The Simple Pleasures – State Taxes and Federal Government Intervention

SALT Chat

05.02.16 | SALT Chat

Yes readers, I know. You are concerned that instead of enjoying a beautiful spring day or the perfect cup of coffee, I am consumed with state and local tax issues. Those who know me well are aware of my other interests in life, but they also know that what I’m about to tell you about probably makes the top twenty, if not the top ten, issues I’m likely to get excited about.

The Mobile Workforce State Income Tax Simplification Act of 2015 has the support of the American Institute of Certified Public Accountants, almost every state CPA society and the last I heard, even both Houses of Congress. While many cringe at the thought of federal intervention into state matters, the ever-evolving marketplace occasionally provides an appropriate entry point for the feds. (The two most well-known examples being federal limits imposed on corporate income taxes for the mere solicitation of sales and similar limits imposed on a former resident state taxing a nonresident’s retirement income.)

The Bill, one of the shortest pieces of legislation I can remember seeing, simply sets forth that no state may impose income tax on a nonresident for wages earned performing duties for thirty days or less during a calendar year in that state. There are exceptions carved out for athletes and entertainers.

Current state laws are inconsistent, with some providing varying degrees of de minimus exceptions, and some providing no exceptions at all. This requires employers to keep track of employees’ every movement so as to not risk penalties for failure to withhold tax. The burden on employees to file tax returns in multiple states can end up costing more than the tax itself.

The Simplification Act, if ultimately passed, is true to its name. Employers and employees will have a significant burden lifted and can go back to enjoying the real simple pleasures of life, whatever they might be.

Should you have any questions about this Act, 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 clients on the unique requirements of governments and municipalities across the nation.