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Remote workers – especially those moving to different states – may be on the hook for additional taxes when they file their returns next spring.
It has been nine months since the US due to the coronovirus epidemic and many laborers are dying every day from far away. The longer you are away from your home base, the more likely it is that you may have new state tax obligations.
If you are primarily domiciled, waiting for an epidemic from your holiday home in a different situation, the situation becomes even more complicated.
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In that case, you may have multiple reporting and payment obligations in different states.
“What matters is that you live there from Friday to Friday and you work there,” said Lewis Taub, CPA and director of tax services at Berkowitz Polak Brant.
“You have this runaway house, and it has helped you create a problem from a tax point of view,” he said.
Many remote workers may not understand that they are on the hook for more state taxes, unless they file their returns in the spring.
Indeed, according to a survey by the American Institute of CPAS, 47% of people working in the far-flung areas were unaware that each state had its own laws related to telecommunications.
The organization selected 2,053 adults in October.
Seven out of 10 were not aware that working remotely in other states could affect their state tax bill, the AICPA found.
Meanwhile, according to the survey, 3 out of 4 workers have punch from outside the state for 60 days.
“If you’re working in multiple states during the year, it causes complexity,” said Eileen Sher, director of tax policy and advocacy at AICPA.
“When these people file, they have no tax of any kind in that state, then they will pay the money, so they need to change their withholding, so they won’t have to pay big in April. ,” he said.
A patchwork of state laws
Taxpayers who work in one place but live in a different state may be hit by a tax in both locations.
States have come up with solutions to reduce the impact of double taxation on workers.
For example, some states have mutual agreements with their neighbors to avoid twice the taxpayer’s income. Such agreements are in place in Maryland, Pennsylvania, Virginia, West Virginia, and Washington, DC, as in Pennsylvania and New Jersey.
Other locations provide a credit to offset the income tax workers pay in a different state. This is the case in Connecticut, where many residents typically expect to train for their jobs in New York City.
According to the Tax Foundation, a group of seven states follows the “Employer’s Facility” rule, which places telecom travelers based on their employer’s office.
Those states are Arkansas, Connecticut, Delaware, Massachusetts, Nebraska, New York, and Pennsylvania.
In the worst case, remote workers may be on the hook for two or three state tax returns because they are working.
If you are making money in a state where you are not resident, you may be required to file a non-resident tax return, as well as pay tax.
“Different states have different rules for what you need to file,” Sher said.
For example, employers should start withholding state taxes if an employee has been in Arizona for more than 60 days.
According to the Mobile Workforce Coalition, employees working in New York have to file returns in a single day.
States have different rules around telecommunications and tax obligations.
Mobile Workforce Alliance
You may want to keep quiet about your roam, but the reality is that states can detect taxpayers who are violating the law.
For starters, if your employer knows where you are working, your Form W-2 and state tax withholding will be an indicator of your location, according to Scherer.
“It is also possible that states can audit the taxpayer and ask for documents such as credit card bills, cell phone records and utility bills,” he said.
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Proceed with your employer on the issue of where you are.
In this way, your state-level moratorium will be correct, and you may face taxes and fines in 2021.
Also arrange your records. “I’m calling customers in New York to make my days count,” Taub said.
Whether you are crashing into your vacation home or traveling to the States for RV, you should keep an eye on the states in which you have worked remotely and according to AICPA, the amount of time you have spent there.
Be specific about your location. Income tax can also be levied on cities and counties.
Make an appointment with your tax professional to get ahead of the problem while you can still work.
“Dual state filing is complicated,” said Dina Pureon, partner at Einast & Young and global leader of EY Taxchat.
“In general, people look at it and say, ‘I don’t know how to file in many states and get the right offset credit,” he said.