November 2nd, 2005
A Taxing Time for Telecommuters
By Michael Santo
Contributing Writer, RealTechNews
The Supreme Court on Monday refused to hear the case of Tennessee resident Thomas Huckaby who felt that he should only pay income tax on 25% of his income, since he only spends 25% of his time in his company’s New York office. The remainder of his time he spends telecommuting from Tennessee, which has no state income tax.
However, the New York tax provision, called “Convenience of the Employer,” allows the state to tax non-residents who choose to telecommute for their New York-based employers for their convenience, as opposed to having to work out-of-state as for the convenience of the employer, say, at an out-of-state job site.
Telecommuters employed by a company outside their home state may be at risk of having to pay extra taxes unless Congress adopts a bill protecting them, experts said Tuesday.
The U.S. Supreme Court on Monday refused to hear the appeal of a Tennessee computer programmer who claimed that New York was violating his constitutional rights by forcing him to pay taxes on income he earned in his home state while telecommuting. Source: News.com
Additionally, from the same story:
“It’s particularly egregious in light of the fact that telecommuters greatly benefit society in many ways, not the least of which is by consuming fewer of our scarce resources–like petroleum, roadways, and bus or train seats,” the American Telecommuting Association said in a statement.
We Say: Basically, someone who telecommutes, depending, of course, on the states involved, could potentially face double taxation — first in the state he lives in and then in the state his employer is based in. These types of laws need to be updated for today’s technologies. It seems like, with the cost of oil and crowded cities and highways, we should be encouraging more telecommuting and not less. The Telecommuter Tax Fairness Act, which could eliminate these issues, is still in committee and thus has not been voted on.
Stephen says:
Telecommuters don’t really face double taxation. What would happen is that if you pay NY state taxes, then you would probably be able to credit them against your state of residence income tax.
The way to get around this provision in the NY state tax alw is to make sure that the telecommuting aspect of your job is written into your contrat or job description as a requirement. That way it would not be for YOUR convenience.
November 3rd, 2005 at 9:47 am
ed3 says:
Actually, the way around it is to have a regional office in the state the worker(s) is/are in. The worker can then be “based” from the regional office and only the tax rules of the state the office is located would apply to the workers. Heck, designate the worker’s home as a regional office!
I ran into a similar situation. I live in TN (no state income tax, yet) and worked for a telecommunications provider which was headquartered in Chicago, IL. Naturally I did not pay IL state income tax on my regular paycheck since I worked at the local regional office.
However, one year they paid us bonuses in stock. I was told I either had to pay $XX or sell the equivalent amount of stock to pay IL state income tax. The way it was explained to me, since the stock was purchased in the state of IL and awarded to me via IL, I owed IL state income tax. I ended up having to sell half my stock to cover the tax. In hindsight I wish I would have contested it. I’m sure they could have purchased the stock through a local broker or somesuch.
November 3rd, 2005 at 1:26 pm