NCPA - National Center for Policy Analysis


November 4, 2005

Telecommuting, or working for an employer at a different location, has become increasingly popular. According to the Telework Advisory Group at WorldatWork, an association for human resource professionals, some 9.9 million people work at home full- or part-times for employers other than themselves.

The millions of people working in one state for employers in other states have given rise to some tricky tax issues:

  • Questions may arise over which state or states are entitled to tax the worker's income.
  • In one case, New York taxed a Tennessee man on 100 percent of his income from his New York employer, although he was in New York only 25 percent of his time.
  • Some members of Congress have introduced legislation to protect telecommuters; for example, under the Telecommuter Tax Fairness Act, workers would have to be physically present and working in a state for that state to be allowed to collect income tax form employees.

New York, a high-tax state that's home to many large corporations, has pursued out-of-state telecommuters aggressively. Many fear that other states will be emboldened by New York's success and enact similar rules that tax out-of-state telecommuters. A handful of other states, including Pennsylvania and Nebraska, already have rules similar to New York's.

Source: Tom Herman and Rachel Emma Silverman, "Telecommuters May Face New Taxes," Wall Street Journal, November 1, 2005.

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