• How are telecommuters being taxed in the state of NY?
• The “Convenience Rule” and what it means for those who choose to work from home
The NYS Department of Taxation and Finance has begun auditing 2020 tax returns for telecommuting taxpayers. NYS taxes nonresident income that is derived from New York sources. This wasn’t a huge issue prior to COVID-19 when commuters from surrounding states, like NJ & CT, still worked in the physical offices located in NY.
Now, telecommuters are living and working at their out-of-state homes, but their jobs are still located in NY. Those who were forced to work remotely due to COVID-19 are in the clear, but for those chose to work from home, NYS has a “convenience rule” that curbs nonresident income tax evasion.
New York’s “Convenience Rule”
The Convenience Rule applies to those who work from home out of convenience instead of necessity; if you live out of state and chose to work remotely, you’ll likely still be subject to taxation in New York.
Exceptions for convenience telecommuters are allowed if the taxpayer meets either the Primary Factor, OR at least 4/6 secondary factors AND 3/10 other factors.
Primary Factor:
The home office contains or is near specialized facilities
Secondary Factors:
1. The home office is a requirement or condition of employment
2. The employer has a bona fide business purpose for the employee’s home location
3. The employee performs some of the core duties of his or her employment at the home office
4. The employee meets or deals with clients, patients or customers on a regular and continuous basis at the home office
5. The employer does not provide the employee with designated office space or other regular work accommodations at one of its regular places of business
6. Employer reimbursement of expenses for the home office
Other Factors:
For other factors or further breakdown of factors look here
Increasing Preventative Measures
The State will be cracking down this tax season on returns with out-of-state filers who may be evading NYS tax liability.
Should out-of-state telecommuters be held liable for NYS taxation? Share you thoughts and questions with us in the comments below, or give us a call at 516-541-6549. And don’t forget to visit our COVID-19 information center to stay informed.