The COVID-19 pandemic has changed how we work. The need to social distance and reduce unnecessary contact with people to help lower the risk of spreading the virus back in 2020 forced many employers to shift to a remote workforce. Instead of coming into the office, employees could complete their work from their home offices. These offices could be located down the street from their work office, in another town or, in some cases, a completely different state.
How does that impact tax obligations?
Workers generally have two tax bills they need to pay: federal and state. But if you were working in another state do you still have to pay taxes in the state where the work office is actually located? This question is of particular interest in high tax states like New York. Workers who spent the majority of 2020 working remotely from a home office in a low tax state may wonder if they could simply pay the state tax for that state instead of paying New York’s tax.
When it comes to those whose work is located in New York, the state generally pulls in a tax regardless of where you choose to work. This is because New York has a rule that allows it to pull in taxes when workers commute from out of state, even when they work from home. This is referred to as the “convenience rule.” But commuters are arguing that the key to the convenience rule is the fact that the workers chose to work from home. In this situation, they state that since they did not choose to work from home this rule should not apply, and they are taking their argument to court.
How will court hold?
We do not know yet, as most pandemic related tax cases are still working their way through the court system. We do know that New York tax officials are taking a very hard stance on the issue. A representative of the state’s Department of Taxation and Finance stated nonresidents whose primary office is in the state of New York should consider dates they worked remote as “in-state work” for tax purposes.
We also know New York courts have upheld this convenience rule in the past, but we do not know if they would rule differently when they consider the impact the pandemic played on the workforce.
These issues are just some of the complicated questions those going through a tax conflict may find themselves trying to answer. In this situation, it is wise to seek legal counsel from those experienced in this niche area of the law. The attorneys at Goldburd McCone are familiar with these matters and can provide guidance, helping to better ensure you have the information you need to make the decision that best meets your needs.