New York State Tax Laws Penalize Out-of-State Telecommuters
Telecommuters whose employers are in New York State face an increased tax burden.
MORE than a few commuters from Connecticut and New Jersey have dreamed about skipping the daily slog to their office in New York and working at home.
Unfortunately, this can also turn out to be more costly, thanks to New York’s tax code, which in some cases double-taxes nonresidents who work for companies based in New York but occasionally telecommute.
New York’s “convenience of the employer” rule taxes nonresidents as if they came to the office every day, even if they worked at home part of the week, unless they can prove their employer required them to telecommute. Yet they must also pay income tax in their home states for work they did there.
New York is the only state that aggressively enforces its tax code this way; most states use a “physical presence” test that lets workers pay taxes in proportion to the amount of time spent working in each state.
The rule has critics, because it penalizes some workers from out of state and also dilutes efforts to promote telecommuting that might ease congestion on the highways and trains in the New York City area.
“There’s tremendous inconsistency that’s hard to understand,” said Edward A. Zelinsky, who lives in New Haven and teaches at the Benjamin N. Cardozo School of Law in Manhattan. “New York’s position is a day working in Connecticut is a day to pay them tax. But with modern word processing, Lexis-Nexis and broadband, I can do research at my kitchen table that 20 years ago I would have had to drive in to the school’s library to do.”
Frustrated by the perceived inequity, Professor Zelinsky unsuccessfully challenged the rule, which the Tax Appeals Tribunal of New York upheld in 2003. Other legal challenges have failed as well.
“Regardless of how people feel about the rule, it’s been upheld every time,” said Thomas Bergin, a spokesman for the New York State Department of Tax and Finance.
The article continues.
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