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Telecommuting Can Be Taxing

By Carolyn Bourgoin and Lisa White

In response to the COVID-19 pandemic and the related public-health concerns, many businesses have implemented work-from-home (WFH) arrangements for their employees. Whether due to government-mandated shutdowns or voluntary efforts of employers to protect workers, there has been a significant rise in telecommuting that continues even as some states begin to relax restrictions.

Carolyn Bourgoin

Carolyn Bourgoin

Lisa White

Lisa White

Businesses with telecommuting workers need to evaluate the potential payroll and business-tax consequences created by those employees working from home in states where the business would not otherwise have a taxable presence.

Though most states have existing guidance addressing telecommuting for both businesses and workers, the unusual circumstances created by the COVID-19 pandemic has necessitated the need for states to revisit these rules. Unfortunately, there is also little uniformity among the states in both the existing guidance and the temporary guidance being issued.

In order to remove some of the uncertainty and to limit the potential adverse state tax consequences of employees working remotely, the Remote and Mobile Worker Relief Act (RMWR) was introduced to the Senate in July as part of the American Workers, Families, and Employers Assistance Act. The RMWR contains special provisions prohibiting a state and its localities from taxing the wages of an employee who is performing services in a state other than their state of residence due to the COVID-19 public-health emergency.

“Businesses with telecommuting workers need to evaluate the potential payroll and business-tax consequences created by those employees working from home in states where the business would not otherwise have a taxable presence.”

For calendar year 2020, this protection is afforded for a period not to exceed 90 days. Businesses would also be provided protections under this tax-relief package concerning their telecommuting employees. Remote workers performing duties in a state or locality where the employer does not otherwise have a presence would not automatically cause the business to be subject to taxation in that state. However, as it is unclear when or if this bill will pass, employers must continue to review the guidance of the respective states and localities where their remote workers are performing services.

Massachusetts Guidance

Massachusetts issued temporary guidance providing tax relief where an employee is working remotely in the state due to the COVID-19 pandemic. A recent technical information release (TIR 20-10) issued by the Department of Revenue provides that the presence of one or more employees working remotely in Massachusetts will not by itself create a withholding responsibility with respect to that employee if the remote work is due to any one of the following:

• A government order issued in response to the COVID-19 pandemic;

• A remote-work policy an employer adopts to comply with federal or state guidance or public-health recommendations relating to COVID-19;

• A worker’s compliance with quarantine requirements due to a COVID-19 diagnosis or suspected diagnosis; or

• A worker’s compliance based on a physician’s advice due to a worker’s COVID-19 exposure.

For businesses, wages paid to a non-resident employee who, prior to the pandemic, was performing services in Massachusetts, but who is now telecommuting, will continue to be treated as Massachusetts source income, subject to income tax and withholding. The information release further provides that, while it is in effect, the presence of one or more remote workers in the state due to the COVID-19 pandemic will not automatically create a Massachusetts sales and use tax-collection responsibility or a corporate excise tax-filing responsibility.

These provisions are effective until the earlier of Dec. 31, 2020 or 90 days after the state of emergency in Massachusetts is lifted. Employers must maintain written records to substantiate the pandemic-related circumstances that caused an employee to fall under the TIR’s provisions.

Massachusetts issued its temporary guidance with the understanding and expectation that other states either have adopted or are adopting similar sourcing rules. However, similar to the relief provided in the Senate bill discussed earlier, it would still be prudent for an employer to still review the guidance of the respective states and localities where their remote workers are performing services.

Guidance from Neighboring States

New York: New York is one of five states that has a ‘convenience of the employer rule,’ treating as New York wages any compensation earned by employees of a New York company while they are working outside the state. Under this rule, the wages of a telecommuter could be sourced to both New York and the telecommuter’s resident state, requiring payroll withholdings for both states.

A bill was introduced in the New York Senate in May that would offer relief to businesses by exempting the non-resident employee wages from New York income tax and withholding requirements for a specified amount of time. However, as of the time of this article, the New York Department of Revenue has remained silent on its position regarding these matters.

Connecticut: Connecticut is another state with a ‘convenience of the employer rule.’ However, the state only applies this rule in determining Connecticut source income of residents of states that also apply the convenience rule. Otherwise, wages are sourced to Connecticut based on the portion of services performed within the state.

The Connecticut Department of Revenue has not issued any form of guidance to date, but did respond to a state survey this past May regarding telecommuting due to the COVID-19 crisis. The agency replied that it was working on guidance that would ensure ‘fair and equitable treatment’ to both its individual residents and Connecticut-based businesses.

Rhode Island: Rhode Island has issued formal guidance similar to that of Massachusetts, providing that the presence of one or more remote workers in the state due to the COVID-19 pandemic will not automatically create an income tax-filing responsibility and sales and use tax-collection responsibility. Wages paid to a non-resident employee who is now telecommuting will continue to be treated as Rhode Island source income subject to income tax and withholding.

Businesses with telecommuting employees in other states must check to see if those states offer tax relief from withholding taxes, income-tax nexus, and sales and use tax-filing obligations created by these remote workers during the COVID-19 health crisis. Unfortunately, there is no set time frame or requirement that states issue such guidance.

Passage of the Remote and Mobile Worker Relief Act would help to remove some of the uncertainty surrounding the tax treatment of these workers. Employers in the meantime are left to monitor potential changes to state tax laws where their remote workers are located during the COVID-19 pandemic to determine whether they have relief from tax filings in the telecommuting state.

Carolyn Bourgoin, CPA is a senior manager, and Lisa White, CPA is a manager for the Holyoke-based accounting firm Meyers Brothers Kalicka, P.C.; [email protected]; [email protected]

Health Care

Game Plan

By Mark Morris

James Ferry, certified aging life care manager at Coaching Caregivers Inc.

James Ferry, certified aging life care manager at Coaching Caregivers Inc.

Many adults take on the role of caregiver for an aging parent, but few are prepared for what’s actually involved in taking on that all-important assignment.

What starts out as a trip to the grocery store or a ride to the doctor’s office can, and very often does, become overwhelming when the parent has a medical crisis or other event where their needs suddenly change.

“It often begins with a hospitalization,” said James Ferry, who manages Coaching Caregivers Inc. in Northampton. “Let’s say your mom is admitted for a urinary-tract infection. After a short stay at a skilled-nursing facility, your family is told that she can no longer stay home alone.”

If the family is local, he went on, an adult child, usually a daughter, typically tries to be the caregiver. But as she tries to balance her mother’s care needs with holding down a job and taking care of her own family, burnout inevitably sets in.

And that, unfortunately, is the time when many families usually reach out for help.

“They come to me when they’re exasperated,” said Ferry, a certified aging life care manager with more than 25 years of experience and an advanced degree in social work. He sees his role as someone who helps navigate the complexities of elder care to relieve the family’s burden and develop a course of action that provides a quality life for the elder parent.

He’d rather get involved before people become exasperated, but human nature often precludes that from happening. Regardless of when he does get involved, the goal is the same — to come up with a care plan that works for both the elder parent and the caregiver.

It’s an art and a science, he says, that brings many rewards.

The Big Picture

In order to develop a plan, Ferry starts by doing an assessment.

“I’ll visit the elder in their home and ask them to tell me their family story,” he explained. “At the same time, I’m listening for what’s going on emotionally and with their mental processing. Then we might take a tour around the home to see how they maneuver in that environment, how safe it is, and how realistic is it for them to remain in the home.”

After the assessment, Ferry develops a care plan to best meet the elder’s needs. The plan can range from a few basic services on an as-needed basis to a more substantial plan that provides daily services.

Arranging for help with even simple tasks can provide great relief for the family, he added. “There’s a big difference between having nothing and having a person in place for grocery shopping, doctor’s appointments, or just to walk the dog.”

For more intensive needs, Ferry will often recommend a plan that functions like assisted living, but takes place in the person’s home and still allows for family to be involved.

He refers to this type of plan as a “split-shift approach” in which a caregiver arrives in the morning around 8 a.m. to help the elder client with bathing, getting dressed, and eating breakfast. Then the caregiver will make lunch, clean up after lunch, and leave. The client has the afternoon to themselves to watch TV, catch up with friends, or take a nap. The elder can be alone during this time because they will have a lifeline-type device in the event of an emergency.

A second caregiver arrives around 5 p.m. to prepare dinner, do the cleanup afterward, and help get the client get ready for bed.

“With a plan like this, you can cover the whole day with only seven or eight hours of care,” he explained. “This approach is much less expensive than an assisted-living facility and provides a much higher quality of life for the client.”

This type of plan reflects the current trend of ‘aging in place,’ where services that were once provided in a facility are now delivered in the home. In recent years, home-healthcare agencies have seen strong growth because their services can cost much less than an admission to a long-term-care facility. In addition, studies have shown that people enjoy better quality of life when they can stay in their home and follow their own schedule.

In addition to health concerns, caring for an aging parent also involves financial, legal, and other issues. During this time, family dynamics can bring out a whole new level of stress. “If a family member has a resource agenda, such as the parent’s house or some cash, they could potentially subvert a plan of care because they see it as less going to them.”

Ferry’s role in these situations, he explained, is to be a facilitator who helps the family reach common ground and remind everyone of what’s best for their parent.

Age-old Concerns

The need for the services provided by Coaching Caregivers and similar businesses is sure to increase as more people than ever before are living longer in retirement. According to the U.S. Census Bureau, a 65-year-old couple has a 50% chance of one of them living to age 93, and a 20% chance that one of them will reach age 97.

“I work with a lot of people in their 90s who need some help, but clearly do not need a nursing home,” Ferry said, noting that, 25 years ago, far fewer people lived past age 90.

When an aging parent is living a vital and independent life, it’s easy to avoid an elder-care discussion, but he said that’s the time to do it. As difficult as it is to start the conversation with a healthy parent, Ferry said it’s much easier than waiting for a crisis when significant decisions about care must be made under stress.

“When people are desperate for help, they don’t have the capacity to shop around. Instead, they listen to the first person who can offer a solution,” he noted, which may not be in the elder’s best interest.

Ferry counsels people to ask many questions before selecting a caregiver. “Try to get a sense of their reputation. Are they looking out for your parent, or are they steering you to the business they are in?”

There are many professionals who consider themselves care managers, he added, but may represent the interests of an agency or an insurance company. His advice, simply put, is to look for someone who will objectively represent the client’s interests. Once a care plan is in place, he explained, he then takes on the role of ‘consumer advocate’ for the client to make sure they get the services they were promised.

“Professionals like me have no bias for a particular course of action,” he told BusinessWest. “I have relationships with many home-care and assisted-living agencies, as well as other professionals I can recommend. My only interest is what’s best for my individual client.”

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