As reported in The Real Deal.
Tax officials in New York state are taking a closer look at the refund claims of folks who traded a desk in New York for their out-of-state home office.
The “convenience rule” is what’s in question, according to the Wall Street Journal. New York state taxes the money that nonresident workers draw from in-state sources, including the income that commuters make when they choose to work from home.
But this year, some telecommuters have challenged the rule, claiming that they didn’t choose to work outside the state, according to the report. Rather, they were forced to by the pandemic and paid income taxes in their home state accordingly.
Mark Klein, chairman of the law firm Hodgson Russ, told the publication that filers have a strong argument to claim their decision to work from home wasn’t one of convenience but of necessity.
In October, the state Department of Taxation and Finance said that nonresidents whose primary office is in New York should consider dates of remote work as in-state work. If they choose to file a claim in their home state, they’ll need to prove that their employer established an office in that state, Darren Dopp, a tax department spokesperson, told the Journal.
New York courts have upheld the convenience rule twice, in 2003 and 2004. And federal courts have ruled that states can tax nonresidents’ income when employees have a substantial link to the state doing the taxing.
Most cases on the pandemic-era tax rules between states are still pending, such as a suit filed by New Hampshire in the U.S. Supreme Court that accused Massachusetts of unconstitutionally taxing New Hampshire’s telecommuting residents. Over a dozen states, including New Jersey and Connecticut, have submitted briefs on the issue.
