Andrew Cuomo, a Democrat, said last week that the federal proposal would “have a very negative effect on New York City,” where many people work but don’t live. Some cities, which levy their own income tax, could be impacted, too. ![]() While a federal change would provide tax relief for workers, it could hurt states’ revenue at a time when many are facing severe budget shortfalls. Sherrod Brown introduced a bill that would have created a 30-day standard. Prior to the pandemic, South Dakota Republican Sen. Previous, similar proposals have had bipartisan support. But lawmakers have yet to strike a deal on a final piece of legislation. After 2020, it would set a 30-day threshold. Republicans in the Senate included a provision in their broader stimulus proposal that says remote workers would only owe taxes in their temporary state if they stayed there for more than 90 days during 2020. Still, it’s possible Congress could step in and create a nationwide standard. They could also face a bigger penalty if they fail to file a non-resident income tax return in the state next year. There could be consequences, including a small underpayment penalty, if a taxpayer fails to withhold or make estimated payments throughout the year, Rigney added. Tax preparers will likely ask when you go to file next year. It could be up to the taxpayer themselves to reallocate their wages by state.Įven if employers don’t ask where you’ve been working, states’ tax departments have other ways of finding out where you’ve been, like if you have a mailing address there, Rigney said. In normal times, your employer will report the states where you worked on your W-2 and withhold wages accordingly. But it can be a huge headache even when there’s not a big impact on your bank account,” said Nathan Rigney, lead tax analyst at The Tax Institute at H&R Block. Some will end up paying a little less, and some will break even. But even those policies can vary by state when it comes to how long the exemption is in effect. Instead, those people will pay taxes to the state where their employer is located, like normal. ![]() They’ve said they won’t tax workers who’ve relocated there temporarily due to the pandemic, according to the American Institute of CPAs. Thirteen states and the District of Columbia have addressed the 2020-specific situation. Some, like Pennsylvania and New Jersey, already have reciprocity agreements because so many people typically commute from one to the other. Often, a taxpayer gets a credit from their home state for taxes paid to another, but it doesn’t always make them whole. Other places would tax only after a 30-day stay. In some places, workers could owe taxes to their temporary state after just one day of work. For example, if you live in Virginia but are working remotely from a family home in New York this summer, you may have to pay income tax to both states.īut it all depends on where you are relocating. That’s because some states tax income earned there even if the person primarily resides and works in a different state. ![]() For the many people working remotely during the pandemic, next year’s tax season could get complicated if they’re sheltering in place in a different state.
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