The Internal Revenue Service (IRS) tax return for each individual income.
U.S. teleworkers may face higher and more confusing tax rates on their tax returns. And the worst-case scenario that could occur is that telecommuters could be hit with double taxation. That’s because two or more different states, where the business location and the office are located, would both tax the same income.
For the large number of Americans who had to work from Home during the Epidemic, the taxes to be paid this tax season could increase because states have different rules about how their income is taxed, Bloomberg reports.
When the epidemic lockdown went into effect late last winter, millions of people found themselves starting to work from their living rooms or bedrooms. At the Time, few people gave much thought to what the tax consequences would be. And now, as remote workers begin preparing to file their 2020 tax returns, they may find themselves embroiled in a state-by-state battle involving billions of dollars in tax dollars.
The rules related to taxes are complex and vary from state to state across the United States. In some states, even if you only work in the state for a day or two, then technically you have to pay income tax to that state. Other states require that you work for at least 60 days before you are taxed. Many employers are not always aware of the rules either. And, since the beginning of the CCP virus (Wuhan virus, New Crown virus) outbreak, many employers don’t even know exactly where their employees are working remotely. Some states have begun to fight in court over jurisdiction to tax the income of remote workers, and the Supreme Court has not yet stepped in.
“It’s just a mess right now,” commented Patrick Duffany, tax managing partner at CohnReznick. “There should be rules that taxpayers can follow, that can be followed. But that’s not the case right now.”
Some state agencies have relaxed regulations during the outbreak, and only about half of the states have provided new guidance. At worst, telecommuters could face a double taxation hit, as there would be two or more states both trying to tax them on the same income. Those who move to a state with no income tax, such as Florida or Texas, may find that they still owe a large amount of income tax to New York or Massachusetts. At the very least, taxpayers face additional paperwork and confusion.
The tax rules are especially complicated for temporary residents, such as those who come to live and work in their vacation homes during the epidemic. Vermont, for example, has explicitly warned New York residents who come to the state that “if you live in your own second residence in Vermont for more than two weeks, then your income from working in Vermont is subject to the state’s income tax.” The top rate of the state’s income tax is 8.75 percent.
Last year, Massachusetts implemented an emergency provision to tax people who work remotely from their homes located in other states who were previously based in Massachusetts. New Hampshire, which has no income tax of its own, filed a lawsuit on behalf of its residents in this regard. States including New Jersey and Connecticut also filed pleadings in support of New Hampshire.
Before the epidemic began, 500,000 New Jersey and Connecticut residents were traveling to New York City for work every day. By 2020, with so many Manhattan commuters staying home, New Jersey estimates that it could lose as much as $1.2 billion in tax revenue from remote work done in New Jersey because New York is also taxing the income from those jobs at the same time.
States like Massachusetts and New York claim that they are simply maintaining their original regulations during an unusual period.
This situation has confused many Americans who have changed locations and telecommuted in the past year.
Since each state has slightly different tax rules, the details of where and when a taxpayer works can have a significant impact on taxes, says Andy Phillips, director of the H&R Block Tax Institute, on the subject: “You have to understand the state involved before you take the next step to make sure you are preparing your tax return correctly.” “But the tricky part is that the rules are often at odds with each other from state to state.”
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