Telecommuters are being taxed by states where they don’t live, vote or use schools, libraries, fire departments and other services. That’s because their employers are based in states that assess income tax on nonresident employees, regardless of how often they visit the office.
States are waking up to the idea that nonresident telecommuters are an untapped revenue stream. This can be a nightmare for peope who work from home.
Courts have upheld this treatment of nonresident telecommuters, at least in New York. And other states are jumping on the bandwagon thanks to New York State’s success.
The rule is that if employees of a New York company are required to work outside the state as a job requirement, they’re subject to income tax only for those days that they work in New York. But if the same workers choose to work outside New York for their own convenience, they’re subject to income tax on they’re full income–unless the workers never work in New York during the tax year, then the taxman makes an exception.
Congress has sopme bill pending to address this. But they completed their last session without taking up the Telecommuter Tax Fairness Act which would require states to apply income taxes to nonresidents only for the days they show up in the office, preventing the double tax.
Moral of the story? Until Congress straightens this out, and because telecommuting is unquestionably good for your employer, get a letter that says you’re working from home for their benefit.
