So, even if you work remotely a few days a week from home in, say, New Jersey or Connecticut, or five days a week in a far-off state, the New York tax authority will not allow your employer to file New York state income tax. I would like to withhold tax at source. As if you were in the New York office for five full days. He is only four other states taking a similar approach to New York.
When it comes to working from home, it’s time for everything to align with how taxes are handled across the country.
Taxing people working remotely wastes employees and employers’ time and can expose them to unfair taxation. It encourages people to make inefficient decisions about when and where to work and for whom to work. Companies may open offices in other states for the wrong reasons. Not because we need a satellite office there, but because we don’t want to impose an additional tax burden on our employees.
Let’s say you live in another location but work in a New York-based office. As you start processing your 2022 taxes, remember that regardless of how many days you were physically in the office, you will need to file your state income tax return and your New York state income tax return. stay here. .
Tracking where and when you’ve been is essential, especially if you’re making six-figure profits or more. One wrong step and the state of New York may send you a standardized audit form asking for your details, and you could face penalties for underpayment.
If you live in a nearby state such as New Jersey or Connecticut, you usually get a tax credit from your state to prevent double taxation. But that doesn’t always translate equally, depending on state tax rates and how they apply to different income levels, said Eric Bronnenkant, tax director at online financial advisory firm Betterment. said.
And who knows how long New Jersey and Connecticut will keep residents going? Instead, the state seems to be headed in the wrong direction, making retaliatory moves. Last fall, New Jersey Governor Phil Murphy proposed a bill that mimics New York. Connecticut already has similar rules for books.
Outside of the tri-state area, those working in New York-based offices have been hit the hardest, and credit is not available in that state. This includes residents of states with no income tax, such as Florida and Texas. Sure, they won’t be double taxed, but they won’t be able to enjoy the full benefits of living in a tax-free state either.
New York-style taxation can also slow business travel. A ragtag rule dictates how long a business traveler can stay in the state before having to pay taxes. At the shortest he can take up to 1 day, and at the longest he can take up to 60 days, and the amount of tax paid is roughly proportional to the time spent in the state. state. Some states specify that these income taxes are triggered when you earn over a certain amount. Either way, it’s a ridiculous use of time for employees and employers to calculate to ensure compliance. People who travel frequently for work should keep close records to know when they need to file another state income tax return. 1 day in Delaware or Colorado, 30+ days in Illinois, 60+ days in Utah.
In a perfect world, New York and other states that tax remote workers, following the example of Washington, DC, Virginia, and Maryland, which have many cross-border workers, would offer reciprocity. You only need to file income taxes in the state where you live. Sounds a lot easier than having to go through the dance of multiple income tax returns, right? Unfortunately New York doesn’t accept it.
A more practical solution, by a group called the Mobile Workforce Coalition, is to establish a standard in every state that workers can only be taxed if they are physically present in the state. Also, set her 30-day threshold for every state to avoid travel disruption. Therefore, he will only be liable for income tax in that state if he physically stays in that state for more than 30 days.
Various iterations to establish standards for every state have been floating around Congress over the years. As remote work becomes more commonplace, it’s clear that it’s the best way forward for taxpayers everywhere.
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This column does not necessarily reflect the opinions of the editorial board or Bloomberg LP and its owners.
Alexis Leondis is a Bloomberg Opinion columnist for personal finance. Previously, Bloomberg oversaw news tax coverage.
More articles like this can be found at bloomberg.com/opinion.