Going Mobile – Feds May Finally Intervene

SALT Chat

09.26.16 | SALT Chat

Back in the year 1971, Pete Townshend wrote and sang the classic Who song “Going Mobile”  that contained the lyrics “. . . watch the police and the tax man miss me. . .[1]” Yet it has taken until Sept. 21, 2016, for the U.S. House of Representatives to pass the Mobile Workforce State Income Tax Simplification Act of 2015, which may in fact, finally help the state tax man miss you.  Before anyone gets too excited about the federal government finally straightening out the mess the states have created, the smart money says the Senate isn’t going to follow suit and will not pass this bill.

Drones and self-driving vehicles are relatively new phenomena, at least as compared to telecommuting.  Yet the federal government has managed to pay much more attention to packages falling from the sky and unmanned vehicles than it has to the long-standing problems encountered by businesses and employees dealing with the confusing and inconsistent tax provisions that come into play when an employee works from home or crosses the state border to make a sales call.

Anyone who has a pulse and is in business or has worked for a business in the past 50 or so years knows the problem.  To keep it simple, the business has one location in State A.  There are only two employees.  Employee 1 lives in State B and occasionally works from home.  Employee 2 lives in State A and travels to states C, D and E to visit clients.

Assume Employee 2 spends three weeks a year in each of states C, D and E.  As the rules stand to this day, Employer needs to know the income tax withholding rules in all three states and possibly be subject to penalties and interest for failing to withhold from Employee 2.  Additionally, Employee 2 now has filing requirements in these states.  While some states do in fact have minimum thresholds before the chaos kicks in, the Act would mandate that an employee must be present and performing employment duties for more than 30 days before a state can tax his or her wages.

While the Act seems to be aimed more at traveling salespersons, employers with telecommuters like Employee 1 will get some clarity as well.  If Employee 1 works from home for 30 days or less, the employer won’t have to withhold.  The Act also provides guidance on how to count full days vs. partial days and the impact of an employer’s timekeeping system.  But most importantly, the Act, if passed,  provides uniformity.

Questions? Contact me at WBerkowitz@Berdonllp.com or your Berdon advisor.

Wayne Berkowitz, a tax partner and head of the State and Local Tax Group at Berdon LLP, New York Accountants, advises on the unique requirements of governments and municipalities across the nation.

[1] Regular readers know my penchant for musical references. I know most of you download your music these days and have absolutely no use for your old CDs. This is my third shameless appeal for you to send them to me c/o Berdon. A small price to pay for the free insight and entertainment, yet have not received even one.