director, Specialty Tax Services

Julie has over 10 years of experience with fixed assets, specializing in cost segregation and expense vs. capital analyses. She has a unique approach and enjoys the complicated areas of the tax law where she can come up with creative solutions for her clients. Knowing the correct answer can look different for each client, Julie works with clients and their current systems and processes to find the best solution tailored for them. Julie has mastered the art of taking complicated tax concepts and translating them into understandable and implementable processes.

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