Work at Home: Tax Impact

I thought I had read something about every aspect of COVID’s tax impact on businesses and individuals, until the morning’s receipt of a tax alert from my own firm’s inside CPA firm. Consider this a shameless plug for going to the DuaneMorris website and then follow the obvious path to our COVID posts. However, here is a teaser :

First, say a company has a home office in Boston but all its employees for a long time are working from home in five other states. Where is the employee taxed? Where is the employer taxed; does the employer need to register as doing business (not likely) or to pay taxes (big question) in each state where an employee’s home sits?

The bad news is there is no uniform rule and you must look at the laws and waivers granted by each state; a dozen states including Massachusetts have provided written waivers and guidance which means conversely you are on your own in the other 38.

A gross generalization for Massachusetts: employees sitting at home in other states will not affect income tax apportionment for employers. Mass employers should continue to withhold for employees who normally work in the Commonwealth but now work at home elsewhere; further, rules are relaxed for business withholding obligations for telecommuters.

The above is general and as of today. Stay in contact with your CPA for personal and business advice; confirm your adviser has promised proactive communication, as laws and practices change.

It is usual for blog sites, as mine, to state that nothing here is formal legal advice, and for this subject that warning is doubly important.

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