The Tax Man Biteth… Telecommuters Respond

This posting about telecommuters being taxed in multiple states has received over 500 comments!

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Apparently he worked in NY 25% of the time, which he didn’t argue about, but the other 75% of the time he worked from home in Tennessee, which doesn’t have income taxes. Also, it appears that right now, for those of us who live in one state and telecommute in another may be doubly taxed if both have income tax. There is a Telecommuter Tax Fairness Act in the Senate, but it has not emerged from committee so has not been voted on.”

In related news the Supreme Court refused to hear this man’s appeal.

Nov 03, 2005 — Northern Virginia telecommuting advocates may have been dealt a setback this week with a Halloween Day decision by the United States Supreme Court not to hear the appeal of a Tennessee man who telecommutes to a job in New York State. He was charged taxes for all his income by the New York taxation officials and the man filed suit, saying it was unfair.
Earlier this year, New York’s highest court, in a 4-3 decision, said the plaintiff owed New York taxes on all of his income from a New York employer—even though he had spent only about 25 percent of his time in New York and the other 75 percent in Tennessee.

The New York State tax-department rule affects people who live in another state, work for a New York employer and occasionally come to New York on business. That rule says income from work performed out of state is taxable by New York unless it’s done for the employer’s benefit or necessity. But the plaintiff asked to telework and it was not a company condition of employment.

This ruling, if applied by other states and the District of Columbia, could have a dampening effect on employees, especially those of the federal government, who are the focus of U.S. Rep. Frank Wolf’s (R-VA-10) effort to force agencies to allow more workers to telecommute at least part of the time. He was not available for comment on Wednesday.

Several other states, such as Pennsylvania and Nebraska, have rules similar to New York.

Democratic Sen. Christopher Dodd and Republican Rep. Christopher Shays, both from Connecticut, have sponsored a bill called the Telecommuter Tax Fairness Act. Under the bill, workers would have to be physically present and working in that state for it to be allowed to collect income tax from employees. Dodd said in a Nov. 1 statement that the Supreme Court’s inaction “underscores the need” to make changes in the law that would circumvent states from imposing such taxes.