Wednesday, November 16, 2005

Interstate Telecommuting = Double Taxation

"The Supreme Court refused to hear the appeal of a Tennessee man, who worked for a New York employer, and was ordered to pay taxes on his income by New York's highest court. The result could mean that more out-of-state telecommuters could face the prospect of being taxed both by the state in which they reside, as well as in the state where they work.

"Thomas Huckaby is a computer specialist who spent 75 percent of his time in Tennessee and about 25 percent of it in New York. A New York State tax-department rule states that people who live out of state, work for a New York employer, and occasionally come to New York on business must pay taxes, even on work performed out of state, according to The Wall Street Journal. The only exception to the state's rule would be if the out-of-state work was done for the employer's 'necessity'. The New York Supreme Court ruled, in a 4-3 decision, that Huckaby had to pay taxes on all of his income.

"Now that the Supreme Court has declined to hear the appeal, New York and other states that have similar rules (such as Pennsylvania and Nebraska) can continue their practices of taxing out-of-state telecommuters, and other states may be emboldened to enact similar rules, according to the Journal. There are about 9.9 million telecommuters in the United States, according to the Telework Advisory Group at WorldatWork, and 'millions' of them telecommute out-of-state, the Journal reports.

"Telecommuters who find themselves in such a predicament may have reason to hold out hope, however. Senator Chris Dodd (D-CT) and Representative Christopher Shays (R-CT) have proposed legislation—the Telecommuter Tax Fairness Act (S. 1097/H.R. 2558)—which would prohibit the practice of taxing telecommuters for work completed in another state. (A number of Connecticut residents who work in New York have experienced the same hardship as Huckaby.)

"Senator Dodd called Monday's decision 'disappointing' and said it 'underscores the need to take action on the legislation that I have introduced… Telecommuting reduces traffic congestion, reduces pollution, and helps businesses strengthen their bottom line. The current rules punish telecommuters rather than reward them and that needs to change.'" ...

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