Since May of 2006, New York has had a remote worker tax, also known as the “Convenience of the Employer” rule. This tax has been under “attack” over the past several years as New York has experienced a significant exodus of workers who have moved to live and work remotely in other states.
The New York remote worker tax requires workers to pay income taxes to New York State if their job is based in New York; even though they may work remotely outside of state lines. This rule is called the “Convenience of the Employer” rule because workers must still pay the tax if they are working outside of State lines due to their own “convenience,” not because the employer assigned them to work outside of the State.
For years, states like Connecticut and New Jersey have credited their residents’ payments of the New York remote worker tax, in an effort to avoid double taxation. However, since COVID-19, these credit refunds have mounted to significant amounts of potentially lost revenue for states like New Jersey. So, last year, New Jersey passed Bill A4694, incentivizing their residents to challenge the New York remote worker tax. Connecticut is looking to pass a similar bill in 2024, offering a 50% credit on whatever their residents owe in Connecticut state income tax, if they can successfully challenge New York over their remote worker tax. A successful challenge would reverse a Connecticut resident’s New York tax obligations, while cutting their Connecticut tax obligations in half, simultaneously.
Employers should be cognizant of these payroll tax obligations for their remote workers. Please speak to your Forework representative if you have remote employees and are not sure how to tax them.