The information posted on PayrollTalk is for informational purposes only and is not intended to substitute for obtaining accounting, payroll, tax, or financial advice from a professional accountant.

NY telecommuting and tax/convenience of the employer test?!

JeffC
edited November 2010 in General Payroll Topics
Good morning,

I am a payroll admin. for a law firm. Our corp. office is in Los Angeles but we have offices around the country, including NYC. We have a new employee who is salaried, exempt, and not an attorney. She will be telecomuting from her home in Mass. to our NYC office. She will come to the NYC office once a week. We do not have an office in Mass.

We have a couple problems/questions regarding this scenerio.

1) How should we withhold state income tax from her paycheck? I contacted the Department of Revenue in MA and they say withhold MA State income when she works from home and NY when she works from our physical NYC office. But from what I read about the NYS Convenience of Employer Test our employee would owe 100% of her income tax to the state of NY. Does that mean we should withhold 100%?

2) If we split this up for her rather than do 100% to NY would we as business have to pay Mass. payroll taxes for the days she is working from home even though it is not physically our business office -- she has her own equipment and furniture we have given her nothing but a blackberry and a laptop which we give to all employees at her level.

2) Does the NYS convenience of employer test relate in anyway to revenue generated by this employee. Do we as a partnership have to apportion this Mass time/revenue generated from work in Mass (though through NYC) on our business return?

Your thoughts and time on these questions would be greatly appreciated.

Jeff C.

Comments

  • Gee - that is the sort of question we would have to ask legal counsel about :wink:
    NY, like CA, likes to flex its muscle and bully everybody else - and they do push the envelope on what constitutes NY source income. The question is whether it is right and or legal (constitutional) or simply whether they can get away with it. And - it does not matter to NY what MA says.

    Telecommuting is not a settled issue at this time. When I was telecommuting for the college in MI, I paid tax to NC (where I lived) and i wondered, but did not rock the boat, whether the college should be paying unemployment to NC, and withholding for NC, etc. They did withhold for MI (and the City of Lansing) and then gave me a letter saying I did not live or work in either place during the calendar year. But had the college been a for profit organization rather than a governmental unit, would my presence as an employee in NC establish nexus in NC? And where were the services actually being performed? Where I was entering stuff on the computer or where the students were learning (delivery of product - where the revenue was earned)?

    The old rules, based on physical presence generally being required to do the job, are obsolete - or at least getting there - When it is a very small number of people, governments don't care - but as we see more telecommuting, the governments will start to care - and at some point, something will get decided.

    I'm afraid I have not been very helpful - I know what I feel should be done - what MA told you to do - but NY may not agree, and that could cause issues.
  • Thanks for your input.

    Yes, we have consulted our Labor lawyers; however, they have been a bit more concerned w/ my 3rd question (mistakenly labeled as 2) and not so much with Payroll tax, sui, etc.

    Our final decision was to split it. Pay worked in Mass for hours spent at home and worked in NY for days she is actually in our office, or on the road.

    NYS may not like this approach but perhaps that is the employee's bridge to cross come tax time, not necessarily ours.

    In the end, more work for yours truly. Thank you powers-that-be.
  • Yes - the nexus issue is a big one - I usually leave that to David to discuss.