Page 11 - BusinessWest September 14 2020

Telecommuting Can Be Taxing
Businesses Need to Evaluate Consequences of These Arrangements
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 employ- ees. Whether due to government-mandated shutdowns or voluntary efforts of employers
emergency.
For calendar year 2020, this protection is
afforded for a period not to exceed 90 days. Busi- nesses would also be provided protections under this tax-relief package concerning their telecom- muting employees. Remote workers performing duties in a state or locality where the employer
• A worker’s compliance based on a phy- sician’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 per- forming 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 ear- lier 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 per- forming services.
Guidance from Neighboring States
New York: New York is one of five states that has a ‘convenience of the employer rule,’ treat- ing 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 Sen- ate in May that would offer relief to businesses by exempting the non-resident employee wages
Telecommuting
Continued on page 51
CAROLYN BOURGOIN
“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
LISA WHITE ” have a taxable presence.
BusinessWest
FEATURE
SEPTEMBER 14, 2020 11
to protect workers, there has been a significant rise in telecommuting that continues even as some states begin to relax restrictions.
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. Unfortunate- ly, 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 con- sequences 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 pro- visions prohibiting a state and its localities from taxing the wages of an employee who is perform- ing services in a state other than their state of residence due to the COVID-19 public-health
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 work- ing remotely in the state due to the COVID-19 pandemic. A recent technical information release (TIR 20-10) issued by the Department of Rev- enue provides that the presence of one or more employees working remotely in Massachusetts will not by itself create a withholding responsibil- ity 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
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