Photo credit: joey.parsons via Creative Commons under CC BY-ND 2.0Remote work
While it has attracted far less attention than the health crisis itself, a major problem has emerged for many people during the coronavirus pandemic: Where do you owe taxes if you work from home rather than an office every day?
New Jersey has already signed a high profile lawsuit designed to prevent states like New York from aggressively taxing nonresidents who work remotely and spending little to no time in the states their employers are based in.
And just in time for this year's belated income tax filing deadline – Monday for those who haven't already – two New Jersey lawmakers recently crossed the party lines to work on a separate push to pass new federal tax policies on Hold Aggressive Extra-State Taxes Line.
Tax wars in the diocese have intensified during the pandemic, as many were forced to work from home in the past year as a precaution in the area of public health and raised questions about where they actually "earned" their income during the pandemic have tax year 2020.
However, the underlying tax policy issues are also not expected to go away once the health crisis is over. Remote working is now being taken seriously as an option by both employers and their workers, and is expected to play a bigger role in the post-pandemic economy.
Also, government budgets, which are heavily reliant on income tax revenues, are more at stake than ever as many companies have already begun recruiting as economic constraints appear to be being lifted day by day.
"If ever there was a time to fight New York's unfair taxation of New Jerseyans, it is now," said Senator Steve Oroho (R-Sussex), a lawmaker who has repeatedly called for new tax policies over the past few months.
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No mutual tax pact with New York
New Jersey has long had a reciprocal agreement with neighboring Pennsylvania that allows commuters and teleworkers in any state to pay income taxes where they live rather than where their businesses are based.
However, there is no such pact between New Jersey and New York, although thousands of residents work for companies that operate across state lines.
Additionally, New York officials have consistently viewed remote working employees of New York-based companies – even during the COVID-19 lockdown – as a "convenience" so workers' incomes remain subject to New York tax laws.
While New Jersey's own tax laws generally mandate that income be drawn "based on the location of the service or employment," the New Jersey Treasury Department has traditionally granted tax credits to residents on income taxes paid to New York to prevent double taxation. And that happened even last year, regardless of whether the workers actually made an income in New York or not.
But Governor Phil Murphy's administration has taken some steps to fight back.
Last December, New Jersey Attorney General Gurbir Grewal filed an amicus brief in an ongoing lawsuit over similar government tax issues currently being ruled in the US Supreme Court between Massachusetts and New Hampshire.
A topic of "nationwide importance"
While it is unclear whether the Supreme Court will ultimately take up the case, Grewal has described the issue as "of national concern."
And Murphy was addressing New Jersey's participation in the case just last week when he was asked about New York's continued drive to introduce a "traffic congestion pricing" system that could further increase costs for New Jersey residents.
Murphy said his government is not "lying down" on these issues, adding that it "doesn't make very good sense" for New York to tax the income of New Jersey residents when "they work from home in New Jersey." ”
The ongoing call for an appeal against tax issues related to remote working has also surfaced in recent budget hearings after the Murphy government paid out an estimated $ 1.2 billion in tax credits to residents most recently from their home in New Jersey worked out year but paid income taxes to New York.
"If we stopped providing this loan – and New York didn't fall back on what they believe is the right to charge – our residents will essentially be paying twice until this can be resolved in court," the state said Treasurer Elizabeth Maher Muoio told lawmakers at a recent budget hearing.
Still, some lawmakers have urged the Murphy administration to take a more aggressive stance on New York and Governor Andrew Cuomo.
Financing public education, easing property taxes
They noted that the new income tax revenue the New Jersey Treasury Department could collect if tax policy changes would constitutionally be used to fund public education and direct land tax relief – two areas of the state budget that are currently nonexistent except for be financed by the statutory level.
"It goes to our Property Tax Ease Fund, which funds K-12 education, our senior freeze program, and our homestead rebate program," said Oroho, who serves on the Senate budget and budget committee.
"I just hope we don't just wait for this court decision," he said.
Even before the outbreak of the pandemic, some federal legislators had introduced laws to simplify tax issues for remote workers and states. Their proposal stipulates that most remote workers should be able to pay income tax in their home states, provided they work no more than 30 days elsewhere.
However, those efforts appear to have stalled in the face of the broader political deadlock that has gripped Washington, D.C.
Last month, Oroho and US Representative Josh Gottheimer (D-5.) Launched a separate initiative to bring about a new federal administrative tax policy to regulate the taxation of remote work. They sent a joint letter to the heads of the US Treasury and the Federal Internal Revenue Service calling for new administrative guidelines to find a nationwide solution.
The two lawmakers noted that in addition to deciding whether states should collect income tax revenues from non-residents, residents themselves could also have much at stake.
Potential savings in paying taxes in New Jersey
For example, because of the different ways New Jersey and New York collect income taxes, many New Jersey residents could see tax savings if they were able to pay income taxes to New Jersey instead of New York, the two lawmakers said.
However, in their letter, they also pointed to a likely long-lasting labor trend, with companies offering more opportunities to allow their employees to work from home in order to stay competitive in a tightening labor market.
"With modern technology, this home-based shift can become a permanent deal with their employers for many of our constituents," said the co-legislators.
"Until permanent legislation is included in the law, the federal guidelines would offer residents in states like ours significant tax security and relief," they said.
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