Guest Post - Simplification for Employers and Mobile Employees

I have a guest post blog here from Danielle Higley of TSheets.com. She explains H.R. 1393 that aims to simplify payroll registration and filings for employers and mobile employees by making the rules uniform among states as to when an employer needs to register and when the mobile employee is subject to tax.

The Tax Simplification Act That Benefits Employers and Mobile Employees

Danielle Higley,* TSheets.com

Have you heard of H.R. 1393? Most people haven’t. It’s been keeping a lower profile than the bills currently aimed at health care reform or corporate tax cuts. One might argue legislation regarding income taxes — like H.R. 1393 — aren’t often interesting enough to end up in the news, as most people tend to tune out the moment they hear the words “Senate Finance Committee.”

That said, H.R. 1393 should have your attention because if it passes — which it’s likely to do — it may have a major effect on employers and employees.

H.R. 1393, also known as the Mobile Workforce State Income Tax Simplification Act of 2017, basically says any person working over state lines for 30 days or fewer out of the year doesn’t have to pay income taxes in those states.

“The bill would create a uniform national standard, eliminating a compliance maze faced by many employers and employees who need to keep track of state income tax withholding laws and varying de minimis exemption periods,” explains a June 2017 article in Accounting Today.

Rather than filing income taxes in all states worked over the course of the year, employees will file only in their home state and/or in any state where they worked over 30 days. The bill passed the House without amendment and is now waiting to go before the Senate, where it is expected to pass with bipartisan support.

Despite the bill’s popularity, some Americans believe the Mobile Workforce State Income Tax Simplification Act of 2017 could go further. According to a recent independent survey of 811 US employees, 23 percent of people surveyed said states should never tax non-residents. Nine percent approved of a 60-day limit, 13 percent were in favor of a 90-day limit, and 11 percent thought a six-month limit would be more appropriate.

Interstate workers have something to gain

The same survey found 62 percent of workers surveyed have traveled for business. Among them, the majority of these travelers worked in other states for two weeks or fewer. Considering these interstate workers will have to file income taxes in multiple states (or at least every state they’ve worked in, depending on income earned and other factors), many people have something to gain by HR 1393 being signed into law.

Here are a few more stats regarding the Mobile Workforce State Income Tax Simplification Act of 2017:

In the past 12 months, most interstate workers (77 percent) visited more than one state in addition to their home state. Meanwhile:

●     27 percent visited two states.

●     21 percent visited three states.

●     29 percent visited four states or more.

While H.R. 1393 will be helpful to many interstate workers, 38 percent will still be held responsible for paying state income taxes in other states, given they spend more than 30 days out of the year working in a state other than their own.

Currently, only 23 percent of interstate workers are paying income taxes in the other states they’re working in, meaning 77 percent could be committing tax fraud.

How interstate employees can protect themselves from tax fraud

All time worked in another state should be documented. Whether employees are there for two weeks or two months, these records are important for proving to the IRS they’ve been filing their taxes correctly.

According to the Mobile Workforce State Income Tax Simplification Act of 2017, it is the employee’s job to use time tracking tools to record their hours worked in other states. Otherwise, their employer must maintain “a time and attendance system that tracks where the employee performs duties on a daily basis” (check out the full bill for more information).

Even employees who only work in other states a few times a year will want to record their location and time worked in those states, should any questions come up regarding their interstate work history and taxes.

Why employers should pay attention to the outcome of H.R. 1393

1. It’s in an employer’s best interest to help protect employees from committing tax fraud.

Employers can rely on an employee to keep their own records, but be aware, should an employee misrepresent their location or time, their employers could be on the hook for abetting fraud or committing collusion.

Employers can protect themselves by “[maintaining their own] time and attendance system that tracks where the employee performs duties on a daily basis.” Should an employee inaccurately report their time working in another state, “data from the time and attendance system shall be used instead of the employee’s determination.” In plain English, the employer’s record will be held above the employee’s.

2. Efficiency and accuracy help employers keep track of changing interstate rules.

Providing employees with a time and attendance system that does all the tracking for them frees employees to be more productive and accurate with their time reporting.

Forty-nine percent of employees use a non-digital method of time tracking, including paper timesheets, punch clocks, or spreadsheets, but these methods leave room for error. Considering only 1 in 4 employees currently keeps a record of the hours they work, it’s possible that the time being reported may be inaccurate. This, in turn, affects billing and exacerbates inaccurate job costing.

If interstate workers are a key component of your business, or if you yourself work across state lines from time to time, keep an eye on H.R. 1393. It’s true, tax bills don’t always give us reason to celebrate. But if the time you spend working in another state is less than 30 days, the Mobile Workforce State Income Tax Simplification Act of 2017 may be just what you need to simplify your taxes at the start of the year.

What do you think?

---

*About the Author:  Danielle Higley is a copywriter for TSheets time tracking and scheduling. She has a BA in English Literature and has spent her career writing and editing marketing materials for small businesses. This year, she started an editorial consulting company.