Remote Tax Worries Compliments Of COVID-19

As we all know, the pandemic caused businesses around the world to shut down completely for a while. Then some businesses realized they could continue on quite well with their employees working remotely, from home or wherever they happened to be outside of the confines on the office. It didn’t take long for many business owners to realize that, with the help of Zoom and other digital formats, they could get along nicely with the remote working situation. Some businesses even came to the decision that they no longer needed a brick-and-mortar place for employees to gather under one roof to work.

For many employers and employees, this was good news. Employees saved money on transportation to and from the office. They saved money on wardrobe, they just had to look good from the waist up! And employers saved big on rent, office supplies, and a long list of other items. But, and this is an important “BUT” this tax season, another issue came to light. Some employees moved to other states and continued to do their work for their employer in the state from which they moved. In fact, this happened on such a wide scale that dual filing requirements and/or dual state filings as residents have kicked in.

This is an issue that is having a greater impact on middle-market companies that don’t have a footprint in every state. It’s definitely going to have an impact on smaller entrepreneurial startup companies that don’t have a taxable presence in every state. Employers are facing increased tax compliance costs, corporate income taxes, sales and use taxes, and payroll withholding filings.

For employees, this raises the point that a resident is taxed on all of their income. Nonresidents are only taxes on the income earned while working with the state or sourced within the state. If you have employees working remotely, you may want to discuss this with your accountant or tax professional. As an employee, you want to make sure the IRS doesn’t red flag your return or that this issue doesn’t come back to haunt you with more taxes owed. If you have questions or concerns about this issue, give us a call. We’ll help you sort it out and stay out of trouble with the IRS.

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