In the wake of COVID-19’s impact on the workforce, New York’s “Convenience of the Employer” rule has become one of the significant state and local tax issues. Regular readers will be well aware of this. For those less familiar, this rule stipulates that nonresident employees’ wages earned while working out of state for a New York employer will be considered New York-sourced income if the employee is working from home for their personal convenience.
The pandemic has pushed many professionals to work remotely from their own residences, which are often out-of-state. As a result, they now see their earnings falling under the umbrella of this contentious ruling. This situation has raised a number of questions regarding jurisdiction for income taxation, and has the potential to result in unexpected and significant tax implications for both employers and employees.
This rule is currently standing under scrutiny as many argue that the pandemic environment has made remote working a necessity rather than an option. In this context, it becomes a question whether it is valid to still consider the homes of nonresident employees as places of convenience rather than what they essentially became – primary places of operation.
The unfolding situations and related litigations could lead to changes in interpretation or possibly, reforms in New York’s taxation approach towards out-of-state remote workers. Legal professionals working in corporations and law firms might need to pay close attention to these developments to devise pro-active strategies for their clients or organisations.
To read and understand in detail about the issue, consider reviewing the full report here published by Hodgson Russ LLP.