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Will NY state authorities go after employers with out of state workers?

On Behalf of | Jul 5, 2022 | Tax Audits

The pandemic came with a lot of negatives — but there were some positives, too. Families spent more time together and businesses ironed out their ability to function without needing all their workers in house. This led to increased flexibility and set the stage for a workforce that could work from essentially anywhere. Love that job in New York but hate the cold winters? Now workers had the possibility of spending the worst months of the year in Arizona, Florida, Hawaii, basically anywhere with an internet connection. This proved beneficial to more than just the workers, it also benefited employers. Employers could use this new flexibility as a benefit and bring in a more diverse set of workers to fill in the roles they needed covered.

But this arrangement does not work out well for everyone. Notably, New York authorities had relied on the funds that came from New York workers. The taxes that resulted from their presence were important and now they are sorely missed.

What will New York taxing authorities do to address lost revenue?

Some expect an increase in audit rates. A likely target: remote workers. This could mean New York taxing authorities start digging into New York income tax returns.

How can authorities tax workers who do not live in that state?

New York has a rule called the convenience of the employer rule. This rule essentially states that unless your employer is requiring you to be in a different state, you are still considered a New York employee. If labeled as a New York employee, taxing authorities can come after you for taxes.

This could mean remote workers face double taxation: those who live in another state may need to pay a tax in the state they reside as well as a New York tax. Some states may offer tax credits to help offset this risk, but the threat of New York’s high tax rates remain.

How can I protect myself from a surprise tax bill?

We touched on audit concerns in a previous post, available here. Although it focuses primarily on federal tax audits, the information still provides helpful tips to help get some control over the situation. Those who find themselves facing an income tax audit in New York and fear a large, unexpected tax bill are wise to seek legal counsel. The attorneys at Goldburd McCone can help you mitigate this risk and discuss potential legal loopholes to reduce tax obligations.