The recent impact of the COVID-19 outbreak put the world in a disarray and the economic downturn caused industries everywhere to temporarily turn the lights off as national lockdowns took place. Remote set-ups showed the workforce’s resilience to push forward, and while social distancing is easing, working from home became the new normal for many employees.
While many professionals miss the old nine-to-five mold at the office, the success of working from home proved that employees can have a flexible working environment and thrive in their careers. For remote employees love turning parts of their home into a workspace, it brings greater convenience, more control over one’s time, and a higher level of productivity, but it also brings one of the biggest headaches: State Tax Changes.
Remote Working: How Does That State Tax Changes?
State Tax Changes laws depending on a number of factors, but the key drivers include the taxpayer’s residence, place of work, and the employer’s office. Many states tax changes have taxpayers file and pay their taxes based on their current setup, and in this case, it can be your home’s location. However, there is also the Convenience of the Employer Rule, which favors the employer by basing the tax income on the head office location instead of the individual employee’s workplace.
Seven states currently follow the Convenience of the Employer Rule from Arkansas, Connecticut, Delaware, Massachusetts, Nebraska, New York, and Pennsylvania. In that regard, there are still exemptions to consider as state laws often vary in different places.
Possible Changes: Paying Double State Taxes Changes on the Same Income
Some states require taxpayers to pay double taxes—one in their place of residence and the other in their employer’s office location. This is particularly true for clients who live in states that follow the Convenience of the Employer Rule, though many government states are striving to balance the financial burden placed on remote taxpayers by offering a tax credit.
The tax credit offers money the same amount the taxpayer paid to the state where they are earning. Whatever the case may be, it’s not a surprise that tax preparers will need to cater to take into account the different taxes for multiple states tax changes, but integrating tools like tax software can help streamline the process for everyone involved—the tax preparer and the taxpayer.
The Bottom Line: Remote Work and Its Impact on State Taxes Changes for Taxpayers
As a tax preparer, you may have more clients who are now working from home as the pandemic fast-tracked the drastic increase and acceptance of remote work. The new setting may bring questions about state taxes change, so it’s a good idea to refresh your knowledge with possible rules and regulations that may change based on your taxpaying client’s place of work and the location of their employer’s base.
Are You Looking for the Best Professional Tax Software to Improve Your Services?
Dealing with taxes can be challenging for anyone, even as an expert tax preparer. If you’re looking for innovative solutions that can streamline your tax preparation process, our professional tax software for CPAs can help simplify matters for you.
Our affordable technology can empower tax preparers and help you start a tax business with no EFIN, so get in touch with us today at 1.800.504.5170 to see how we can ensure your tax business is booming.
