Employee compensation for a PA employer is still subject to PA income tax and deduction laws regardless where the employee is working. COVID-19 Rule: PA will not consider temporary telework as a change in compensation source.Generally… Nonresident employee compensation for services performed within Pennsylvania is subject to PA nonresident income tax and deduction unless there is a reciprocal agreement with the employee’s state (i.e. This announcement is important for employers with NY-based employees who are teleworking from their homes in NJ due to NY’s convenience of the employer rule. COVID-19 Rule: NJ Wage income will still be sourced as determined by the employer’s jurisdiction.Generally… The employer’s jurisdiction determines New Jersey Wage income. These businesses would then be exempt from New York income tax and income tax withholding. However, businesses must confirm that such telework is necessary due to the employer’s needs, not just for the employee’s convenience. COVID-19 Rule: New York will provide relief to businesses that have employees working from home (outside of New York) due to COVID-19.Generally… New York follows the convenience of the employer rule, in which the employer must withhold NY’s state income tax from all wages of the employee If the employee spends at least one day in NY, AND they are working from home outside of the state for the employee’s convenience.
Some states that are not a part of a reciprocal agreement include Connecticut, Delaware, and New York, which have adopted the convenience of the employer rule explained below.
For instance, the reciprocal agreement between NJ and PA – if you work in NJ and live in PA your wages are only taxed in PA and your employer withholds PA taxes instead of NJ Taxes – and vice versa. Generally, the employer’s location is deemed the site of the employee’s services unless the employee is working at employer-designated sites in other jurisdictions.Īn exception exists if that specific state has not imposed an income tax or there is a reciprocal agreement between the state where the employee works (where the service is performed) and where the employee lives. State income tax withholding is generally required for the state in which the employee’s services are performed, and not for the state in which the employee lives. Income tax withholding when the employee is living & working from home in a state different than their normal base of operations. Here, we provide a glimpse of some state and local tax laws that employers and employees working remotely should consider. These new circumstances have raised unique issues regarding wage income sourcing, state payroll tax withholding, and income taxability for both employers and employees.
If the employer required remote work sites, then where are the employee’s wages earned? For example, an employer’s regular work location may have been in New York, but their employees are working remotely from their vacation home at the shore in New Jersey. Now, employees can work in any place (i.e., their home, vacation home, parents’ home, etc.) in any city or state. To meet social distancing guidelines and protect their employees while also keeping business rolling, most companies have asked employees to work remotely from their own houses or locations convenient to their employees. Now, the physical location of businesses has less relevance. As we all have witnessed over the last several months, the novel COVID-19 pandemic has changed the way the world works.
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