By Peter M. Langdon
It is common for businesses that employ a mobile workforce or that are located near borders where employees frequently cross state boundaries to keep careful records of the locations where their employees live and work. They are accustomed to tracking state tax reporting and payment obligations. But now, as the COVID-19 pandemic has resulted in many employees working remotely, the tax compliance landscape has changed almost overnight.
As a result of the pandemic, businesses were forced to move to a remote workforce, and employees began to work from home or another remote site instead of their traditional work location. Sometimes, this remote location is in another state.
Employers are generally required to withhold and remit state income tax from an employee’s compensation to the state where the employee is performing services for the employer, provided the state imposes a state income tax. However, due to the pandemic, some states have issued guidance suspending income tax withholding for remote workers who are teleworking in a different state than their employer. But, as this trend continues on longer than initially anticipated, an employer’s state income tax withholding obligation becomes an issue.
Some employers may view a remote workforce as a temporary reaction to the pandemic. However, many employers are considering a move to longer-term or even permanent work-from-home or work-from-anywhere policies.
If your business is thinking about a structural change in working conditions, you should pay attention to the guidance published by states where you have employees working remotely and consider speaking with an attorney skilled in such matters.
Peter M. Langdon is an employment law attorney at Abrahams Kaslow & Cassman LLP and can be reached at [email protected] or by phone at 402.392.1250.