Louii, my massive Great Dane, likes to get involved in Zoom calls. Usually, it’s just a matter of trying to figure out who I’m talking to, but sometimes, like the picture shows, he gets very involved.
If you’re working from home, you likely have your own funny Zoom, Skype or other teleconferencing story.
That’s part of the fun, and challenge, of working from home. There are some more serious things to consider, though, and they have to do with taxes.
This could end up being a surprise for employees who usually work in one state and live in another and now have a change. Their employer may be in one state but they’re working from home, so they live and work in another state.
Generally, tax nexus (connection) is based on where the employee physically works. For example, an employee who works in New York will be a NY based employee. He or she will have NY taxes deducted
The change for the business occurs when the majority of the employees now work in another state. In the case of NY, let’s say that the NY business employees mostly live in New Jersey. Now with coronavirus, they’re working from home. But if that same New York business now has the majority of its employees performing their tasks at their homes in New Jersey, it now has an income tax nexus in the state of New Jersey.
That means that NY business will need to file a tax return in NJ as well.
Fortunately, some states (including NJ) have determined that nexus won’t apply if employees are working from home. So, in this example, all is well. But, other states (CA for example) have not.
What does that mean for your business?
We don’t know yet.
My best guess is that we’re all going to be filing extensions for 2020 tax returns, especially if you have businesses that could be crossing state lines.
We need to give the states (and businesses) time to catch up with the changing ways we do business now.
Pay Attention to These Important Tax Stories!
What the Feds Give, the State Takes Away