In general, there is a difference between employees who work remotely because of their employers’ necessity and those who do so for their own convenience. Along with the many challenges this created in the workplace, the most important issue is how remote workers pay state and local taxes. As such, be aware that this is not a comprehensive analysis of the subject matter covered and is not intended to provide specific recommendations to you or your business with respect to the matters addressed.When COVID-19 began, no one envisioned how long remote work would last or if people would want to continue working remotely permanently. Some of those modifications may be significant. As legislative efforts are still ongoing, we expect that there may be additional guidance and clarification from regulators that may modify some of the provisions in this communication. Although our firm has made every reasonable effort to ensure that the information provided is accurate, we make no warranties, expressed or implied, on the information provided. Please contact us to set up a convenient time to meet.ĭISCLAIMER: The WM Update, WM Wednesday Wisdom, WM Daily Update COVID-19, COVID-19 Business Resources, COVID-19 Client News Alerts and other related communications are intended to provide general information, including information regarding legislative COVID-19 relief measures, as of the date of this communication and may reference information from reputable sources. Our tax team is available to discuss your corporate income and sale tax situation at any time. Each company has a unique set of facts that should be evaluated for compliance with the revised guidance. The employer and employee remote work rules are complicated. In this case, an employee would have to file a return in their home state and pay any tax due and file a nonresident return in the state where taxes were withheld and request a refund. What if the employer does not withhold their resident tax? For example, a PA resident working in New Jersey will give the New Jersey employer a Form NJ-165, Employee’s Certificate of Non-Residency in New Jersey, which certifies the employee is a resident of Pennsylvania and that Pennsylvania’s income tax should be withheld rather than New Jersey’s income tax. The taxpayer must provide the employer with the appropriate form to notify them of their nonresident status. Pennsylvania has signed reciprocal agreements with Indiana, Maryland, New Jersey, Ohio, Virginia, and West Virginia under which one state will not tax employee compensation, subject to employer withholding of the other state. If telework is optional at the employer’s discretion, then these rules may not apply. Is telework required of an employee? Is this in the employee’s job description? If not, it should be. If the company does not have a policy, one should be created. In addition, PA employers with remote employees should no longer be withholding PA tax on the compensation of employees working from home outside the state.Įmployers should revisit their remote work policies. According to the guidance, PA residents will not be able to claim a resident credit for tax paid to another state on this compensation.Ī non-resident employee who is required to telework full-time from home in another state should treat their compensation as non-Pennsylvania source income even if their employer is located in Pennsylvania. The remote work guidance goes on to provide that a PA resident who is required to telework full-time from home in PA rather than the employer’s location outside of the state should treat their compensation as PA source income. These companies may now have a filing responsibility in PA for corporate income and sales tax. This will directly impact non-PA businesses that have employees working from home in PA. A company which continues to have a Pennsylvania resident working at home after June 30, 2021, may have sales tax nexus for 2021 and future years based solely on the activities of that employee. That includes, in part, engaging in any activity as a business within this commonwealth by any person, either directly or through a subsidiary, representative or an agent. The guidance also provides that a business has nexus with PA for sales tax purposes if it maintains a “place of business” in PA.
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