Paul Rohan has lived in Westport for 40 years. A retired CPA, he practiced in both Connecticut and New York.
Last week he emailed me. He notes a double state income tax issue that may affect commuters to New York who now work from home. He says:
While my practice was never in taxation (but rather in financial reporting and auditing), I long ago became aware of this issue. It emerged when personal computers first made working from home a real possibility — not the rarity it was when limited to relatively rare blizzards or hurricanes that precluded commuting for a day or two.
With extremely limited exceptions, New York takes the view that state income taxes for non-residents are due for all work done on behalf of New York-based employers, regardless of where the work is performed.
Connecticut takes the view that for Connecticut residents, all work performed in Connecticut is subject to Connecticut income tax, regardless of where the employer might be located. Thus a Connecticut resident employed by a New York employer is subject to state income tax in both New York and Connecticut for all work done at home. Connecticut will recognize a credit for New York income taxes paid only if the work actually was performed outside of Connecticut.
Many articles have been written on the subject in tax accounting and legal publications. The best description — from the Connecticut Office of Legislative Research — fully addresses the issue, and references the Zelinsky case that was decided by the New York appeals court. (Click here to see.)
My concern is for the many “06880” commuter readers who work for New York employers. Like most people, those readers may be completely unaware of the conflicting positions taken on working from home by the states of New York and Connecticut. At 2020 tax return filing time, they will have a huge surprise. Being forced to pay state income taxes to both Connecticut and New York for the same work performed at home is, in my view, unconscionable.
Making this issue known at this time might force politicians on both sides of the state line to get together and solve this problem once and for all. Over the years since working from home became more commonplace, many articles have appeared in tax accounting publications about this. They mention various politicians at the state and federal levels who have expressed interest and concern, but the issue remains largely unresolved.
Since governors in New York and Connecticut claim to be coordinating all their efforts related to the pandemic and its economic effects, perhaps now would be a good time to ask those who represent us to help solve this unfair state tax dilemma.
This issue has been created for many readers as a direct result of following the both the Connecticut and New York governors, who have adamantly asked employees to work from home. It seems grossly unfair that compliance with those executive orders should have such a high price tag — the unintended consequence of double taxation.
Of course, since both states are strapped for cash, this may present their leaders with a convenient mechanism to cash in on the crisis, by claiming they are only following the laws and regulations as they exist.
NOTE: After sending his original email, Paul followed up the next day. He wrote:
“New York State is planning on taxing out-of-state emergency healthcare workers who came into the state at the urgent request of the governor. The governor’s position is that since tax regulations call for anyone working 14 days or more in the state is subject to the New York State non-resident income tax, they will be required to pay that tax—no exceptions.”