Telecommuting

[Edsel]

What is the latest on the seemingly endless struggle to divide income for telecommuters?

State 1 has the employer providing the income, but State 2 has the employee doing work from home...

[Lion EA]

Common problem for NY/CT and other states. Laws are state by state, so report the income in each state per the law of that state. If you are lucky, client will qualify for a credit in their resident state. I've suggested clients stop telecommuting when they are taxed on the same income in two states.

[Edsel]

Thanks Lion.  I imagine this is a big problem in the Northeast. 

Most states tax law is aggressive when it comes to claiming income, and double taxation is quite possible.  The problem is made worse when one of the states has no income tax, because there is no way to take a credit.

 

[Medlin Software, Dennis]

It is an "ignored" problem everywhere, at least for payroll and withholding purposes.  For employers it is terribly complicated already, and that is without considering their remote employee may work while in a other locations (not at the agreed upon location) and never tell the employer...

There are several states (the last time I looked) that tax based on employer location (coupled with taxation for the location worked), which is where the double hit can come into play.  In theory (or maybe fact), should I travel to NY and take a work call or an email, I have to report wages to NY (maybe even NYC or Yonkers depending on location).

Going back to basics, an employee should be reporting (time clock, paper, whatever) all time worked and at what location(s).  Employer is responsible, but employee usually has to provide the data unless there is tracking involved.  Employer then has the required information to register with the proper jurisdictions, assign wages appropriately, and so on.  It an employee is allowed to be remote, employee also has to monitor what their employer reports, and handle, via their own returns, any wages subject to taxation not already handled by the employer.

Jock taxation (pro sports) is a fine example, with a wealth of references.  Not that I wanted a certain player to sign with "my" team, the tax burden he would have faced was a factor in his decision, since it does not appear my "home" team would have increased their matching offer to make the player "whole" compared to having 81 games in a more tax friendly location.