Businesses with employees working remotely, as they would have in an office location, could find they are subject to a state’s tax laws based merely on the presence of the employee.Įstablishing nexus through remote workforce could cause new income and franchise tax and sales and use tax obligations if nexus was not previously established in the employee’s resident state. A company is generally considered to be doing business and subject to a state’s tax laws if the company has employees working in the state. Nexus footprint and Public Law 86-272 considerationsĪ remote workforce can dramatically affect a company’s state tax nexus footprint. With all of those workforce dynamics in mind, there are a number of state and local tax considerations for remote workforces. Employers near state lines may find moving operations to neighboring jurisdictions could decrease state and local tax expenses without sacrificing the quality of the product or service offered. Employers may find expensive downtown office spaces are no longer needed, or find more value in a smaller real estate footprint. However, the nature of a remote workforce may not just benefit employers struggling to respond safely and appropriately to COVID-19. Fringe benefits such as daycare, transportation, and parking paid by employers are reduced, and costs to employees to commute are all but eliminated. Offices can avoid restocking costs or closing down kitchens and coffee machines. Cubicles no longer need higher walls or even ceilings. From a public health perspective, offices do not have to reengineer work spaces to accommodate social distancing. The benefits of a remote workforce are clear. As uncertainty about the COVID-19 recovery and the distressed economy continues, many employers and employees may choose to maintain remote workforce arrangements. Civil unrest has prevented some businesses in city-centers from reopening as pandemic stay-at-home orders are relaxed and states move into new phases of reopening. The spring shutdown of the economy led to massive lay-offs and furloughs. Millions of employees worked remotely during the pandemic.
"Connecticut will provide you with a credit for taxes paid to New York, but the credit is limited to what Connecticut taxes you on income," he said.The COVID-19 pandemic is rapidly changing how businesses are managing their workforces. "Maybe you worked in New York, but now you work from home in Connecticut for five months," Walczak said. Other states may grant an income tax credit to residents who work elsewhere. More from Smart Tax Planning: Employers who took PPP may have to report workers to unemployment Tax return filings crater as Americans hold off until July 15 The HEROES Act may allow you to undo this retirement withdrawal Similar agreements are in place among other mid-Atlantic states and a few jurisdictions in the Midwest. Some states have pacts with other jurisdictions in the area to minimize duplicative taxes and non-resident returns for cross-border workers.įor instance, New Jersey and Pennsylvania have a reciprocal personal income tax agreement, which means Garden State residents working in Pennsylvania won't face the Keystone State's income taxes. Personal Loans for 670 Credit Score or Lower Personal Loans for 580 Credit Score or Lower Best Debt Consolidation Loans for Bad Credit
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