If you’ve been WFH this year, you could face double the taxes
Nine months of working from home for millions of Americans has U.S. lawmakers asking an important question that could affect remote workers everywhere: Who gets the tax dollars?
States used to have a simple recipe for taxation: They would tax people based on where they lived or worked. A New Hampshire resident who traveled everyday into Massachusetts for a job could be taxed by Massachusetts. But many people who used to cross state lines have been working from home for most of 2020.
This could lead to many complicated results: Some newly remote workers may be taxed twice. Some workers who are now working in lower-tax states may petition their company to redo their tax forms. And some companies may have to pay business taxes in more states than usual.
Congress is working on a solution
Many Democratic and Republican lawmakers have advocated for taxing people the way they were before the pandemic, regardless of where they moved or where they worked remotely.
New York may be the biggest obstacle. Some 15% of its annual tax revenues come from nonresidents. The state will likely not want to see the federal government creating a precedent of telling states who they can tax.
Remote work has thrown many tax laws into disarray for years. Changes made in 2020 could be a preview of greater reform in the future.