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Sunday, September 27, 2009

State Taxes and the Mobile Workforce

In today's information age, there are many knowledge workers who don't necessarily need to be at the corporate headquarters to get their work done. Both employers and employees may desire to have an employee work from a remote location. It might be a recruitment approach - finding the very best person for the job even if they don't live nearby. Also, employers may want employees available 24/7 and so have to be flexible when the employee asks if they can work remotely.

Also, some employees may be assigned to meet with clients or corporate offices in various states as part of their work assignment.

The tax issue is how to effectively assign the employee's wages to the different states in which they work. The rules are not consistent from state to state and some of the rules come as a surprise to workers. For example, a few years ago, a worker in Tennessee who occasionally travelled to corporate headquarters in New York, but did most of the work remotely from his home office, found that New York taxed 100% of his wages, rather than only the wages attributable to the days worked in New York. The reason - New York's rule that if the work outside of NY was not for the convenience of the employer, the work was attributable to the employer's location in NY.

For the past few years, bills have been introduced in Congress to simplify and make uniform, the state rules on when they can tax wages of non-resident employees. But, nothing has happened.

I've got a short article on the issues and legislation proposals - State Taxation and the Modern Workforce, AICPA Corporate Taxation Insider, 7/24/09.

What do you think Congress should do?

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